Bankless - 174 - EigenLayer Will Change Ethereum Forever

Episode Date: June 5, 2023

Is re-staking the biggest thing to happen to Ethereum since MEV?  We’re joined by Sreeram Kannan who walks us through Eigenlayer. The re-staking protocol that is set to change the trajectory of Ethereum forever. It may even be launching pretty soon… ------ ✨ DEBRIEF | Unpacking the episode:  https://www.bankless.com/debrief-sreeram-kannan  ------ 🪂Airdrop Alpha is waiting for you on Bankless 🪂 https://www.bankless.com/the-ultimate-guide-to-airdrops?utm_source=YouTubeRSS&utm_medium=Info&utm_campaign=Airdrop_Alpha   ------ BANKLESS SPONSOR TOOLS:  🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2   🦊METAMASK LEARN | HELPFUL WEB3 RESOURCE https://bankless.cc/MetaMask   👾STADER LABS | ETHX LIQUID STAKING https://bankless.cc/Stader  ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum   🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/Toku   🎮IMMUTABLE | GAMING ECOSYSTEM https://bankless.cc/Immutable   🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle  ------ Topics Covered 0:00 Intro 7:51 How Big Is Restaking? 9:41 What is Restaking? 16:22 What Was The Aha Moment? 21:32 Restaking Explained (Simply) 25:11 Where Does Eigenlayer Live? 29:40 Slashing on Eigenlayer 42:20 Risks of Restaking 57:23 Restaking Networks 1:05:27 Designing Modular Trust 1:07:43 Eigen DA 1:10:35 The 3 Aspects Of Trust 1:14:18 Tokens On Eigenlayer 1:17:54 Why Start a Network on Eigenlayer? 1:24:22 2 Uses Of Economic Security 1:26:06 Eigenlayer Alignment 1:30:42 Restaking Risk Management 1:36:19 Takes on Vitalik's Post 1:46:55 When is Mainnet Launch? 1:49:59 How Will Restaking Change The World? 1:56:59 Outro ——— Resources: Sreeram Kannan: https://twitter.com/sreeramkannan  Vitalik’s Article ‘Don’t Overload’: https://vitalik.ca/general/2023/05/21/dont_overload.html  Sapiens by Yuval Harari: https://www.amazon.com/Sapiens-Humankind-Yuval-Noah-Harari/dp/0062316095  ------ Related Episodes: MEV: https://www.youtube.com/redirect?event=video_description&redir_token=QUFFLUhqa196eHJidEhiMUdla1Q5Y0FpWklJTVFkWXVfQXxBQ3Jtc0tuSGtubk1QcFpIS2lfeHdjQzJRY3dmbUFDdHpNNDRISlJfZ1F6MWh2SGM4X2JTWk1RbnVPb1dZVy1sRFF2WDNlNXFPQlFZN3dCRnJ3XzFyelp0WmxMTGtuSWh0eXhhejhuTTJCaVBDYnh6b042d2s1NA&q=https%3A%2F%2Fwww.bankless.com%2F-cryptos-existential-threat-mev-panel&v=nb7x7n8Ga3U https://www.bankless.com/125-matt-cutler    ---- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://www.bankless.com/disclosures 

You guys talk a lot about this, like, you know, banks, right? Banks go and take risks and, you know, they may crash. And if they crash and burn, they're going to come to, like, the government and say, hey, you know, pay us out. 2008. That's exactly what happened. Too big to fail. Too big to fail. We also heard that in the crypto space, if you remember, someone said, we're going to be too big to fail.

Yeah, that's not all those words. Welcome to Bankless, where weeks for the frontier of internet money and internet. internet finance. This is how to get started, how to get better, how to front run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. I think we've got another opportunity to front run the opportunity today. This time with restaking. This is a phenomenon. I think David thinks restaking will change everything. And so we have the father. There's no going back. There's no going back now. We have the father of restaking. Srivram can. He's the founder of eigenlayer.

The concept behind restaking is pretty simple. You stake your ETH, and then you stake it again. And it sounds deceptively simple, but it is quite the rabbit hole. This is the first episode where we go down the restaking rabbit hole. A few takeaways for you today. We talk about what restaking is going to do to Ethereum. Have we just opened Pandora's box? Number two, we talk about all the cool things that can be built on top of restaking. Number three, we talk about Vitalik's concerns about restaking. what happens when ETH stakers become polyamorous? Number four, we talk about eigenlayer. That's the protocol that Sri Ram is building, how it maximizes the surface area for non-zero-sum games. And number five, we talk about what happens if restaking is maximally successful? How does crypto change? How does the world change? David, why is this episode significant?

It's not often when a new innovation comes into the fold of the crypto-economic world that goes as deep in the tech stack as eigenlayer does, as restaking does. And this is why the discovery of restaking, many people, myself included, has compared to the discovery of MEV. Once upon a time, we discovered that you could extract some value by arbing trades on uniswap. And then the snowball rolled, and now we have a multibillion dollar industry of MEV and different parties. And now there's being like Ethereum EIPs in order to account for M.EV. People think that EGenLayer and restaking are similarly as big as that discovery. Once you learn that you can restake your ether to one thing, why not restake it to more things? And this is where I'll pull in my Skyrim mods metaphor.

I don't know if you've ever modded a game, Ryan, but you can download the base game, the base Skyrim game, and then you can go to these hobbyists, enthusiasts, lists of Skyrim mods. and you can start installing some mods to make your game better. But then you can continue to do that, and you can start to get really weird with the mods that you install until your game crashes. You're like just bloatware. Yeah, well, it's just like,

we're just talking about like weird mods that turn like guards into chickens and gives you foam swords. Like you're on the weird end of the spectrum of mods. And that's fun inside of Skyrim. That's fun inside of a game where like the consequences are your computer crashes. It's different when we are talking about global economic networks that transact, you know, trillion dollars of value. So there's a lot at stake here. Just like how there was a lot at stake

with MEV, there is a lot at stake with restaking. And similarly, how MEV also changed the nature of eth the asset, I think restaking is also going to deeply change the nature of what ether is as an asset. This is not, sadly, a topic that we were able to get into with three ROM. So, Ryan, you're not going to have to save that for the debrief because... Oh my God. Yeah, I really want to talk about that. I've got some thoughts about how ether, the asset is impacted. by restaking. And I know that this is a topic that I know Justin Drake and Dan Grad and many others and the Ethereum research team are also thinking deeply about. And so I want to share all those thoughts in the debrief, rather. Yeah, I've got an inkling. Like, this could be almost as big as

ultrasound money as kind of the burn in terms of economic effects. Like, I don't think you can actually understand ether the asset or the theorem, the network without understanding restaking. I would go that far. But let's continue that discussion in the debrief. The debrief, of course, is our episode that David and I record after the episode with our raw unfiltered thoughts, it is available right now on the bankless premium RSS feed, which is available to bankless citizens. You can upgrade through the link in the show notes, become a citizen, and get access to the bankless premium feed where we'll talk about that. All right, guys, we're going to get right to the episode with Sri Ram. But before we do, we want to thank the sponsors that made this episode possible, including our number one recommended

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Bankless Nation, excited to introduce you to our next guest. Shri-Rom Cannon is the founder and CEO of EganLayer, which is a new protocol that lets you stake your ETH across multiple networks at once. People call this restaking. That may have been the buzzword you've heard before. Sriram is also the director of blockchain labs at the University of Washington, where he and others research, crypto economics. Sri Ram, welcome to Bankless.

How are you doing? Very good. Thank you so much, Ryan and David. Looking forward to talking to you both. Okay, well, we've got to start here. I'm just going to hit you with the big question. Everyone's wondering, Shri-Rom, did you just open up Pandora's box with this restaking thing? It feels like that.

And, you know, you all mentioned somewhere earlier that this is kind of like the M-EV thing. You know, you discover one R-Bot doing something on the side, and then suddenly you just realize all the consequences going downstream of that. I think there is something like that. The idea that the security can be supplied flexibly, that leads to so many consequences that are some predictable, some are highly unpredictable. The metaphor that Sri Ram is talking about is in an article I wrote on the bankless newsletter, trying to explain resecking to people, and why so many people have been compelled to think and talk about this, to elaborate on the metaphor that Sri Ram brought up. Like once upon a time, we discovered this Rubeck on a lot.

Ethereum doing this weird thing with Uniswap. And then that turns out was like the tip of the iceberg of what we now call MEV, which is a multi-billion dollar vertical inside of the crypto space that has extremely massive implications. And so this is kind of, we kind of feel the patterns once again emerging with restaking. It's like, oh, restaking. And then the ball goes and goes and goes and goes. This might be the very beginning of a very long part of a new frontier in the world of crypto. So as a content producer, Sri Ram, thank you for opening that box because it gives us a lot of things to discuss and talk about. I heard some people from EF say the same thing as a researcher, you know, open up a whole new area so that we can all, you know, geek out about it.

Well, Sri Ram, I think we want to get to restaking and actually define that for folks because I do think this will be maybe first in a series of content that David and I put out on a bankless about restaking. I think it's going to be that big, as big as M.E. EV was. But first, I think I'd actually love to hear more about you, Sri Ram. So it's actually, for my perspective, you seem to sort of burst onto the scene in crypto, at least. But I know you've been actually teaching this at the University of Washington for a while. Could you tell us about your crypto journey? So like, how did you get into crypto? How did you start researching this restaking thing? What's kind of your day job? What's your interest in the space? Like, who are you,

Sri Ram? Tell us. Thank you, Ryan. My interest in peer-to-peer systems goes way back to my master's and PhD at between 2006 and 11, where I worked on pair-to-peer wireless systems. You know, this was an era where we were thinking about how do you build wireless in a place where there is not enough wireless infrastructure, no base stations, no access points. Can you kind of have nodes, just talk to each other from like ad hoc connections and multi-hop? Just send information from one to the other to the other until you get.

