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5 min read

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10/01/2024

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EigenLayer · EIGEN Analysis

1. What is EigenLayer?

EigenLayer is a decentralized protocol built on Ethereum, offering "restaking" functionality that enhances security and scalability across various decentralized services.

EigenLayer allows Ethereum stakers to repurpose their staked assets (such as staked ETH or LSTs) to secure additional services like Actively Validated Services (AVS). This reduces the need for new assets to bootstrap security for emerging projects on the Ethereum base layer, ultimately improving the interoperability and modular security of blockchain ecosystems. This also enhances security for the base layer, which in this case is Ethereum.

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Key Concepts:

  • Restaking: Users can restake ETH or Liquid Staking Tokens (LSTs) to support other decentralized networks and earn rewards.
  • Modular Security: EigenLayer supports multiple service types, including data availability, consensus, and decentralized applications.
  • Innovative Security: EigenLayer decouples Ethereum's security from its base layer, allowing new protocols to "borrow" Ethereum’s economic security.
  • Actively Validated Services (AVS): Any system that requires its own distributed validation semantics for verification, such as sidechains, data availability layers, new virtual machines, keeper networks, oracle networks, bridges, threshold cryptography schemes, and trusted execution environments.
  • Intersubjective Faults: Behaviors that are not identifiable on-chain but warrant a penalty (Source).

Learn all the key terms: EigenLayer Key Terms.

2. EIGEN Token Utility

The EIGEN token powers the EigenLayer ecosystem, providing utility across governance, incentives, and security.

Core Functions

  • Work Token: EIGEN is staked to secure Actively Validated Services (AVSs) on EigenLayer, performing tasks such as data availability and transaction validation.

  • Governance: Token holders can participate in decision-making processes for protocol upgrades and parameter adjustments.

  • Intersubjective Fault Handling: EIGEN addresses issues beyond on-chain verification by leveraging social consensus mechanisms, enhancing security in decentralized networks.

  • Incentives: Users earn EIGEN by staking or restaking assets within the ecosystem to secure decentralized services like AVSs.

Unique Characteristics

  • Universality: EIGEN is designed as a universal intersubjective work token, capable of supporting various digital tasks across blockchain networks.

  • Two-Token Model: The system uses both EIGEN and bEIGEN tokens, with bEIGEN being fork-aware for dispute resolution.

  • Forking Mechanism: Allows for handling disputes and network upgrades without centralized control.

  • Slashing Mechanism: Advanced system to penalize malicious activities, including intersubjective faults

3. Tokenomics of EIGEN

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The total supply of EIGEN is capped at 1,673,646,668.28 tokens, with a circulating supply at launch of 200,000,776 EIGEN (11.95%). Here's a detailed breakdown of its tokenomics:

  • Team & Early Contributors (25.5%): Allocations for the team and contributors are locked for one year after the token becomes transferable, with gradual vesting over three years.
  • Investors (29.5%): Investors follow a similar lockup and vesting schedule as the team, preventing mass token sales that could disrupt the market.
  • Community’s 45% Initial EIGEN Supply:
    • Stakedrops (15%): Around 251 million tokens are reserved for stakedrops. 200 million of the 251 million tokens from Season 1 (6.75%) and Season 2 (5.2%), with the remaining ~3% reserved for community programs.
    • Community Initiatives (15%): This portion supports users, developers, and contributors through incentive programs and grants. These tokens are part of the Available Supply but not the Circulating Supply and may include vesting or lock-up periods.
    • Research and Development & Ecosystem Growth (15%): Allocated for research, ecosystem development, and operational costs. Like community initiatives, these tokens are part of the Available Supply but not the Circulating Supply, and will be distributed over time to support long-term growth and innovation.

Only 60% of the initial supply (Stakedrops) has been claimed, making a circulating supply at launch of 121,161,466 EIGEN (7.2% of Total Supply).

4. Airdrop Details for EIGEN

EigenLayer has implemented a Stakedrop mechanism to distribute EIGEN tokens to early participants.

  • Season 1: Airdrop ran from May 10, 2024, to September 7, 2024, targeting users who staked ETH or LSTs with EigenLayer. This season saw an allocation of 6.75% of the total supply.
  • Season 2: Beginning on September 16, 2024, this season offers a total of 87 million EIGEN (~5.2% of the fully diluted valuation, FDV) for stakers, operators, and ecosystem partners. This allocation is set to run until March 16, 2025.

Only 85.3% from Season 1 has been claimed and 29.5% from Season 2 (Source).

5. EIGEN Unlock Schedule and Emission Rate

The EIGEN unlock schedule is structured to ensure stability and long-term project success.

  • Team & Investor Unlocks: These tokens will remain locked for one year after the token becomes transferable, with a 4% unlock per month for three years, ensuring a smooth and gradual release.
  • Programmatic Incentives: These incentives will be retroactive based on staking since August 15, 2024, and will become claimable every week. In the first year, Programmatic Incentives V1 will distribute 66,945,866.7314 EIGEN, equivalent to 4% of the total initial EIGEN supply.
    • 3% to ETH and LST stakers and operators.
    • 1% to EIGEN stakers and operators.

After one year from the unlock, on October 1, 2025, $EIGEN will have a 4% monthly inflation rate plus Programmatic Incentives (Source).

Conclusion

EigenLayer and the EIGEN token represent a new approach to decentralized security. By introducing restaking, EigenLayer allows ETH holders to increase their staking rewards while simultaneously helping new decentralized protocols secure their operations. With its innovative model and planned token unlock schedules, EIGEN has the potential to grow into a key asset in the Ethereum and broader blockchain ecosystems.

Key details to watch include the further rollout of staking services, the progression of community-driven governance, and whether EIGEN can continue to differentiate itself through modular security and new decentralized service offerings.

Disclaimer:

The information provided by Axiomizelabs, including but not limited to research, analysis, data, or other content, is offered solely for informational purposes and does not constitute investment, financial, trading, or any other form of advice. Axiomizelabs does not recommend or endorse the purchase, sale, or holding of any cryptocurrency, financial instrument, or investment. Always perform independent research and consult with a licensed financial professional before making any investment decisions.

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