EigenLayer (EIGEN) is the first and foremost re-stacking protocol in the Ethereum ecosystem
LST tokens can then be used like any other digital assets: exchanged, transferred, and staked. However, the team of the EigenLayer project, which will be discussed in this article, has gone even further and developed a protocol that allows you to reuse Ethereum cryptocurrency and LST tokens, i.e., re-stake them.
What is EigenLayer?
EigenLayer is a re-stacking protocol based on the Ethereum blockchain launched in April 2024 without its token.
That same month, the EigenLayer team added payments to its protocol to Actively Validated Services (AVS) operators, which provide security for the re-stacking platform. Decentralized applications (DApps) and bridges between blockchain networks act in their role.
In addition, the developers have implemented a token-burning mechanism in the EigenLayer protocol, which is a type of penalty for operators' malicious or poor performance.
How does EigenLayer work?
The primary function of the EigenLayer protocol is re-staking, which allows investors to reuse digital assets for their use.
Restructuring is similar to re-mortgaging, in which a lending institution or private investor takes assets such as securities, real estate, or goods as collateral and reuses them. For example, the pledged real estate can be rented out to generate additional income, and dividends can be paid for holding stocks.
The EigenLayer protocol works like this: investors receive LST tokens to stake their ETH cryptocurrency through a liquid staking protocol such as Lido or Rocket Pool. LST tokens are also called liquid-stacking tokens.
Investors can stake these LST tokens via the EigenLayer protocol, which is the re-stacking or re-stacking of digital assets.
Even though re-stacking is very similar to re-mortgaging from traditional finance, one significant difference exists between the two. The fact is that in the case of re-mortgaging, the borrower cannot control his collateral, i.e., for example, return it before his debt is paid in full.
Re-mortgaging, on the other hand, leaves owners with complete control over their mortgaged LST tokens. On the EigenLayer platform, re-staking is available for both Ethereum native cryptocurrency and LST tokens such as:
- stETH,
- rETH,
- cbETH,
- LsETH.
EigenLayer token
EigenLayer has its native utility token called EIGEN. EIGEN tokens are endowed with functionality and are used for a variety of tasks, such as:
- Staking. Users bet on so-called intersubjective errors, which are a type of error whose presence is evident to most observers;
- Validation in various AVS (Actively Validated Services). An AVS is a set of services that provide services that are subjected to regular checks and monitoring to determine their quality;
- Incentives and penalties for operators based on their performance and quality in the ecosystem.
The EigenLayer token emerged and began trading on cryptocurrency exchanges in October 2024. Despite its recent emergence, the EIGEN token has a capitalization of over $570 million and is ranked 118th on CoinMarketCap. At the time of listing on October 1, EIGEN's capitalization exceeded $770 million.
At the same time, the price of the EIGEN token reached its peak at $4.53. However, by the end of the month, the cost of EIGEN dropped to $3.07 — almost to a historic low. The token price began to decline due to the generally unfavorable background in the crypto market, as digital assets often rise in price in the first days after listing.