to your destination. So that was my PhD thesis, you know, at that time. And our hope at that time was basically that we don't really need like a lot of infrastructure in places where there may not be enough wireless infra. So however, it turned out that even in places, developing countries and other places, there was widespread infrastructure deployments. And the only real people interested in what we were doing was, you know, DARPA and the US defense and so on. So I moved out from working on, like, peer-to-peer wireless to work on computational genomics. You know, I was a post-doctoral scientist at Berkeley, Stanford, you know, started here at the lab at the University of Washington, all working on, you know, computational genomics, trying to

understand how information is encoded in the DNA. Like, around 2018 January, my PhD advisor called me and he's like, hey, Sharam, you know, there is this peer-to-peer systems, like, that we studied for many, many years. this thing called Bitcoin. And the two problems we used to always think about from a theoretical viewpoint is what is the maximal throughput of these systems, pair-to-pay systems, and what is the minimal latency, right? Like, you know, whenever you see a wireless advertisement, they're like, oh, one GbPS and like 20 millisecond latency. This is the kind of thing that you have to obsess about if you want to design those systems. And it's like, oh, this system is the worst in

throughput and the worst in latency. But it has some other, like, amazing properties. So do you want to come research this? And I'm like, I have memories of doing this before and that didn't end up well. So I don't want to do this. I came to genomics because that's something that I think is really useful to all of us. But it took me like three to six months of like thinking about the underpinnings of what this could be, why actually I wanted to study peer to peer, all of these things. But really like the tipping point for me was, you know, realizing how it fit with one of my

core principles, and this actually comes from U.L. Noah Harari from his book Sapiens, where he mentions that the evolutionary advantage of humans is that we cooperate flexibly in large numbers, right? Like, it's not that we're intelligent. It's not that we're anything else. It's the fact that we cooperate flexibly in large numbers. So if this is the evolutionary advantage of humans, anything that boosts this ability to cooperate flexibly in large numbers is a kind of like a civilizational upgrade. And that's the context through which I started seeing crypto is, if you can remove trust frictions, then it massively enhances our ability to cooperate with each other. And just like the internet is the information superhighway, crypto could be our

coordination superhighway. And once I got this, it fit in with my own life philosophy. I'm like, okay, now this is something that even if it doesn't go anywhere in three years, five years, you know, this will go somewhere in 30 years because it's an upgrade. And an upgrade to humans is what I was looking for. So I got it. That's the story. But I've been mainly doing research at the University of Washington. You know, we came up with new consensus protocols, scalability layers, data availability,

game theory for some of these things. This is the kind of thing like core infra is what professors are usually good at. I used to work on everything on the infrastructure and protocols outside of new cryptography. So that's the research at the University of Washington. And how it led to eigenlayer is when I was doing this, you know, the first the instinct I had when we came up with new consensus protocols is like, oh, let's just take this and go show the Bitcoin guys, how cool it is, and then they'll just upgrade themselves.

And I realized, like, you know, my own nivet in thinking that. And then, like, I started interacting with the Ethereum guys. And I'm like, wow, this is much more welcoming, much more open to new ideas. But I still felt that there is, you know, this is a massive protocol and nobody is going upgrade or change their protocol like randomly in different directions. It takes like, you know, several years of commitment to go in a certain direction. And the thing that I was left wondering with was this phenomenon of at that time what we were calling prof coins. Professors had to come up with, you know, as they came up with new consensus protocols, the only way that, you know,

that could come into the industry was that you had to go build a whole new L1. And the only way to build a whole new L1 is to have a token of value securing it. And this, I thought, was a complete misfit to what professors are used to doing because, you know, they come up with new cool technologies, but not to build new ecosystems or create like a decentralization movement. That was kind of like at the base of my thinking is how do we repurpose existing networks to go to other things so that this, you know, latent energy, which I was perceiving a lot, is a lot of really good ideas exist in the academic sphere, even as implementations, but never make it into reality. So that is kind of the beginning of the journey that led to eigener. So was there like

an aha moment? Was there a eureka moment? When did eigenlayer as a concept pop into your brain? Yeah. For many years, I've been having this question, which is, you know, how do we repurpose existing trust networks? And, you know, we had many different variants of ideas. How do you use proof of work trust to supply it to somebody else, some other chains? We wrote a bunch of papers on that. But what happened was I had, you know, as a professor, one of the main milestones is to get tenure. So I got my tenure here at the University of Washington, Seattle.

And that meant like I can take a year or two leave and go explore whatever other things, you know, I want. So I took a leave. I said, okay, I'm going to kind of figure this thing out, which is how do you supply trust flexibly. And we called our project, eigenlayer, even before we had a solution to the problem. The eigen layer is basically eigen is your own layer.

So anybody should be able to come and build their own ideas and technologies into this common system. So that was the vision. We didn't have a solution to how to do it. Initially, we had a different version of the ideas and so on. It took like over six months to evolve into its form. But the main kind of like epiphany was basically that we were looking closely at merge mining. The idea that you can supply the Bitcoin Proof of Work Trust to anybody. else by saying that the same hashes that you're doing in the Bitcoin Provo Work or in Ethereum

Provo Work before the merge can be supplied to secure another network. But there were major problems with this thing, which is what made it not take off. And the major problem was, if you're mining Bitcoin and mine another like altcoin, right, using the same Provo Work energy, even if 100% of the miners mine this other coin, if they go and attack this other alt-coin, they have no penalty. At least if they attack Bitcoin, they're going to lose the value of Bitcoin, which means they lose the value of the equipment

that they've invested heavily in. But if they go attack this alt-coin, nothing happens to anybody. Like, most of their value is in the Bitcoin. So merge mining had this like zero crypto-economics associated with it. So it's just easy come, easy go, right? Like, you're not putting anything,

no skin in the game. It was all carrot, no stick. Exactly. And Bitcoin's kind of like that too, but the stick in Bitcoin is that, oh, you invested a lot in your mining equipment. And then, you know, the mining equipment's value goes to zero if you go try to attack Bitcoin. But that's not the case when you attack an alt-coin, which is like an even more, one more level, laden on top of it.

So you get basically no incentive transfer. And the fact that one of the most important reasons we went to proof of stake is not even the energy and the issuance and all these things. it is the ability to do negative incentives, right? And that is such a powerful thing that one of my underlying, you know, when you think about how to cooperate flexibly in large numbers, one of the underlying important things is that there should be like a working system of karma, like, you know, attribution of who did what, and they should get the thing that they did.

You know, you do good, you should get good back. If you do bad, you should get bad back. You cannot socialize your own, like, attacks, whereas privatize your own gains. And this is the kind of system that proof of work was. Because if you go and do an attack, then everybody's all Bitcoin holders are affected. Right.

But your own bribes, you'd gain or like whatever value you gain, you gain separately. But as proof of stake had this very fine-grained karma, which is that if you go to an attack, you will lose your eat, not anybody else. So I think having this fine-grained system of like positive or negative incentives is super powerful in actually creating these kinds of systems. And okay, you know, can we do instead of merch mining, mud staking?

And that's what later became restaking. It's interesting to see that the argument for proof of stake, for eigenlayer, for restaking, it seems like just a logical continuation of why proof of stake in the first place. A lot of the arguments that you're giving, I remember Vitalik saying, like, about just the economic security model between proof of work and proof of stake, like what's more secure? if you lie to the system that somebody comes takes all your money versus you lie to the system, you just stop receiving new money. Like the one where you just have all of your money taken away from you is going to be much more secure because that incentive. And also just like the idea of

flexible security just makes sense in a Turing complete proof of stake platform. But I'm wondering if we can just try and do the extreme, explain like I'm five, maximally simple, left side of the bell curve explanation of restaking. So if people understand Ethereum staking, there's no way they can listen to banklets and not understand what Ethereum staking is. So starting from there, what is restaking in its most simplest form? Restaking is the idea that the same stake that is used for securing the Ethereum proof of stake network can now be used to secure many other networks. That's the simplest version. So in staking, what you do is you lock a bunch of stake and then you're saying, I'm going to validate the Ethereum blocks correctly as per the

rules and the covenants led down on the protocol. If I don't do it, I'm going to lose my ETH. That's the covenant that you're opting into when you're staking in Ethereum. If you restake, you use the same stake in eigenlayer. Like, you take the same stake. Now you not only add a covenant that you're going to validate Ethereum blocks correctly, but you add covenants that I'm validating David's new Oracle correctly or Ryan's new chain correctly. And if you don't obey these covenants, you may lose your eat, just like you lose your eat in the Ethereum-based layer. And one way of visualizing this is you will talk a lot about like blockchains as nation states kind of analogy, right? And if you think of like Ethereum as a nation state,

you have the stakers or the validators who are the army for this kind of nation. This army secures against certain kinds of attacks, which is you cannot do a double spend. You cannot do an invalid block. These are the basic things that you get when you're basically validating the Ethereum blockchain. But to have a functioning system, you not only need this ability to secure this kind of a land border, which is block validity and double signing and stuff, you also need all kinds of other things. you need to make sure that your bridges work correctly. You need to make sure that your data storage protocol works correctly.

You need to make sure that some other, like, features, all of them work correctly. Can we repurpose the same like Valer Set or the Army to go secure all these other things? And, you know, that's like protecting the naval border and like protecting the air surface. So that's basically the expansion that we're doing is, instead of restaking, you can also think of this as programmable staking. You know, when you're staking, you're basically opting into the specific covenants laid out in the Ethereum protocol. In programmable staking, you're opting into any sets of positive and negative incentives, other people write. And out of your free will, you can opt into that and say that, hey, I'm going to go secure these five other things or 10 other things. So with eigenlayer, it simply says, hey, you've taken your ether and you have opted into slashing conditions on the beacon chain.

would you like to take additional risk to do other things for other chains? And the reason why somebody might say yes to this question is because the things that if it's an Oracle network or another like layer two or data availability network is that, well, you get paid for that risk. You get paid for the opportunity to validate other chains. And so where does eigenlayer actually sit in the tech stack? Is it a smart contract in the application layer? Is it some like software that like you run as a sidecar along with? your Ethereum node, like, where actually is eigenlayer? Yes. The way I think about eigenlayer is it just explaining functionally, eigenlayer is a series of smart contracts, which interacts natively with staking. So that's the important thing. So somehow you have to be able to stake in Ethereum

and then specify to the eigenlayer contracts that you have given this power to it, right? Which is the power to slash and the power to incentivize, you know, the power to earn rewards. And so eigenlayer is functionally a system of smart contracts on Ethereum. And if you are a staker and you want to opt in to eigenlayer, there are two forms of restaking that we allow. One is called native restaking, which is normally when you stake in Ethereum, you set your own hardware wallet as the withdrawal address so that when you withdraw, your money goes into the Ethereum execution layer address, which is controlled by your hardware wallet. instead, if you opt into eigenlayer, you add one intermediate step in the withdrawal flow.

You go and set to the Ethereum staking, you say that the withdrawal addresses in the eigenlayer contracts, a specific region in the eigenlayer contract you control, called an eigenpod. And in that eigen pod, you specify that the pod owner is your hardware wallet. So essentially, it's just adding one more step in your withdrawal flow. Instead of directly going into your wallet, it's going to go to a contract which is partly controlled by, and partly has the slashing power given to the eigenlayer contracts, and then you can now, like, potentially withdraw. So in the normal mode, if you did everything right, according to the eigenlayer system, you'd be just able to trigger the withdrawal. It goes to your part, you know,

where you control the money, and then you can withdraw it back. Except if you have done a provable violation on, according to the eigenlayer contracts, in one of the covenants that you opted into, you might lose a portion of your eat and only be able to withdraw the remainder of the eat, because you've got that portion slashed. And when you're doing this, you know, this is the on-chain actions that a Staker is doing, which is opting into this system. The off-chain action is because you're opting into this new David's storage protocol or Ryan's new chain, you have to download the node software for those other things and then run it.

