In this first installment of our series on Restaking & Oracles, we will break down the essential concepts of restaking and its role within decentralized finance (DeFi). As restaking continues to evolve, this article aims to provide a detailed explanation of the mechanisms behind it, explore the importance of data availability, and highlight the practical applications and challenges restaking may bring to the DeFi landscape. It's important to note that this article reflects the state of restaking as of February 2024, just prior to the mainnet launch of EigenLayer.

Imagine you're looking to secure your home. Instead of building your own security service, wouldn’t it be more practical to hire an existing security company? Restaking operates on a similar principle. Restaking involves leveraging already staked Ether (ETH) to enhance the security of smaller networks and applications. Whether it's a rollup, appchain, or a bridge, restaking allows them to benefit from Ethereum’s economic security without needing to build their own security model from scratch.

Restaking, introduced by EigenLayer, enables stakers to reuse their locked ETH to secure additional services and protocols. By opting into restaking, Ethereum validators can assign their credentials to EigenLayer smart contracts and run additional software. In return, these validators can earn extra rewards for securing various services like consensus protocols, oracles, virtual machines, and data availability layers. This creates an efficient model for bootstrapping security for emerging networks and applications.

EigenLayer also supports multiple restaking options, allowing validators to restake ETH, liquid staking tokens (LST), or liquidity provider (LP) tokens. Each restaking method offers different levels of risk and reward, with module developers deciding which tokens to accept for their actively validated services (AVSs).

At its foundation, restaking relies on a set of Ethereum smart contracts designed to validate additional modules like oracles, bridges, or data availability layers. The ecosystem revolves around several key entities: restakers, operators, actively validated services (AVS), and consumers.

• Restakers: These are users who delegate their ETH or LSTs to the protocol. Restakers can either run their own node as an operator (solo staking) or delegate their stake to an existing operator.

• Operators: These are the individuals or entities responsible for running node software. They register within the EigenLayer ecosystem and perform the necessary validation tasks for AVSs. An operator can be both a staker and an operator, but the roles are not mutually exclusive.

• Actively Validated Services (AVS): These are the protocols or systems that need validation. AVSs can include sidechains, decentralized sequencers, data availability layers, virtual machines, oracles, and bridges.

• Consumers: The end-users or dApps that rely on AVS for secure data and validation. These could be rollups, decentralized applications, or protocols that benefit from the enhanced security provided by restaking.

Data availability refers to the guarantee that all transaction data on a blockchain is accessible to participants, allowing them to validate the integrity of the chain. Ensuring data availability is crucial for decentralized verification and maintaining transparency within the network.

Modular blockchains solve the problem of scalability by using data availability sampling. This process allows users to verify large blocks without downloading all the data, ensuring that blockchains remain accessible as they scale.

One notable restaking implementation is EigenDA, a decentralized data availability service built on Ethereum through the EigenLayer mechanism. EigenDA allows users to delegate stake to node operators, who validate and store data. Rollups, including optimistic and zero-knowledge rollups, can utilize EigenDA to reduce costs, improve throughput, and ensure the security of transaction data. By leveraging the collective security of staked ETH, EigenDA provides scalable, secure data availability for rollups across the EigenLayer ecosystem.

Other solutions, such as Celestia, are also emerging as modular data availability networks that offer scalable solutions for rollups and Layer 2s by ensuring high-throughput data publishing and verification.

EigenLayer has fostered a growing ecosystem of AVS implementations, leveraging restaking to enhance decentralization, scalability, and security for blockchain applications. Below are some notable examples:

• Espresso: Focused on decentralized sequencing for rollups, Espresso utilizes restaking to engage Ethereum validators in running its sequencer protocol. This helps avoid centralization risks while increasing security and scalability.

• AltLayer: A decentralized protocol designed for rollups, AltLayer introduces the concept of "restaked rollups," which enhance security and interoperability by using EigenLayer's restaking model. AltLayer provides various services for rollups, including decentralized sequencing and rapid finality.

• Omni Network: A cross-rollup platform designed to aggregate users, liquidity, and activity from various rollups. Omni uses restaked ETH to ensure security across different rollups, allowing developers to create interoperable applications without the complexity of managing multiple rollups.

