Understanding DeFi Lending
Lending stands out as one of the pinnacle applications of blockchain and crypto. But it's not just a claim... It's also the 2nd biggest DeFi narrative in terms of Total Value Locked (TVL)!Let’s break down this concept ELI5. (Explain Like I’m 5) We’ll cover:Lending in TradFi vs DeFiHow DeFi Lending Platforms WorkKey Elements to MonitorCase Study7 Risks to Consider4 Core BenefitsLet’s goo.1. Lending in TradFi vs DeFiPicture this:🌐 Traditional Finance (TradFi): Want a loan? Prepare fo...
Understanding Liquid Staking
Liquid staking is the biggest DeFi narrative in terms of TVL.Let’s break down this concept from its root ELI5. (Explain Like I’m 5) We’ll cover:Understanding Blockchain TransactionsThe Dinner Party AnalogyThe Liquid Staking EraStaking vs Liquid StakingRisks Associated w/ Liquid StakingLet’s goo.1. Understanding Blockchain transactionsBefore introducing the notion of staking, we need to come back to the basics first. How a transaction operates on the blockchain. It’s actually pretty simple:Con...
Understanding Liquid Restaking
This new narrative taps into a $45B market. In this article, we’ll cover how you can benefit from it before the masses.From Staking to Liquid StakingEntering The Restaking EraLiquid Restaking & OpportunitiesFrom Staking to Liquid Staking In our Liquid staking article, we covered the basics of blockchain transaction (tx). In a nutshell, to confirm tx on the blockchain, validators need to find an agreement method that will benefit all. This is called the Consensus.2 most popular ones are PoW (P...
Understanding DeFi Lending
Lending stands out as one of the pinnacle applications of blockchain and crypto. But it's not just a claim... It's also the 2nd biggest DeFi narrative in terms of Total Value Locked (TVL)!Let’s break down this concept ELI5. (Explain Like I’m 5) We’ll cover:Lending in TradFi vs DeFiHow DeFi Lending Platforms WorkKey Elements to MonitorCase Study7 Risks to Consider4 Core BenefitsLet’s goo.1. Lending in TradFi vs DeFiPicture this:🌐 Traditional Finance (TradFi): Want a loan? Prepare fo...
Understanding Liquid Staking
Liquid staking is the biggest DeFi narrative in terms of TVL.Let’s break down this concept from its root ELI5. (Explain Like I’m 5) We’ll cover:Understanding Blockchain TransactionsThe Dinner Party AnalogyThe Liquid Staking EraStaking vs Liquid StakingRisks Associated w/ Liquid StakingLet’s goo.1. Understanding Blockchain transactionsBefore introducing the notion of staking, we need to come back to the basics first. How a transaction operates on the blockchain. It’s actually pretty simple:Con...
Understanding Liquid Restaking
This new narrative taps into a $45B market. In this article, we’ll cover how you can benefit from it before the masses.From Staking to Liquid StakingEntering The Restaking EraLiquid Restaking & OpportunitiesFrom Staking to Liquid Staking In our Liquid staking article, we covered the basics of blockchain transaction (tx). In a nutshell, to confirm tx on the blockchain, validators need to find an agreement method that will benefit all. This is called the Consensus.2 most popular ones are PoW (P...
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EigenLayer (EG) is stepping onto the DeFi stage with a fresh idea to help DeFi projects leveraging Ethereum security with ease and allow investors to generate more yield on their assets with simplicity.
EG has secured over $50 million in funding with big names like Coinbase Ventures, Polygon Ventures, and Polychain Capital backing them up.
Summary:
Fixing a Big Issue
How EG Does Its Magic
Slashing Mecanism
Potential Risk
Growing Ecosystem
1- Fixing a Big Issue
Right now, if a decentralized app (dApp) wants to build on Ethereum but doesn’t understand its language, it has to create its own security system (called AVS) from scratch. This is tough, expensive, and the new security system can be an easy target for hackers.
EigenLayer (EG) offers a smart solution by leveraging Ethereum’s built-in security to create AVSs. dApps can then use these ready-made security systems instead of building their own, saving time and money.