And we provide an interface for making it easy to do all of these things. But you have to actually download it and run it in your off-chain thing. Because you know that if you don't run this thing and like make claims and stuff, Firstly, you're not going to get the rewards, and you may be subject to the slashing conditions that you're opting into. So icon layer has two parts. One is the on-chain part, which is, you know, you have the smart contracts, which is opting in. And then you have the off-chain part, which is you have to download and run these other things. So while logically this is how it works, and technically this is how it works, I think at an abstract layer, it is almost like putting a hook into the root of thrust of Ethereum.

You have staking, which is at the kind of way base of Ethereum, on top of which, you have a stacker. on top of which you have the consensus layer beacon chain, and then you have the execution layer, get nodes, and you have the particular ways in which blocks are produced. But somehow it's able to kind of go to the very route, which is the stake, and then say flexibly transfer attributes of the decentralized trust that emerges from there to other services that may want to rent portions of this trust.

So for those who aren't familiar with Ethereum staking, you set a withdrawal address to an Ethereum. address so that when you are done staking, the ether goes to that address. And presumably you would send it to your address. But, Mr. Rom, what you're saying is that in this scenario, you actually send it to the eigenlayer address. And that eigenlayer address is like the enforcement layer part of eigenlayer, where like if you need to be penalized, that is where you would get penalized. So like, you actually don't get your ether back until you go through like the enforcement, like the gateway, to make sure that you've done all of your duties correctly for all these other networks.

That is right. You are also signed up to do some sort of certain role for these other networks, be an Oracle network, a layer two. And they will go also to that contract and say, hey, this person did their duties. We don't need to slash them. You can let all of the ether go out and back into their actual address. Or they will say, hey, actually they did do something bad. They need to get slashed. But that brings me to my next question. Does that mean that eigenlayers really only suited for objective things where the thing that you have signed up to be a resaker for can actually make a unchain proof that this person or this entity did some, a slashable offense. That's my intuition. Is that correct? That's partly correct. The way we think about it is if you think about what is the root of decentralized trust. Another mental model, which may be helpful for some of the listeners, is, you know, first mental model is eigenlayer is a restaking or a programmable staking protocol. The second mental model is, eigenlayer is a marketplace for decentralized trust. If you think about decentralized trust, when you think of what is a crypto solution and what is not a solution. You basically say that anything with a decentralized trust is a crypto solution, anything

without decentralized trust is not a crypto solution. It's a very sharp boundary. So decentlyized trust is the raw material out of which all crypto products are manufactured. And the decentralized trust in Ethereum is distilled in a specific way. You take this like group of nodes and stake and stuff and there's a particular coordination, consensus layer called the beacon chain. And then there's a particular execution layer called the EVM. And then on top of which there's a particular things like the gas limits. And then it induces this thing called block space. Oh, you have 15 million block space. Give 15 million gas every 12 seconds or whatever. And essentially, Ethereum itself is a marketplace for decentralized trust, right? But it's decentralized trust

distilled into a specific product called block space. So you have this notion of decentralized trust. It goes to the consensus, it goes to the execution, it goes to the gas limit. and then creates an object called block space. And the block space economy is clearly emerging in Ethereum to be one of the preeminent economies in the crypto space precisely because the raw material of, you know, like I said, every crypto solution needs decentralized trust. And Ethereum is a marketplace for decentralized trust.

But it's a marketplace for decentralized trust distilled in a specific direction, using a certain consensus protocol, using a certain virtual machine, a certain scalability layer, and a certain gas, leading to this economy of the block space. But decentless trust itself can be supplied potentially in a much more raw manner. And that's what eigenlayer is. Igen layer is a marketplace for raw decentralized trust. And what is raw decentralized trust? Like, what is

decentralized trust composed of? Decentless trust is composed of the economics of decent less trust, which is, oh, I have some amount of money state. And if these services or some combination of these services go wrong, then those eat will be burned. or redistributed or whatever the covenants are. So that's number one, is the economics of it. But number two, even in Ethereum, this is by itself insufficient. If it's only the amount of each stake that matters,

then we wouldn't have to worry about decentralization. We would say let Black Rocks take $35 billion, and then we'd be fine. Like, why do we worry about homesickers? Why do we worry about, you know, solo node operators and all of this? It's because the trust model of Ethereum itself is not purely reliant. on staking, on money.

It relies on a combination of money and collusion resistance. Why is this? Because money only lets you slash objective violations, even on Ethereum, right? Like, if you double sign, then it's an objective violation.

I know David signed block number 30 with hash X and block number 30 with hash Y, and that's just not allowed. So I'm going to slash David. Like, it's an objective, on-chain verifiable, algorithmic thing. But what if, like, David and Ryan

and everybody collude, and then they're not allowing certain transactions to go on-chain. They're censoring a fraud-proof. They're censoring an oracle input, like whatever things. They've taken some off-chain bribe and going and doing this stuff. Censorship is not on-chain verifiable, because how do we know inside the blockchain that David has excluded some events from the blockchain? Because, you know, there is no locus. There's no reference point for us to know that.

We need, therefore, block producers to be divers, right? Because that's integrating different perspectives into block production. Because if there is many, many independent agents who are actually doing it, the probability that all of them can collude and form some invalid input or, like, sensor is going to be much lower. And not only that, like in Ethereum, we also have this concept of social slashing. And the concept of social slashing is needed because safety is algorithmically slascible, like safety violations if you violate safety like oh you know you sign two things or you sign an invalid block these are objectively verifiable but liveliness or censorship by lifeless violations or censorship

is not objectively verifiable but it's subjectively very fiable from us outside it's obvious if a fraud proof has gone into ethereum and not being included for seven days this is why vitalik and others encourage that the fraud proof time period not be like one hour in practice likely one hour is good enough but just to make sure that in the most extreme event, if censorship's happening for seven days, it's human observable. It's knowable for all of us. You know, people are going to shout.

Somebody's going to tweet. Somebody is going to write in the Reddit posts and in the Ethereum forums and so on. So the idea, the way Ethereum structured is safety is on-chain observable and slashable. So safety violations are enforced based purely on economics. Liveness is enforced by two different things. One is decentralization, which is integrating a variety of different perspectives,

so that different people have opportunities to engage in block proposal. But also, from the outside, we have a vantage point to see and say that something bad happens and we can safely agree on that something bad happened, which is censorship happened. Then there is an ability to fork. So these two things interlock together to create the Ethereum security model, which is the guarantees of the base layer that you have safety and you have liveliness. So that's just like explaining the underlying modules of decentralized trust in Ethereum itself, so that now I can explain the same thing at eigenlayer.

When somebody is wanting to build new services, they need to think of how do they take these raw elements of decentralized trust and then compose the services they want to compose. This is a very sophisticated task, right? Like, you know, we had Vitalik and Justin Rake and Darncrad and like very sophisticated actors actually come up with these protocols. calls. And we expect the same thing to be true at the eigenlayer level as well. So what are the raw elements of decentralized trust that eigen layer can supply? On the one side, we can supply economic trust. Why can we supply economic trust? Because you're restaking, right? If you're restaking, then, you know, essentially you can subject yourself to slashing and anything objectively

verifiable can then be slashed through the eigenlare system. That's number one. So you can supply that. So what if you had a protocol or aspects of the protocol like liveness, like censorship, that do not rely on economics alone, they need a notion of decentralization. You could come to eigenlayer and just borrow the Ethereum decentralization. You could somehow say that I only want the homestakers of Ethereum to participate. I only want these group of notes to participate. And then say that I only want a decentralized quorum. I don't care whether they bring $35 billion or only $350 million,

because it's not the economics that drives this particular asset. of trust. I want as many distinct agents to participate as possible in my consensus protocol. Let me give a kind of like a very tangible example, secret sharing. I take a secret, and I want to distribute the secret to many, many nodes. And there's a covenant in the secret, which is that if something happens, then reveal the secret, right? If that thing doesn't happen, don't reveal the secret. What I do is I take my data and then encode it into small portions and no one person has all the data. I take these like, you know, 5,000 homestakers in Ethereum and split this secret and send it to all of them. Now, the only way I can reconstruct

the secret is, you know, more than a majority of them come together and reveal their portions. Then I can use an algorithm to stitch all those pieces together and then recover my secret. So this is called Shamir's secret sharing is a basic cryptography primitive. And if you want to build something like this, economics is not useful because it is not observable. It is is not objectively attributable whether David and Ryan and others like colluded together and reveal their portions of the secret because who knows, maybe they met in a secret room in the bankless office and revealed the secret. Whereas it's not observable. So I'm only relying on collusion resistance. You know, if I bring 5,000 homes takers from around the world,

where are they going to meet and reveal the secret? They may have to go through some, you know, it's not easy. So by building this barrier, you can actually bring aspects of decent decentralized trust. So, Igonlead is a thing which allows slashing only for objectively attributable offenses, but it allows the usage of decentralized trust for other things. Imagine I can have an article which allows people to bring in inputs, but has no slashing. You are taking an assumption when you're using the article that a majority of the nodes are honest. And if you take a very distributed group of nodes, it's possible that your assumption is satisfied. So just like the Ethereum protocol designers had to have like a very first principles understanding of

What is decentralized trust? What are the aspects of decentralized trust? How do we combine them to actually make something useful and productive? Builders on top of eigenlayer also need to have the same first principles of understanding of what aspects of decentless trust exist? How do you mix and match these two obtain services that have the properties that you want? This opens up so many different channels. I feel like we could go down Sri Ram, and I'm conscious of trying to take all the paths at once. So we'll do our best to kind of navigate because you've opened up so many different topics.

of discussion here. So we'll try to get to them all, including the applications that this enables, which feels like where you left that conversation. But just so I'm understanding it, so the idea is that eigenlayer is really sort of modularizing the decentralized trust of Ethereum. So bankless listeners should know that, like, obviously we think, and I think generally it's accepted Ethereum is maybe the most decentralized network out there. If not, then some people would say it's number two to Bitcoin. Anyways, what eigenlayer is doing through restaking is modular. modularizing the decentralized trust component. So in the way the market could buy decentralized trust from Ethereum is through blocks-based sales. That was the commodity that you

could purchase. You want Ethereum's decentralized trust? Here, we've turned it into a block that you can purchase, right? And that was the export from Ethereum. What restaking and what eigenlayer is doing is essentially saying, no, that's not the only form of decentralized trust. That's not the only commodity we can actually produce. There's a layer down, which is further, which is this concept of decentralized trust, and it could take a different form. It doesn't have to be block space,

and it can take the form of economic trust and decentralization, but essentially any chain or any application can tap into that supply of decentralized trust and create something different out of it, not block space, but maybe something different. And that concept in itself is very, very, very, very powerful, I think. And I think we're just scratching the surface of imagining what it could be useful for. But Sri Ram, your counsel is like, hey, and if you're designing an app

or designing a chain to take this new primitive into account, you have to really understand what you're doing, right? This is like potter's clay, and you have to like make sure it forms the use case very precisely. One thing I want to ask, though, is from a staker's perspective. So many bankless listeners hold ether, the asset, of course. Maybe they're staking. it, some portion of it, I want to be clear on kind of the risks that somebody takes on when they restake. Okay, so first of all, it seems like they have to have their ETH staked in order to restake it, right? So we're saying that. You can't do this with raw ETH. Is that correct? That's right. That's right. So you can either do it with ETH staked or you can do it with

liquid staking tokens. Like if you already have like R-Eath or let's say Lido-Staked ETH, you could deposit the staked ETH. You could also theoretically do it with just raw eth, you know, but the assumption is if you're okay with the risks that come with free staking, you should likely be okay with the native staking. So that's the assumption on which it's built. Got it. Okay. So the first layer of risk is fairly well understood by the market. That is you stake your ether. There is some risk associated with that. A lot of that is protocol risk. If you stake it with a third party or staking pool, then you accept another protocol's layer of risk. So that's a risk layer one. It seems like there is risk layer two, which might be eigensmart contract risk. That's correct. So you guys are putting some code out there. And we all cross our fingers, do security audits, have high lindy effect, make sure the code is secure. there's the chance that that is not secure, that there's some element of risk associated with that, and that would apply across all of eigenlayer, anything that uses eigenlayer for restaking, right?