Restaking offers a unique opportunity to improve the security and efficiency of rollups, particularly when it comes to decentralized sequencing and managing maximal extractable value (MEV). With restaking, decentralized sequencers can be created on platforms like EigenLayer, allowing ETH stakers to validate and sequence transactions across multiple rollups.

For example, Espresso is pioneering decentralized sequencers to handle a large number of nodes, ensuring scalability while maintaining strong security guarantees.

Restaking can also enhance both zero-knowledge and optimistic rollups. In the case of zero-knowledge rollups, restaked operators can verify ZK proofs off-chain, reducing delays and improving composability. For optimistic rollups, restaking increases the size of the collateral pool, reducing the risk of slashing and enhancing overall security.

While restaking offers significant benefits, there are risks involved. Validators who engage in restaking are subject to slashing if they fail to meet the validation requirements. Additionally, because restaking relies on Ethereum’s social consensus, disagreements within the community could potentially cause disputes over which version of the blockchain is considered legitimate.

There are also potential risks associated with liquid restaking, which introduces leverage and dependency on the underlying liquid staking token issuers. In the future, new solutions may emerge that combine restaking with innovative economic models, potentially offering stakers new ways to earn rewards through dual staking models or fee-sharing systems.

Despite these risks, restaking presents a promising avenue for increasing the security of DeFi protocols, rollups, and other decentralized applications. As the ecosystem continues to grow, we can expect to see more AVS implementations, enhanced modular services, and widespread adoption of restaking across various blockchain platforms.

Restaking and AVS are poised to transform the DeFi landscape by offering scalable, secure solutions for decentralized applications. By allowing validators to restake ETH and validate additional services, EigenLayer’s restaking mechanism ensures that new applications can benefit from Ethereum's economic security without the need to build their own security infrastructure.

As we continue to explore the potential of restaking, its ability to enhance security for rollups, oracle networks, and other AVSs is clear. Stay tuned for Part 2 of our series, where we will dive deeper into how restaking can revolutionize oracles and further improve blockchain security.

Restaking may just be the key to unlocking the next phase of growth and innovation in decentralized finance.

For more information, explore the following resources:

• EigenLayer Whitepaper

• Celestia Documentation

• Espresso Systems Documentation

• AltLayer Documentation

In this first installment of our series on Restaking & Oracles, we will break down the essential concepts of restaking and its role within decentralized finance (DeFi). As restaking continues to evolve, this article aims to provide a detailed explanation of the mechanisms behind it, explore the importance of data availability, and highlight the practical applications and challenges restaking may bring to the DeFi landscape. It's important to note that this article reflects the state of restaking as of February 2024, just prior to the mainnet launch of EigenLayer.

Imagine you're looking to secure your home. Instead of building your own security service, wouldn’t it be more practical to hire an existing security company? Restaking operates on a similar principle. Restaking involves leveraging already staked Ether (ETH) to enhance the security of smaller networks and applications. Whether it's a rollup, appchain, or a bridge, restaking allows them to benefit from Ethereum’s economic security without needing to build their own security model from scratch.

Restaking, introduced by EigenLayer, enables stakers to reuse their locked ETH to secure additional services and protocols. By opting into restaking, Ethereum validators can assign their credentials to EigenLayer smart contracts and run additional software. In return, these validators can earn extra rewards for securing various services like consensus protocols, oracles, virtual machines, and data availability layers. This creates an efficient model for bootstrapping security for emerging networks and applications.

EigenLayer also supports multiple restaking options, allowing validators to restake ETH, liquid staking tokens (LST), or liquidity provider (LP) tokens. Each restaking method offers different levels of risk and reward, with module developers deciding which tokens to accept for their actively validated services (AVSs).

At its foundation, restaking relies on a set of Ethereum smart contracts designed to validate additional modules like oracles, bridges, or data availability layers. The ecosystem revolves around several key entities: restakers, operators, actively validated services (AVS), and consumers.

• Restakers: These are users who delegate their ETH or LSTs to the protocol. Restakers can either run their own node as an operator (solo staking) or delegate their stake to an existing operator.

• Operators: These are the individuals or entities responsible for running node software. They register within the EigenLayer ecosystem and perform the necessary validation tasks for AVSs. An operator can be both a staker and an operator, but the roles are not mutually exclusive.

• Actively Validated Services (AVS): These are the protocols or systems that need validation. AVSs can include sidechains, decentralized sequencers, data availability layers, virtual machines, oracles, and bridges.