2- How EG Does Its Magic
EigenLayer makes these security systems (AVS) by collecting staked ETH (ETH locked on Ethereum blockchain to secure the network) from investors and restaking them.
To better understand the roots of restaking, read this article.
EG offers multiple restaking options:
If you want to generate yield on your LSTs, EG currently supports the following tokens:
3- Slashing & Risks
Slashing is a penalty system to sanction validators' bad behavior in PoS systems.
Ethereum has its own slashing rules.
Each dApp building on EG can also set its own slashing rules.
EigenLayer's smart contracts manage how Ethereum PoS validators can withdraw their staked ETH. If a staker breaks the rules on an AVS, they can lose some ETH and be stopped from other activities on EigenLayer. When they take out their ETH, they’ll get less based on AVS rules.
4- Potential Risks
No DeFi protocol is immune of potential hacks.
In cryptoeconomic security, a system is secured if CoC > PfC.
CoC: Cost-of-Corruption
PfC: Profit-from-Corruption
To attack a network a quorum of 50% is required.
➡️ if $8M AVS secures a $2M TVL protocol
CoC ($4M) > Pfc ($2M) -→ ✅ Network secure
➡️ if $8M AVSs secure 10 $2M TVL protocols
Pfc ($20M) > CoC ($4M) -→ ⚠️ Network at risk
5 - Growing Ecosystem
EigenLayer has a growing ecosystem with more and more interesting projects leveraging its technology.
We’ll keep following its growth as EigenLayer’s vision looks very promising.
I hope you now have a better overview of EigenLayer.
EigenLayer (EG) is stepping onto the DeFi stage with a fresh idea to help DeFi projects leveraging Ethereum security with ease and allow investors to generate more yield on their assets with simplicity.
EG has secured over $50 million in funding with big names like Coinbase Ventures, Polygon Ventures, and Polychain Capital backing them up.
Summary:
Fixing a Big Issue
How EG Does Its Magic
Slashing Mecanism
Potential Risk
Growing Ecosystem
1- Fixing a Big Issue
Right now, if a decentralized app (dApp) wants to build on Ethereum but doesn’t understand its language, it has to create its own security system (called AVS) from scratch. This is tough, expensive, and the new security system can be an easy target for hackers.
EigenLayer (EG) offers a smart solution by leveraging Ethereum’s built-in security to create AVSs. dApps can then use these ready-made security systems instead of building their own, saving time and money.
2- How EG Does Its Magic
EigenLayer makes these security systems (AVS) by collecting staked ETH (ETH locked on Ethereum blockchain to secure the network) from investors and restaking them.
To better understand the roots of restaking, read this article.
EG offers multiple restaking options:
If you want to generate yield on your LSTs, EG currently supports the following tokens:
3- Slashing & Risks
Slashing is a penalty system to sanction validators' bad behavior in PoS systems.
Ethereum has its own slashing rules.
Each dApp building on EG can also set its own slashing rules.
EigenLayer's smart contracts manage how Ethereum PoS validators can withdraw their staked ETH. If a staker breaks the rules on an AVS, they can lose some ETH and be stopped from other activities on EigenLayer. When they take out their ETH, they’ll get less based on AVS rules.
4- Potential Risks
No DeFi protocol is immune of potential hacks.
In cryptoeconomic security, a system is secured if CoC > PfC.
CoC: Cost-of-Corruption
PfC: Profit-from-Corruption
To attack a network a quorum of 50% is required.
➡️ if $8M AVS secures a $2M TVL protocol
CoC ($4M) > Pfc ($2M) -→ ✅ Network secure
➡️ if $8M AVSs secure 10 $2M TVL protocols
Pfc ($20M) > CoC ($4M) -→ ⚠️ Network at risk
5 - Growing Ecosystem
EigenLayer has a growing ecosystem with more and more interesting projects leveraging its technology.
We’ll keep following its growth as EigenLayer’s vision looks very promising.
I hope you now have a better overview of EigenLayer.
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