So that's a second layer? That is correct. Okay. And then the third layer is the new slashing conditions, and that can be application-specific, and folks can kind of opt into that. What this reminds me of almost is we used the kind of the nation-state analogy a little bit earlier.

Bankless is called Ether, the Internet Bond for quite a while. like ether when stake is kind of a bond. It's almost like a treasury bill. It's a T bill that we create. And if you look at the one year short-term treasury market in the U.S., the yield right now of that is 5.3%, right? Which is kind of interesting, 5.3%. Ether, the asset when staked, is about in that range, right, when you include M.EV and such. We're between 4 and 6%. So the invitation here is to take that almost like you would with T-bills and be able to use those T-bills. And be able to use those T-bill. to economically secure something else. That is almost an analog here.

Of course, like, T-bills are not really very fungible in the U.S. And one might argue they could be or they should be. I kind of feel like I'd rather have a T-bill than use dollars, right? Because that T-bill is giving me, you know, the 5% interest rate that maybe I should be entitled to. But that is not a fungible unit. But on Ether, it really is. And so you can use your staked eth, the protocol risk of Ethereum,

and restake it, and you take some other risk in exchange for some reward, and we would imagine that reward would be, obviously, beyond the risk-free rate of staking eth. Don't be triggered, bankless listener, when I say risk-free rate, okay? I'm using that very precisely. Of course, all crypto is risky. You can lose what you put in. We're ahead and west. You know this. But the risk-free rate for ether is like, if you want to return on ether, there's no better place than actually staking ether. There's no less risky place than staking ether. So that becomes the risk-free rate. And then anyone who wants to tap into the trustless security of Ethereum is going to have to pay some premium on top of that.

So from a staker's perspective, you could stake your eth at like four to six percent, annualized, you restake it in eigenlayer. You take on some smart contract risk. And then you opt into the applications or change you want to support, and you can further increase your yield above the risk-free rate. So there's more risk here, but now I may be going from a 4 to 6% type yield to like a 7, 8, 9, 10%. You really can't predict this because you're just the marketplace for this. And the market will determine what the true yield is. Is this all correct? That is absolutely correct.

In terms of things like the smart contract risks on eigenlayer, I think definitely that is a significant aspect of how we think about when we try to build systems. we are trying to think of not only mechanisms on how to audit the contracts, how to make sure that we have very minimal surface, but still we also think of other things. For example, in eigenlayer, there is when before you withdraw your money out, there is a withdrawal lag of seven days. And this is true for most staking and unstaking protocols. It is not a short-term activity like a bridge where you're like, oh, you know, why is my funds still day? It's a long-term activity. It's much slower in timescale. And this lets us exert some amounts of other controls.

For example, we have an ability to pass the contracts. There is something called the community multi-sig, which is composed of members, not from the eigenlare team, and it can upgrade the contracts. So having like a system of like checks and balances so that we can minimize but not eliminate the risks associated with the eigenweiler system, these are. steps that we've taken, but absolutely correct that even if the eigenlayer system has some amount of risk, each service that you're opting into has also some additional risk because you have to trust their smart contracts and such. And we have put in measures for some of those things as well.

For example, one of the things that we do is there is a committee called the slashing veto committee, which basically the role of the slashing veto committee is if you got illegitimately slashing, because of a bug in the slashing contract, then they can veto the slashing. They cannot add new slashing. They can only veto an existing slashing. And what this does is also segregate, because you know, you have this veto committee, which can veto slashing. And this veto committee will only accept some set of services because they have to be able to understand the service in order to veto what is a legitimate and what is an illegitimate slashing. So what this does is create a tiered system where there is a permission tier which is onboarded by this veto committee

because they're going to vet the various conditions. For example, like the composition of trust that I mentioned, you should only have objectively attributable false. If you're using subjective things, then use decentralized trust. Don't try to slash it. Like all of these kinds of things, which are protocol specifications, can be checked by this onboarding committee in the permission tier, which is protected by the slashing veto. There's going to be another permission tier where if you built a protocol, if you built a service and it is well ossified, then you would say, like, who is the flashing committee? I don't need them. I'm going to go to a tier, which is not protected by this. But you need to be able to convince the stakeholders who are now

taking an excess risk, right? Because they're not protected by the veto committee. You need to convince them. And if a random like D-Gen protocol is built on top of this other service, it's up to them to then go and convince the stakeholders that they have to go like do this crazy thing. So by creating a system of checks and balances and internal social consensus inside the eigenair system, the slashing veto is an internal social consensus, right? It's a system of, like, you know, participants which can basically veto slashing. They cannot add on slashing, but they can veto slashing. So things like this actually create a very nuanced system, which has a lot of internal checks and balances. But at the end of the day, the high level

picture is what Ryan laid out, which is you have your ETH. You have your ETH. You. You want to earn additional rewards for validation services. So you use the Ethereum base layer staking that is the absolute risk minimal thing that you can do. On top of which, you may say, oh, I like these protocols. These are pretty risk minimal. I'm going to opt into them. I want to just say one important thing, which is that if you look at the scope of what possible revenue opportunities exist in Ethereum or in blockchains in broadly, you know, you have things like, oh, I can go and participate in decentralized finance. I can go and participate in a landing market. I can go and participate in a kind of like a market making or whatever and then

earn like a bunch of yield. But all of these yield, you know, all of defy yield is you're underwriting some price risks. That's what you're getting a yield for. You're underwriting a price risk. Like you are saying, oh, I don't believe like eat to USD is going to change that much or like this to that is not going to change that much. And because if it does, you're going to lose money. going to underwrite like some volatility risk. That's what you're doing in a landing market. Like you're underwriting some set of like financial risks, price risks when you're like trying to gain yield in defy. But really, and this is not unique to blockchains. Blockchains make them transparent, right? Like unverifiable that some of these conditions and covenants are held.

But that's the only reason you have a non-zero yield is your underwriting price risk. Because if that's not the case, then you don't get any yield. What happens in eigenlayer is that we have this realization is validation yield is the unique thing about blockchings. So what is validation yield? Validation yield is you hold a bunch of EAT and then you put it down, you lock it down in a contract, and then you are providing a service. It's a service provider fee. It's a combination of locking up some money and providing a service. That's what staking yield is. And staking yield is non-zero because of an information asymmetry. What is this information asymmetry? As a staker, you know you're honest. And if you understand the protocol and its risks, which is potentially doable, right,

if you understand the protocol and its risks, you can basically be sure you won't lose your eat unless you're malicious, right? That is an external party. Like, you know, you look at me and you say, oh, Shreda, maybe he's good, maybe he's bad. So you don't know that I'm honest or not. You're going to say, oh, but I see he's putting down his money. And if he's not honest, he's going to lose this amount of money. So from your point of view, you're saying, you're saying, you're saying, I don't know if he's honest or not, but if he's not honest, he's going to lose this money. So it's predicated on this information asymmetry between the service provider and the service receiver. It's a very unique form of yield that is created inside the crypto economy.

And it can underwrite a lot of digital trust. Like, I'm a server and I'm providing a certain service. I'm a storage provider and I'm providing a service and I'm a matterverse like system and I'm providing a certain service. There's all kinds of these services that people want to provide, and because it unlocks this new kind of economy, which simply doesn't exist anywhere else, there's no parallel to this. So the rate here could be quite different from the rate that you would get on other instruments. We're going to get to all of the different applications in just a minute and what this innovation can breed. But just, I want to pause on the staker piece. Guys, staking is about to get real interesting, like, real interesting. Because imagine now

you are a staker, and you have the opportunity to maybe juice. your yields by some amount, and there's thousands of different options in order to do that. And I'll remind bankless listeners, you know, as usual, right, in a competitive marketplace, higher reward equals higher risk, okay? So you want to go sign up for, you know, the double-digit API. You're probably taking commensurate risk associated with that. If you don't know what you're getting into, you better not go do that. But imagine this. kind of competitive marketplace competing over that decentralized trust. And as a staker, you're kind of at the center. You're what all of the other chains actually want and demand.

I think this is very fascinating. You can see why we are so fascinated by this topic is because there could be entirely like rating agencies just based on rating the risk of different eigenlayer type of applications or chains. And like this is going to spawn so many different industries and different companies. That's why we're so excited about it. We should probably get to some of the new things that can be built on eigenlayer. David, you want to take that? Yeah, just to really reiterate this. I think it's important to be able to put into people's brains, like what these new networks actually could be. Like, all right, you can restake your ether. We haven't answered the, okay, to what question? So, like, Sri Ram, what are some examples of, like, networks that could

come alive because of restaking, because of eigenlayer? Can we just make this, like, really concrete for listeners, brains. Yeah. If you look at the kind of broader crypto economy, I think let's start with this high-level observation that decentralized trust underpins pretty much all crypto solutions, right? And so you start with that and then you say, okay, what are the other innovations people are doing, which are currently potentially outside the Ethereum ecosystem that we can now like supercharge with this $35 billion plus dollars of staking that exist in the Ethereum ecosystem? system. Number one, new chains, right? Like, you look at, oh, I'm going to start this new chain. I know, why do you start a new chain? You start a new chain because you have a new consensus protocol. Okay, this new consensus protocol is going to achieve finality in like half a second. Okay, that sounds pretty cool. Can we bring that to Ethereum? You stick it, and then you opt in, and now you're running a new consensus protocol. And this new consensus protocol can get finality at like one second or half a second. And if you're If finality is broken on this new consensus protocol, I'm going to be able to slash heat.

It's an objectively attributable offense of signing two blocks with the same block number. That's a superpower, one example. Like take any L1 is now part of this restaking economy. Okay, but that's not all. Actually, I think this idea that you're going to build all these silos of many chains, I think it's not a good model. I want to draw the listeners into a old model that happened in the internet. Like, imagine it's in 1994 and you want to build your web application.