• Consumers: The end-users or dApps that rely on AVS for secure data and validation. These could be rollups, decentralized applications, or protocols that benefit from the enhanced security provided by restaking.

Data availability refers to the guarantee that all transaction data on a blockchain is accessible to participants, allowing them to validate the integrity of the chain. Ensuring data availability is crucial for decentralized verification and maintaining transparency within the network.

Modular blockchains solve the problem of scalability by using data availability sampling. This process allows users to verify large blocks without downloading all the data, ensuring that blockchains remain accessible as they scale.

One notable restaking implementation is EigenDA, a decentralized data availability service built on Ethereum through the EigenLayer mechanism. EigenDA allows users to delegate stake to node operators, who validate and store data. Rollups, including optimistic and zero-knowledge rollups, can utilize EigenDA to reduce costs, improve throughput, and ensure the security of transaction data. By leveraging the collective security of staked ETH, EigenDA provides scalable, secure data availability for rollups across the EigenLayer ecosystem.

Other solutions, such as Celestia, are also emerging as modular data availability networks that offer scalable solutions for rollups and Layer 2s by ensuring high-throughput data publishing and verification.

EigenLayer has fostered a growing ecosystem of AVS implementations, leveraging restaking to enhance decentralization, scalability, and security for blockchain applications. Below are some notable examples:

• Espresso: Focused on decentralized sequencing for rollups, Espresso utilizes restaking to engage Ethereum validators in running its sequencer protocol. This helps avoid centralization risks while increasing security and scalability.

• AltLayer: A decentralized protocol designed for rollups, AltLayer introduces the concept of "restaked rollups," which enhance security and interoperability by using EigenLayer's restaking model. AltLayer provides various services for rollups, including decentralized sequencing and rapid finality.

• Omni Network: A cross-rollup platform designed to aggregate users, liquidity, and activity from various rollups. Omni uses restaked ETH to ensure security across different rollups, allowing developers to create interoperable applications without the complexity of managing multiple rollups.

Restaking offers a unique opportunity to improve the security and efficiency of rollups, particularly when it comes to decentralized sequencing and managing maximal extractable value (MEV). With restaking, decentralized sequencers can be created on platforms like EigenLayer, allowing ETH stakers to validate and sequence transactions across multiple rollups.

For example, Espresso is pioneering decentralized sequencers to handle a large number of nodes, ensuring scalability while maintaining strong security guarantees.

Restaking can also enhance both zero-knowledge and optimistic rollups. In the case of zero-knowledge rollups, restaked operators can verify ZK proofs off-chain, reducing delays and improving composability. For optimistic rollups, restaking increases the size of the collateral pool, reducing the risk of slashing and enhancing overall security.

While restaking offers significant benefits, there are risks involved. Validators who engage in restaking are subject to slashing if they fail to meet the validation requirements. Additionally, because restaking relies on Ethereum’s social consensus, disagreements within the community could potentially cause disputes over which version of the blockchain is considered legitimate.

There are also potential risks associated with liquid restaking, which introduces leverage and dependency on the underlying liquid staking token issuers. In the future, new solutions may emerge that combine restaking with innovative economic models, potentially offering stakers new ways to earn rewards through dual staking models or fee-sharing systems.

Despite these risks, restaking presents a promising avenue for increasing the security of DeFi protocols, rollups, and other decentralized applications. As the ecosystem continues to grow, we can expect to see more AVS implementations, enhanced modular services, and widespread adoption of restaking across various blockchain platforms.

Restaking and AVS are poised to transform the DeFi landscape by offering scalable, secure solutions for decentralized applications. By allowing validators to restake ETH and validate additional services, EigenLayer’s restaking mechanism ensures that new applications can benefit from Ethereum's economic security without the need to build their own security infrastructure.

As we continue to explore the potential of restaking, its ability to enhance security for rollups, oracle networks, and other AVSs is clear. Stay tuned for Part 2 of our series, where we will dive deeper into how restaking can revolutionize oracles and further improve blockchain security.

Restaking may just be the key to unlocking the next phase of growth and innovation in decentralized finance.

For more information, explore the following resources:

• EigenLayer Whitepaper

• Celestia Documentation

• Espresso Systems Documentation

• AltLayer Documentation