What would you do? You would basically have to build your own server, make sure the server is performant. You'd have to build your own identity stack and say, okay, you know, how do you log in people? You would have to build your own payment stack so that when they come to your website, they know what they're doing. You have to build your own database stack so that you have like a history and stuff. store and then you would have to build like the thing that you really wanted to build. So this is the internet web application development in like 94. But how does it look in 2023?

You'd say, oh, AWS is the server of choice or whatever, Azure or something, right? Like, so you choose one of the clouds. Then you say, I'm going to choose like a SaaS service, like an, you know, Oath as an identity as a service or a payment as a service using Stripe or PayPal or something else. use like a DB as a service on top of it and then like tie all of these together and then hey I just do the one special thing and then create my application of choice.

So that's what you do today. And what we envision is of course you want to bring the same kind of like a development economy into blockchains. The problem is AWS cannot be the substrate. Right. Like the substrate needs to have decent less trust. We already established that that's what demarkates

a blockchain solution from a non-blocking solution. Now we have the decentralized trust substrate, which is Ethereum Stakers, putting down money and computational resources to supply that trust. Igenlator makes it more flexible. Now you can have services built on top. Just like the SaaS software as a service was the corresponding economy in like the cloud era, you build many SaaS services and then any end application concatenates these SaaS services to form the application of choice. imagine like a composability layer, imagine a bridging layer, imagine an oracle layer, imagine an identity layer, imagine a settlement layer, imagine an ordering layer. When you're building like already the modular economy has started to hint at what this looks like,

right? You have a sequencing layer, is separate. You then have a bridging layer, is separate, you then have a settlement layer, is separate. Or a data availability layer is separate. But this is not all the components is what I'm trying to allude to. Just like you look at the SaaS economy, there is many, many, many SaaS services. A typical web application uses 15 SaaS services and concatenate stem, right? And we would expect the same thing to happen in crypto. Like, why would we think otherwise? And SaaS is one of those categories where you can take one concept and then like dive deep

and really kill it. Like secret sharing is a SaaS service on the crypto world, right? Like secure multi-party computation is a SaaS service, trusted execution environments and doing a particular thing on top of it is a. the SaaS service. There's many, many, many core primitives that are missing in the crypto economy to actually build all the crazy things that we envision to build here. So to make it a little bit concrete, so I just want to present a high-level vision and then I can make it a bit concrete. Let's just look at the role of modular economy today on Ethereum and kind of envision,

what are the missing components and how we can supplant them with eigen-layer? Because some people get very confused when they look at eigen-layer, they're like, oh, is this going to be competing with the layer-2 landscape? No, it's completely complementary to the layer. to landscape. Why is that? The architecture of layer two is the way to scale Ethereum, is the way to scale any decentralized blockchain. Why is it? It's because you offload computation, you offload memory management into a separate system and then provide cryptographic proofs that these have been done correctly to this decentralized network. If you didn't do this, if you just said, oh, I have like Ethereum, I'm going to restake and then run like thousands of chains. Now every validator

needs to run like thousands of chains, that doesn't make any sense. Like, we are going to kill decentralized trust if we try to do that. So what we need is these services that are highly scalable that can then be built on top of each other so that we keep the underlying notion of decentralized trust intact. You know, a DGEN version of restaking that could have been built, like even one year back, would have been take a liquid staking token, forked Solana, and then run on Ethereum Trust Network. This would be like a very bad way of designing restaking.

because it will kill the decentralized trust on which this system's built. You just gave someone a great idea, I think, sure that happens. I'm sure, right? The thing is, the way eigen layer is designed is it allows for modular aspects of trust. Somebody could build that, but somebody can also build the more decentralized, the more stable version. We're launching everything together as opposed to saying that this is the only thing you can do with it.

because when that's the only thing you can do with it, all the stakes starts drifting towards that because there's no yield to be decentralized. You need to be centralized in order to make any yield. And so we're trying to preserve the core values of Ethereum while allowing this marketplace. And that's why I want to highlight what we can do for the roll-up landscape

using something like Agenlare. So number one, data availability. The total data bandwidth of Ethereum is somewhat constrained. It's right now at 83 kilobytes per second. And there is a roadmap in Ethereum to expand this from 83 globytes per second to 1.3 megabytes for second using this method called dunkshadding. It'll take two to three years to get there. But in the free market, everybody trying to build new interesting things, can we take

some of those best ideas and already try them out on eigen layer? And the first attempt is what we are doing ourselves, a solution called eigenDA, which is the data availability layer. It runs at 10 megabytes per second, not even 1.3. It's basically just dunk sharding. built with, because it's a more flexible, more open system, it doesn't have to interface with consensus and other things that cold dung starting has to. You can actually like do a lot of interesting things at this layer. And that's one thing that we're already building. And we have a

roadmap to get from 10 megabytes per second over time to even 10 gigabytes per second. So you can scale this out, thousand X. So, you know, we envision the crypto economy to grow, you know, so big that, you know, megabytes per second is not going to be enough. So that's one example. all need data availability and can we provide a cheap and sustainable version of data availability where everybody doesn't have to download everything like nodes do very little work they use data availability sampling and other ideas to actually scale the system so that is eigenda one example arbitram one is pioneering the world of secure ethereum scalability and is continuing to accelerate the web three landscape hundreds of projects have already deployed on

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Can we actually hang on to Eugen, DA, just for a little bit, just because it's super concrete, and it's worth just unpacking this part of this story. I think it's just a good way to understand eigenlayer. If we're using nation-state metaphors, which I guess we are so far in this episode, maybe like dang sharding or data availability inside of Ethereum, native data availability. Ethereum has data. It doesn't have too much of it. It's very, very constrained on that because it's decentralized.

And so maybe Ethereum's data availability is like the United States Postal Service, whereas eigenlayer's data availability is like UPS. Like maybe it's more in the free market. So it's more in the private market. And so it can compete on that threshold. It can compete in that world. And it also doesn't have to be constrained by the low movement that happens at the nation state level. Like you've really got to wait 4844 for dang sharding to actually come to main net. Maybe the private market can move faster. And it's good that the private market and the actual like enthrined protocol of Ethereum like these compete with each other. These is an open free marketplace. There is one like really cool vision that we have for. I

layer is that it is a place where many EIPs compete before it becomes enshrined. So the same idea for layer 2s, right? We have, you look at sharding, right, which was basically like state enshrined like roll-ups, right? Basically, it's an execution charting is a particular version of roll-ups that has to be fixed and enshrined and like by the core protocol team. Whereas, you know, layer 2s were free market competition on top of like, oh, you know, I'm building scroll.

you're building ZKSing. There's so many varieties of ZKEVM, so many varieties of optimistic roll-ups, all of them compete on this free market. And the best ideas are, of course, over a longer time scale, going to be absorbed back into Ethereum. These protocols, you know,

the free market protocols will continue to have an edge because, you know, they're going to have newer or newer features, whereas the core protocol will also upgrade. And this is the same roadmap that we see because you need to be battled tested a lot. And there was no place for tattle testing all these different ideas

before they get enshrined, if it was at the more deeper levels of the protocol stack. And that's what Igen layer furnishes exactly what you're saying, which is that it allows for free market competition on, say, like, what is the right version of dunk starting? Many people build these different versions, and then somebody's like, oh, actually this is the right thing, and maybe not the one Igen Dea is building, but somebody else is building. And that then goes and becomes part of Ethereum itself or a three to five-year time scale.

Whereas on that layer, people are still innovating and saying, oh, it's 10 gigabytes per second, it's not enough. We want to do 10 terabytes per second, and that's what runs on that layer. The important thing about this, too, is that it is secured by the same ether stakers. Essentially, it's the same kind of economic security that could potentially secure eigen-DA, as would secure dank charting. That's right. So there were three aspects of trust on the Ethereum core layer.

One is the economic aspect of the trust. The other is the decentralization aspect of the trust. And the third is the social forking aspect of the trust, right? remember when some transactions not included, you can fork Ethereum. That third aspect of trust is missing in eigenlayer, even if 100% of stake is restaked, right? Even if every staker restakes and runs, when Dangshadding is running, if a block data is missing, Ethereum will fork around it because, I mean, that's the protocol. It's the protocol folks around, like, invalid states.

On eigenlayer, if the same thing happens, we have no ability to socially forked Ethereum. So there is a difference. The dividing line is the protocol. all concerns basically has social faking, which is like a nuclear option, like, you know, going with the state analogy, like the nuclear power is only with the state, it's not with the free market. So that's something I want to delineate. But everything else, the decentralization, in fact, it's possible to have more decentralization on eigenlayer than on Ethereum. Why would I say that? Even if the valetor set is the same, it's because you could say that

I'm excluding these whales, like, who control, like, the top, I take the top 30 valetors and remove it. And only the remains. remaining ones all have power. So to get to a majority in Ethereum, I may need like 30 or 40 notes because they have a dominant amount of stake. Now I remove those 30 or 40 in my service and then say I only have the remaining 9,960 or whatever. Just like all the solo stakers, let's say. All the solo stakers, exactly. Retail chain. Exactly. So you could build like really because it's modular, you can isolate like a, you know, you have this laser like ability to say, I only want these things. I don't want those other things. Or somebody might say I'm building a

Solana on Ethereum, I don't need these like slaggards from home, like, trying to opt in. I only want economic security. I just go with these like just Coinbase and like liquid checking protocols good enough. That's fine. Like that's the free market and that's what it needs to do. And picking up on the whole like UPS metaphor, I want to bring in a third player here, which is like Celestia. Celestia is a data availability solution that is outside of the fault. It is a layer one blockchain that is meant to be a data availability solution, kind of in the same way that eigenlayer DA is also a data availability solution, but Celestia is secured by its own token. So it's like the USPS of Canada. I don't know what it's called in Canada.

Canada Post. Canada Post. The point of like that we're really trying to drive home here is that, well, with eigenlayer, with restaking, we can have the benefits that Celestia has, that Canada Post has, if Canada Post is meaningfully that much better than USPS. We can bring that into the fold, have it be secured by ETH stakers, and then also have that. that data availability solution that is free market competitive, but closer to home, if you consider home to be Ethereum. How do you like that for a metaphor, free roam? That's really good. The one thing I want to say is like, you know, the Celestea guy is bad from Ethereum. And if there was something like this, maybe several years back, it's possible that even Celestia would have

built on top of this kind of a common layer. And also, I want to mention that there is a benefit for having your own token for services building on top of eigenlayer. And why is that? That's because that aspect of the token you can do social forking, whereas you cannot do social forking on ETH. So you can have things like dual staking where you say that, oh, there is a kind of eat stakers are securing this, but also my own token stakers are securing this. But if this service goes wrong, I can socially for these guys. And so that imposes some kind of like an economic penalty, but it's only can be enforced socially. So there are all these aspects of trust like I think Ryan mentioned earlier, like, when you're constructing these protocols, you have to think from first principles what is happening and try to build enough attributes in different layers, just like Ethereum has thought very deeply about these things. So when you're building a protocol, maybe you need your own token, but it's an addition to like whatever trust is coming from Ethereum because Ethereum doesn't have social forking and you want to have social forking on your token. And data is considered stored or available,

only if both these different quorums agree that data is considered stored. So you can mix and match aspects of trust, not only services are modular, trust itself is modular, right? Like, you're going to say, I need decentralization trust for this, I need economic trust for that, I need social forking trust for this. All of these different things come together in order to make your particular service. I don't know if we're stretching the analogy too far here with, you know, Canada in the U.S. and Canada Post versus the United States Postal Service or something, but what's interesting is Canada certainly would not want to, speaking on behalf of a Canadian citizen here. That's me. So Canada would certainly.

not want to leave its social forking over to the U.S., right? Not want to, like, opt into the U.S. congressional rule of law, that sort of thing, right? Of course. But Canada does benefit, I would argue, and I think if you ask any Canadian, they would also agree, from the U.S.'s military security. It's kind of their sort of umbrella of security that the United States of America kind of provides. And Canada, in various ways, like, opts into that, you know, NATO and other sort

of alliances. So it does tap into that military network, which, is very interesting. And you don't know how all of this will shake out. Anyway, observation. I don't see Canada Post being supplemented by the United States Post. But they do use UPS, which I don't know what that means. And there's FedEx in Canada as well. I don't know what that means in our analogy here. Well, they're all United States domicile companies, right? And so can be spawned inside of the Ethereum network and then also be data availability solutions for non-etherium chains. So it can go cross-border. Shriam, you brought up the idea of,

of tokens inside of these resake networks. And I want to bring up a counterpoint that I, too, eigenlayer, too, resaking that I think people want to hear asked. And that is, Sri Ram, I want to go and spin up my own chain or start my own Oracle network or do something. I want to go start a new network. A main motivation for why I would want to do that would be like I get to issue a token. And I don't really care about letting all the eth whales secure my network because they already have all of their eth. I would like to generate my own brand new wealth. I want to distribute my new wealth to all my early adopters and all the eth-stakers and the eth-maxis can go F-off because I'm going to go issue a new token. And that's always been actually the reason why we've enjoyed tokens,

because they are network bootstrapping mechanisms. They really have solved the bootstrapping problem. So why would people want to start their own network with eigenlayer when they could just issue a token? Like you're taking away the cool thing about this whole industry, which is issuing token. So what would you say to this? That I would say history proves otherwise. You go back to 2013, okay? And you could say, why would, in fact, Bitcoiners were saying, why would all these applications come and live inside one common tent, the Ethereum, and just be a tap on top of this Ethereum network? How would Ethereum network itself be secure enough to hold so many applications? It's an unstable equilibrium, is what people said. So two, both the aspects combined here. One is

why would you want to be part of this kind of like a big tent thing, number one? And number two is how would this tent be big enough? Like, how would there be enough stake and value in this to actually secure all these things? And the answer is we saw both the things happen, which is pretty much all daps were built on Ethereum till Ethereum was saturated, right? Like in block space, you know, the CryptoKitties thing happened. And then people are like, oh, maybe this block space is not infinite and it's going to get saturated at some point. So maybe we need to build another L1 or go build on another L1. And it is because it's much, much easier to bootstrap your network if you don't have to also do your security.

It's the same reason why like same thing happened in the cloud, right? Like you go back in 2001, 2002, you'll read articles and 2005, even 2010. You'd read articles that say there's no way companies will migrate to the cloud. except now, like, only the absolute, like, biggest ones even think of running their own, like, server infrastructure. Because it's a headache. It's a super specialty to actually go run a cloud, right? It's not something you want to do.

It's going to add huge overheads. It's exactly the same thing. So first is, DAPs have tokens, right? Like, we're not against tokens. DAPs have tokens, and their tokens can be used for bootstrapping. And in fact, on eigenlayer, you can use your token for. bootstrapping without having any fee, right? Because initially, on Ethereum, if you're building a DAP, initially all the users still have to pay the gas fee of Ethereum, which could be expensive.

And whereas if you're building something on top of eigenlayer, you would say I'm compensating stakers directly from my own tokens, small fraction of my own token. And because it's restaked security, it's shared security across so many systems, the per system fee is much lower, right? So here's a very simple way of visualizing this. Let's say there are thousand applications. each of which can afford like $1 million worth of security because of the fee they are paying. If you aggregate all of them, you get a $1 billion security with the same fee basis. And everybody is enjoying the $1 billion Shad security. It's just much better.

And Shad security is much better than disaggregated security. We see this in the real world. We see this inside blockchains. So the cost of purchasing that security is much lower because it's shared. It's not like Canada could say, you know, it's big enough to say that I can have my own army. right but they do but not to the same extent that US does and because they're sharing in our partaking in this through like a variety of like soft and hard agreements that's the same thing that will happen in this space is you don't need to bootstrap your own system so actually bootstrapping

your system is one of the hardest things you know and we see this time and again because what happens is when you try to bootstrap your own system using your own security you can only supply services to things of value less than your token value, right? Imagine your token is a kind of like a new chain and it's worth like $100 million. Now you can really supply security only worth $100 million through this token and that restricts your own like ability to gain adoption.

Whereas if you come and use a restake security, maybe you get $35 billion of security and maybe now you can offer services to everybody in the ecosystem and that grows your market. So that's answer number one. Answer number two is if you're, look at the SaaS economy on the cloud era, you see, this is one of the most productive for VCs and for entrepreneurs, because you can take a narrow slice and then kill it. Say, I am the

identity layer for X kind of like for social login. It's a very, very narrow thing. But there are so many things that rely on this narrow thing that it's worth it. Right. Like, that's the same thing we envision would happen. If somebody would come and build like a service, like ordering sequencing transactions for all the layer twos is a narrow service. But it's built on Ethereum's great security. Firstly, as a roll-up, that's much more compatible to say that, oh, yeah, it's secured by Ethereum. You know, it's the decentralized sequencing coming from Ethereum stakers, much more attractive for a roll-up to opt-in. Otherwise, they'll be like, why should I touch your token?

Like, why should I not, like, use Ethereum? And so there are ways in which this market, like, you can enhance your market share. by opting into the system. You have your own token as a value capture mechanism where a fraction of the fees get routed to your token. You can use your token even as a payment token. You pay fees in only that token, possibly. You use your token as an incentive on bootstrapping mechanism.

You could also use your token as an additional staking mechanism. So you can do all of these things. But the benefit of sharing in having in a pool security layer is quite a lot. So I think people will opt in because of that. So AgenLayer is not going to be a token killer, per se, but it could, and it might very well, kill use cases for tokens as they relate to economic security. So if you are using a native token for decentralization and economic security for

those guarantees, you should probably be a little bit worried about what eigenlayer and restaking is doing. But this doesn't kill the general purpose of tokens. There are all sorts of other tokens. In fact, from a market perspective, it might make tokens more efficient. value accrual mechanisms because you can tap into them directly. That's right. Except at an asterisk on the token not being useful for staking, there are two uses of economic security, two ways in which you get economic security. One way is that you have objective attributable things like slashing. So that gives you some amount of economic security.

The other kind of economics that is a play in staking is value alignment. You know, if you're holding a certain token and staking it, and even if there's no slashing, a majority of the stakers won't like go and try to do something bad in the system because that affects the value of their own token. And so we do expect things like dual staking where each staking exists as a separate quorum and your own token staking exists as a separate quorum. And then you aggregate information from both of these corums and say that, oh, the eat quorum has said this and your quorum has said this only if they're within some reasonable deviation, that's considered a valid. input. So there are ways in which, you know, your token can be used even for staking and security, but only as a complement to this kind of general purpose, slashable security, which is much better derived from something like Ethereum. It's a much less volatile store value. It doesn't fluctuate based on your own tokens like, you know, value proposition. So even if your token goes down in value,

you still have the large amount of economic security intact rather than going through a death spiral, where your token goes down in value, then your chain is considered less secure, people exit, and then your token goes down even further, and then it's just kind of a spiral down. We've seen these spirals in this space. You guys have covered a lot of it. Yes, we have, yeah.

You said the word alignment, which I've been hanging out with a number of the Ethereum researchers, and the topic of eigenlayer alignment or re-saking alignment is like, it's the new brain candy for the Ethereum research team. I think even Justin Drake has talked about, like, yeah, I'm into eigenlayer alignment in the same way that Ryan and David are into AI alignment. Similar problems. Existential? Well, one's existential for Ethereum. The other's existential for humanity.

I'll articulate this this way. Currently, pre-Igenlayer, pre-restaking, in our naive, protected form before restaking came and penetrated our bubble, all of the Ethereum stakers were this homogenous group of people that had one network to do their one job, which was to secure your one network. Now, with restaking, we have, I've dubbed network polyamory, where like, eath stakers can actually go flirt with other networks with their original stake, but they can also stake for additional networks. And now Ethereum, which used to have a very monogamous relationship with its own eith stakers, now these eastakers gets to go have other relationships with other networks. And so no longer are the east stakers committed to this one single Ethereum network, which is one problem. But then it also continues from there,

which is that, well, some set of Ethereum Sakers can go and sign up for Network A, and then some set of Ethereum Sakers can sign up for Network 2, and that can fracture and go forth. And all of a a sudden, we used to have this nice pool of Ethereum Sakers, which had one job, which was secure Ethereum. And now we have a fracturing of this pooled security to secure 20 different chains of dubious, perhaps, levels of commitment to Ethereum. And so this now threatens Ethereum security is the concern here because what was once dedicated to Ethereum can now go and just do the DGen yield farming thing. And now Ethereum as a whole is less secure as a result of that. What would you say to this?

It is approximately correct in that basically when you're sharing security, you're giving up a portion of the security to these other layers. But your own security also goes up as a consequence, right? Because U.S. is the security supplier for the rest of the world, you are gaining fees from all these things. that means U.S. upgrades its own security battalion, right? That's the same thing that's happening through restaking is the total amount staked. Right now, let's say, like Ryan pointed out, it equilibrates to the market rate of like 5%, 5.5%, whatever. And that means like right now, whatever, 35 billion worth of ETH is staked, right? And if you want this to go to 100 billion worth of each staked, the core protocol itself may not have enough incentives to actually drive it to that level.

But because you're getting staking and restaking yield together, the staking yield plus restaking yield may be enough to stretch the security from like a 35 billion budget to a hundred billion budget. So I completely understand and acknowledge the concern. Also, I think in the short to medium term, there is a lot more information sharing between, firstly, the eigenlayer kind of like teams and the Ethereum like protocol teams that is important. But over the medium term, maybe even the protocol information. information passing, like how does something like eigenlayer or any restaking protocol communicate information with the staking protocol better? So that is that aspect of it. A very simple, technical version of it is called smart contract triggered withdrawals. Right now, who holds the validator key, they can trigger the withdrawals. But there is, in the roadmap of Ethereum,

Danny Ryan and others are putting together the idea of contract triggered withdrawals. That a smart contract, which has the withdrawal key, can trigger the withdrawal instead of the validator has to trigger the withdrawal. So that's an example of information sharing between like eigenlayer and Ethereum. Then over the longer time scale, there are more complex information sharing mechanisms like shared insurance and other things. We're working on internally and sharing with the Ethereum folks. But over the long, long term, I do hope that something like restaking or programmable staking becomes part of the Ethereum protocol itself. Because it's such a powerful thing that actually like, you know, having it, and, you know, over time, as we remove all kinds of

subjectivity and battle tested, it's possible that something like eigenlayer can become core part of the Ethereum protocol. Sri Ram, when you tell me that I can take my Ethereum and I can restake it to get more yield, the first place my brain goes is like, okay, how many times, though? Like, can I restake to all the chains? In the article I wrote on bankless, I've been using this in the way to explain what restaking is, I've been using the Skyrim mods as like this metaphor where, like, if anyone's ever modded a game, you start with like the biggest, most common mod because it's the most useful and it's the least likely to crash your game. But then you inevitably like, okay, what about the next mod? And then you go down the long tail of mods. At some point, you're installing something completely ridiculous and then you try and open up your game and it crashes. So like the metaphor here is that like when all of these Ethereum validators, Ethereum stakers, are given the option to sign up for additional slashing conditions because they get more yield. They're going to sign up.

for all the slashing conditions that they can't. Just like layer on all the mods, like juice my yields up to 20%. Humans aren't good at this whole risk thing. Yeah, I think this is kind of should be considered the base case for a decent portion of the Ethereum stakers who are going to sign up for a lot of extra yield because we've seen that before. What's the risk here?

Is this a legitimate concern? Like, why is this not going to kill Ethereum? So, you know, I like the idea of the Skyrim mods. I think what we want is if somebody installs a Skyrim mod and the mod crashes, that's totally okay. Somebody installs a Skyrim mod and the server burns, that's not okay. That's the principle that you want to hold here.

So how do you make the server not crash, but the mod crash, right? The mod crashing is like their karma, like they did something bad, like their service is not well built. It should not have good protections, but Ethereum Stakers should not get, like, their stake should not be burnt or something for that.

How do we do this? Is partly by holding to the core standards of what I explained, which is have objectively attributable slashing conditions. And when you have objectively attributable slashing conditions which are well-wetted and on-border, then what happens is imagine somebody builds newer and newer consensus protocols. So let's just take this as a special example, right? Consensus protocols. Ethereum has a consensus protocol. All other chains have their own consensus protocols.

And I would say the project to figure out the best consensus protocol is nowhere near done. Like it's academically an ongoing exercise as well as industry innovation is still not stopped. So what do we do there? The slashing condition is very simple. What's the slashing condition? If you sign two messages which are conflicting with each other, right? Like two blocks, then you get slashed. So the slashing contract can be the same contract across hundreds of consensus protocols.

So you have a very velvetted, simple slashing protocol. In fact, you could also have in your note software something we call an anti-slasher. What it does is, I don't know, I cannot trust these hundreds of different node software that I'm running, but I have this thing that whenever I'm signing a message, I'll make sure I don't sign a conflicting message. I'm basically forward-simulating the slashing contract and making sure that I'll never trigger the slashing contract. So this is called an anti-slasher module. So you just double-check this, and now you go D-Gen into like hundreds of different consensus protocols. nothing happens to you. By the way, this is the same thing that happens on Ethereum, right?

On Ethereum, when you're staking, you're really staking into all applications that are built on top of Ethereum. It's just that the only slashing condition that you have is the Ethereum's slashing condition, right? So when people think about like, oh, you know, new services building on top is adding leverage, that's already there in proof of stake, right?

Your stake, what if tomorrow, like, you know, a $1 trillion stable coin protocol launches on Ethereum, it is going to increase leverage, and that's default built in into the structure of proof of stake. It's just that it's going to generate enough fees over the longer term because you're generating more fees, more things are going to get staked, because more things are going to get staked, the total value of eat itself grows. All of these secondary effects is what regularizes this economy. The same thing happens also on eigen-letter. Okay, so the high level is how do you make sure that stakers are protected?

And like I said, the two-tier system is what we're building. that's our best attempt at saying that here's a grade of like service which has gone through all this kind of wetting and we want to do our best in guiding that and bring best of the community members into that and there's going to be a permissionless tier which we will say is don't use you know use at your own risk it's extraordinarily risky whatever and we will see basically what happens is risk stratification which is you know stakers are usually like low to staking right among all the family of like you know, D-5 Dgens and other. Stakers are one stable, long-term yield. So that's the kind of people who are participating in this economy, or they want to support the Ethereum ecosystem and want

to contribute their own decentralization to it. So we basically kind of expect that to be like a very high-grade, low-risk tier. But there'll also be like a free tier, because if we don't enable it, somebody will enable it. And there is an emergent economy there that the only thing that we can do is to educate and you two are at the top of that game. Well, I appreciate you saying that. Sri Ram, we certainly try, but the only way we move forward is honestly with conversations like this where we're trying to. It's all we're doing is we're just airing our education and putting that out in podcast

form. The other thing I do to get educated is I read posts by this guy named Vitalik Buteran. I was pretty smart. I don't know if you've heard of him. He wrote a fantastic post. I think it was fantastic. I'm still sort of trying to walk through the implication of what he was trying to and what this means, but it was a post entitled, Don't Overload Ethereum Consensus.

Did you make him write this? I feel like it. So, Vitalik says this in the post. Over the years, there have been a number of ideas, usually at the thought experiment stage, to also use the Ethereum validator set and perhaps even Ethereum social consensus for other purposes. One of those other purposes he mentions is restaking. He also mentions eigenlayer.

And this is, Igen layer feels much more beyond the thought experiment stage, okay? This is going to main chain type of stage. And he says, the purpose of this post will be to explain in detail the argument why, in my view, a certain subset in italics, certain subset of these techniques brings high systemic risk to the ecosystem and should be discouraged and resisted. A certain subset of techniques maybe like restaking that use the Ethereum, invalidator set, Ethereum Social Consensus for another purpose, should be discouraged and resisted. I'm curious, what do you think Vitalik was saying in this post? What was your reading of this post? Yeah, I think the title, do not overburden Ethereum Consensus. My read of the actual article is

do not overburden Ethereum social consensus. And essentially, it is creating this layering principle. What is the concerns of the state and what's the concerns of the free market, right? And Ethereum had to go through this growing pains, like very early in its life at the application layer. The application layer, you had things like the Dow hack, and how does, you know, the social consensus of Ethereum respond to this? And one of the very important things that Vitalik and others had to do is do this one-time thing where, like, okay, you know, we're going to revert this, but only for this time, it's not going to happen again and again and set a boundary and a shelling point that people don't assume that they can take excess risk and then externalize it. back to the protocol. The way I think about it is you guys talk a lot about this, like, you know, banks, right? Banks go and take risks. They may crash. And if they crash and burn, they're going to come to like the government and say, hey, you know, pay us out.

2008. That's exactly what happened. Too big to fail. Too big to fail. We also heard that in the crypto space, if you remember somebody's saying, we're going to be too big to fail. Yeah, let's not say those words. But the thing is, I read the article as basically saying, hey, now that we're going beyond applications, now that we're talking about raw decentralized trust being supplied, I want to make it clear, or at least Vitalix, wanting to make it clear, what aspects of decentralized trust may be usable and what is not usable. And he's basically saying social consensus is sacred. Don't touch it. Don't signal that, oh, you know, if something happens in ABCD protocol, like I have the backing of Ethereum. And he doesn't single out restaking. I think it's true for things like layer twos. So you can't say, oh, I'm a big layer two. If I fail, then Ethereum's going to fork around my failure.

If you're a big, like application, like, you know, if you're a uniswap, if you're a maker. Because, you know, this has already been said for the applications. It doesn't have to be spelled out, but it's the same principle. If you're a big tap on top of Ethereum, if you're a big stable coin, if there's a failure, we're not going to fork around you. Same thing for restaking. If you restake a set, and he gives you. these examples where, like, we've internalized all this internal discussions with both EF, but also reading all of the things that Ethereum research has ever written over the years.

So one of the issues that could happen, you know, when social fulking would be triggered is a lot of, like, honest parties lose their money in a way that they didn't anticipate. And one way you might not anticipate is if you slash nodes for failures of disagreeing with the majority. In the normal mode, you assume that the majority is right, right? And if you say that, oh, whenever you disagree with the majority, I'm going to slash you. Let's say I build an Oracle and say that, hey, you know, anybody that disagrees with the majority is going to lose their eat. And then now what could happen is a lot of stakers who opted in may basically say that a majority is malicious.

And now, like, a minority, which is honest, gets slashed relative to the majority. And then everybody's like, oh, my God, I trusted the majority and is, you know, creating these problems. Now you need to go forked eat. So those are the kinds of examples where you don't want that to happen. In the same way, things like hacks, smart contracts hacks, that's why we built in things like the slashing veto, which is a social consensus internal to the protocol rather than saying it's external to us, and Ethereum has to fork around failures. So that's how I read it, is as marking the boundaries of the layer.

The Ethereum core consensus, the social consensus is reserved for core protocol functions. And like I mentioned, the core protocol function for which we need social slashing is censorship. Other than that, we don't need social slashing for anything. Everything is algorithmic. Maybe if there's a failure in Get or like all the consensus layer clients or something like that, that is a possibility, but we should not be using this nuclear power for anything else. My summary of Fatalix Post is no bailouts. That's the shortest summary possible.

I agree with that completely. I think this point, this part about Vitalx, piece and also the question about like, all right, what happens if we like load up all the mods and try and stack all the mods? I think your answer is the same for both of these points either way, which is that like if you loaded up all those mods and your computer crashed, that's on you. That does not go back to the server. And that's the same thing that Vitalik saying in his article is like, okay, it's fine that your server crashed because that's the choice that you made. But it's the buck stops at extending that back to the main hub.

And that is simply something that I think you, Sri Rum are saying like, well, it doesn't matter if they load up all the mods because so long as Vital, we follow through on Vitalik's post and accept that, hey, there's no bailouts. If we accept that there's no bailouts, you can load up all the mods that you want because all the consequences are on your machine or on your East stake. I think your answer to these things are the same, just to articulate in two different ways. Is that right? I think that's correct. And we've been talking to the EF researchers over the last like one and a half years. And this is the first thing downgrad told me like one and a half years back is don't overload social consensus, you know, do anything

else. Once you said it, it's going to happen. It's much rather that somebody who cares about this ecosystem to it than like somebody who doesn't. But I think the other risk that is not necessarily mentioned in Vitalik's article is things like over-financialization of native restaking. So things like, you know, you're going to draw a loan against the collateral that you're using. So basically, IgenLAD is not a DFI protocol. We want to supply validation services. We are not supplying, like, DFI services. So what it means is you're not going to be able to take out a loan against your, like, collateral position or whatever kinds of things. And it's because, you know, it's not going to be onboard in the permission committee. And people wrote things like,

oh, how is she I'm going to mediate? I'm not mediating this. The slashing, there's a slashing veto and the slashing veto kind of onboard services on who, which set of services are low risk. And it's very important that this happens. it is possible to build financial applications on top, but with a layer of buffering. So imagine you build like a liquid staking protocol. So just take Ethereum, right, like a liquid staking protocol, you take a liquid staking token and then you go and do something in a lending market or whatever. Any issue happening there doesn't affect the core staking protocol because it's buffered by the liquid staking.

So that could be liquid staking on top of something like eigenlayer and then that buffers some of it. So there are layers that are going to be built. But what is built or what layer is very important. And so in our layer, we are building validation as a service. That's the core thing. And we have basic rules. Use only objective slashing. Use a slashing veto.

Slashing veto has power to onboard. You know, if you're using anything which is not objectively very fabled, just use decentralization. Don't use slashing. Don't assume that you're going to be bailed out by Ethereum social consensus. If you trust a majority of the Ethereum notes, to be honest, and they are not, for whatever reason, you're on your own. And that's the plus model.

And that's how I can know it's going to work. Yeah, the no bailouts point is, I think, a very valid one. And yet I am also comforted by the fact that there have been many candidates on Ethereum for the too big to fail designation in the past. I remember when Maker Dow was one of those and Dai was. I remember another one that said that anyone who controls USDC will be kind of the kingmaker of a future Ethereum for it. You know, another candidate for this is Lido.

Another one is the various exchanges, you know, the binances. where the coin base is the crack. And now it's restaking as kind of a candidate for, you know, Fortress. I'm strangely comforted that there are so many candidates for too big to fail in all separate categories. That's a really, really, really good point. That's a really good point. Because all of them agree to actually do anything.

And then, like, they're all different entities. And I doubt they will agree, which is also a contributing fact to this decentralization. So Sri Ram, this has been an exciting journey and really understanding what restaking is. I think we've got to, you know, tie this off with. understanding where eigenlayer is as part of the deployment process. So when you guys launching, is there going to be a token? We've talked about using ETH for security, but we've also talked about use cases for like a token, maybe somewhere else. So tell us about launch date for MaineNet and token. And then I've got one last question for you and then we'll close on that.

But what are the specifics? When do you guys go on Mainnet? So if you think about the structure of our marketplace, it's three-sided. We have stakers, you know, people with who are putting in the ETH. We have no option. operators who may be the same as the stakers may be different, right? You know, you could be your own node operator or you could delegate to somebody else. And then we have services, which is people building bridges, oracles, whatever, other kinds of things on top of the system. And we have three sides to the marketplace. So we are basically going on a phased roadmap where we launch one side at a time. We're starting with staking. You just restake. You cannot do anything with it, but you

understand what is going on with the ecosystem as now new stake onboards into Ethereum. They have a one-time opportunity to set the withdrawal credentials when your stake is when you can set the withdrawal powers. So, you know, people who want to participate in the eigenlayer ecosystem may want to restake in the beginning. So there are three phases are like turn on stakers, then turn on delegation and node operators and then turn on like actually working services on the main net. And so there is a same set of phases going on in the test net. We're already on a public test net on Gourley with adjust restaking. So there will be a corresponding thing on the main net. then there is a delegation, that'll be a delegation on the main net,

then there are services, services on the main net. So that's our launch roadmap, and we expect this to take, like the first version is going to be between Q2 and Q3 and then every quarter after maybe the next phase gets onboarded. Of this year starting. Yeah, the first phase is going to be between Q2 and Q3 of this year. And then every phase is like a quarter after, you know, something like that. Basically, we expect the whole system to be functioning once all these three sides are on board.

So in terms of whether we have a token, we don't have a token. The design philosophy in eigenlayer is we start with something very specific performing a certain role, this protocol. Think of eigenlayer as a protocol. It's designed with very similar aesthetic to Ethereum in the sense of try to make the protocol neutral, try to make all the decisions pushed to the agents. For example, which liquids taking tokens do we allow? We allow all liquids taking tokens. It's up to the services to figure out which tokens they want to respect and so on.

So there's a lot of agency pushed out to their services rather than very specific decisions being made at the protocol level. But as the protocol evolves and we understand the role for governance, we may have to think about how to create a decentralized governance. So we are committed to a progressive decentralization roadmap rather than to decentralization on day one. So Sri Ramas, we wrap this up with kind of the last question. I want to bring this round circle to where we. we started, which was kind of your arc and how you really got interested in crypto and what you're here on Earth to go do. And something you said earlier was like upgrading humanity. Maybe that's the reason you got into computational genomics, upgrading humanity on kind of the genetic level,

and that would apply maybe to individuals and groups. But then you discovered crypto, and that was really an opportunity to upgrade humanity as a social technology on the social level to allow us to coordinate across large groups even better. It's funny you mentioned the book Sapiens. I know David and I've mentioned it many times on that episode. That was actually a very salient book for me when I was getting into crypto and kind of understanding the why, the impact that this technology could actually have. I want you to imagine five years from now where we have restaking in Eigenlayer, restaking as a core primitive is now successful. What does that do to forward the goal of upgrading our social technology? Like I think people outside of crypto right now, after 2022,

deservedly so. I understand their perspective or saying, what is crypto doing for the world? Because I saw a whole bunch of Ponzi schemes, and I saw this guy named SBF making out with like $15 billion. Like, what are you guys actually doing for the world? And right now, of course, their bare case is nothing. Cryptos, meme coins and scams, and there's nothing lasting there, which I think is bullish for builders like us who see something more. So take us five years in the future. Restaking is a core primitive. We are able to export trust from our blog. blockchain networks in different forms, not just block space. What does the world look like? What have we accomplished? What's on our crypto resume? Can I take your 20 years forward? That's the time

skiller, which I'm thinking. Go for it. So let me start with the core principle. One of my, like, very fundamental principles is non-zero-sum games. If you think about like a zero-sum game is where like one has to win, for one to win, the other has to lose, right? And a non-zero-sum game is where both of us can win. There are really only two kinds of non-zero-sum games. Number one is cooperation. Like, we coordinate together, like you and David and Ryan could have gone their own ways, but coming together, they produced this, like, really amazing podcast. So coordination is one example of a non-zero-sum game.

The other non-zero-sum game is innovation. Innovation is I take sand and I make silicon out of it. I take ad and I make spectrum out of it, right? Like, all of these amazing things where, you know, it's nothing and then it becomes something. Like, these are the two, like, fundamental things. And one of my like kind of life metrics is maximize the surface area of non-zero-sum games, right? Like the more non-zero-sum games we produce, the more net output. You know, otherwise it's all like I lose and you win or you win and I lose or somebody else loses.

It's not fun. So how do we maximize the surface area of non-zero-sum games? We have to maximize the ability to cooperate, the ability to coordinate. What are some examples? Some of these things are best seen like when we take back like 2000. thousand years. Like, how does society look like? You know, imagine you're living in your own tribe. There are certain virtues of, like, a tribe which we're missing in the modern world. For example, you know, I know my teacher. Like, I build a one-st-to-one relationship with my teacher. And if my

teacher is not doing well and, you know, I don't take care of my teacher, that's shame on me, right? And that's an example of a one-st-to-one long-term relationship between a teacher and a student. And that's broken in the modern world. Same thing with a farmer and, like, the consumer or, you know, all kinds of different relationships. But the problem with those kinds of tribal relationships is there, one is to one, their long term, which is awesome, but you can only form it within the small group of people that you trust, right? Otherwise, there's no long term.

There's no way to exchange goods and information and, like, you know, learn from people who are outside your small group. So what we've done in the world is to move from that to a very multitude of people contribute to our education, a multitude of people contribute to our health, the multitude of people work together in producing our supply chain and all of these things. But the way we've structured it is by pricing out each transaction into money. That's what is basically made this trustless. Like I go and learn something from somebody from a piano teacher and I pay him like $100 an hour, whatever. So we price out each transaction. But what that does is break the long-term alignment.

To have long-term alignment, we need two things. We need long-term memory and long-term enforcement. You need a system which remembers who your teacher was when you were in your fourth grade and who inspired you into going into this direction. You need to be able to make a commitment to that teacher that, hey, if I do well, I'm going to pay you X, you know, long-term income shares. When you're going and dealing with a doctor, you need to be able to engage in a way that essentially aligns your long-term fits much more tightly than the medical system does today. When you're engaging with a global supply chain, you have to understand where, like, effects come from and go back. So essentially, I think of this as broadening the system of karma, like the ability to attribute. And karma itself is a system of memory and enforcement. It's a theological, philosophical concept that, you know, if you do good things, good things

will come back to you. But you need a system to measure, track all these things that you actually did. And things like staking and slashing are like some simple examples, but not the only thing that we want to produce. Okay, so that's on the cooperation side. The cooperation velocity can be increased massively when you have global systems of memory and global systems of enforcement. On the other side, if you think of what enhances innovation, innovation is enhanced when it becomes permissionless, when I can build on top of your things without your permission, because you don't need to know who I. I am, I can just come up with some new things and build it. And you don't need to trust me. Because we are all interacting with each other on top of this like trust engine, which is the blockchain, innovations get decoupled from trust. Trust is underwritten from the blockchain and innovations decoupled and underwritten at a different layer. That lets innovations compose

with each other. So I see essentially crypto as turbocharging the two core reasons why we can have non-zero-sum games or in other economic terms, why we have growth in this world. And I think, you know, by working relentlessly towards this goal, you know, we can do something really fun together. That is a very comprehensive, very cool answer. And I like that 20-year vision. I think if we can introduce the world to how crypto is scaling non-zero-sum games. Cooperation, scaling reciprocity might be another word for karma, and scaling innovation in permissionless tech. That certainly would be something would be quite transformational. So Sri Ram, we're, I guess, maybe the first few steps of a thousand mile journey, but here we are with this concept called restaking. Thank you so

much for coming on bankless and educating us about this today. We appreciate you. Thank you so much, Ryan and David. This has been such an awesome opportunity and a privilege to talk to the bankless listeners today. Here we go. Bankless listener, some action items for you today. We mentioned a few things to go read. One is don't overload the consensus layer. That's a post from Vitalik will include that a link in the show notes. Of course, I got to include the book link Sapiens from Yuval Noah Harari is one of my favorite books that was mentioned. So any excuse I can do to inject this in the show notes, I'll take it. Got to end with this. Risk and Disclaimers. Of course, none of this has been financial advice. Crypto is risky. We don't know

what the future yield will bear, nor all the restaking protocols that you could ape into. But be careful out there. We are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.