The evolution of blockchain technology has introduced sophisticated mechanisms that enhance network security and efficiency. One such innovation in the Ethereum ecosystem is EigenLayer, which allows for a concept known as restaking. This article aims to demystify EigenLayer and its components, providing a clear understanding of how it works and what terms like re-staking and EigenPods actually mean.  

What is Restaking?

Restaking is an advanced process within the Proof-of-Stake (PoS) framework where a single staked asset, such as Ether (ETH), is used to secure multiple networks, protocols, or applications simultaneously. This is not merely about earning multiple rewards; it’s also about amplifying the security across various chains by leveraging the staked assets of a more established network like Ethereum. 

EigenLayer: A Gateway to Re-Staking

EigenLayer is the first restaking implementation on Ethereum that facilitates the use of ETH to secure other protocols. By using EigenLayer, token holders can deposit their ETH to activate new validators while opting to re-stake their ETH across chosen networks for additional security roles. This process is managed through a series of specialized smart contracts, each serving a specific function within the EigenLayer ecosystem.

Key Components of EigenLayer’s Re-staking Solution

EigenPods: These are critical components of the EigenLayer architecture. EigenPods are smart contracts that manage the ETH re-staked on secondary networks. These contracts enforce any penalty and slashing events that occur on the secondary networks that the ETH has been re-staked to secure.  All consensus layer rewards and withdrawn validator balances are sent to the EigenPod. The EigenPod then checks for penalties that have accrued during re-staking, enforces those penalties via burning, and relays the remaining ETH to the end user’s wallet. 

EigenPod Manager: This tool allows users to create and manage their EigenPods. It simplifies the process for ETH holders to begin re-staking, providing a user-friendly interface to engage with multiple networks securely.

StrategyManager: This contract is designed for the re-staking of liquid staked ETH tokens (like LsETH, stETH, etc.). It enables users to employ different strategies for their staked assets, maximizing potential returns while managing the associated risks of multiple network exposures.

More Key EigenLayer Terms

Actively Validated Service (AVS): AVS refers to any protocol or application that utilizes re-staked ETH for its security needs. These services are similar to conventional networks or protocols but are distinct in that they rely on the security provisions of re-staked ETH facilitated by EigenLayer. AVSs can only function effectively when a sufficient amount of re-staked ETH is committed to securing their operations, ensuring a robust defense against potential threats.

Operators: Operators are specialized service providers responsible for running the infrastructure necessary for AVSs to operate smoothly. These entities ensure that the AVSs produce blocks reliably and maintain network integrity according to the rules of the network. When a user chooses an Operator for their re-staked ETH, they are effectively choosing to share in the risks and rewards associated with all of the AVSs that the Operator supports.

Step-by-step Guide

Re-staking your ETH is a multi-step process that can feel complex and difficult. Fortunately, the Figment app guides you through each step in the process, helping you get re-staked quickly and easily.  

• 1. Deploy an EigenPod: EigenPods have a 1:1 relationship with end user addresses, meaning each wallet you wish to use as a withdrawal address will need its own EigenPod contract. 
• 2. Stake your ETH: Once you’ve deployed an EigenPod, you will use that pod’s contract address as your withdrawal address when you deposit your ETH. The Figment app manages the withdrawal address setup process for you, so the end user does not have to worry about setting addresses correctly. 
• 3. Wait: Approximately 15 hours after the deposit, your validators will be registered with the Beacon chain and you can move on to the next step.
• 4. Verify Your Validators: EigenLayer requires that you verify every validator after deposit. This sounds complex (generating cryptographic proofs and signing with your withdrawal address) but again, the Figment app will manage all of this for you. Simply go on the Figment app once your validators are active and click the “Awaiting Restake” button to verify the details. This step can be completed in 2 clicks.  
• 5. Delegate to An Operator: You are already successfully re-staked (and earning EigenPoints), but you still need to delegate your re-staked ETH to an Operator in order to earn rewards from AVSs. Delegation is done for the entire EigenPod, so one end user address can have one EigenPod which can be delegated to one Operator. If you want to delegate to multiple Operators you will need to use multiple wallets.  

You are now fully re-staked, verified, and earning rewards! There are a few things to keep up with from this point on:

• 1. Verifying new validators: If you stake more ETH you will need to repeat the verification step for the new validators.  However, you will not have to repeat the delegation step. This step is done in the Figment app. 
• 2. Claiming rewards: Since consensus layer rewards are swept to the EigenPod every ~4 days, you will need to follow a partial withdrawal process to claim them and have them sent on to your withdrawal address. This functionality will be available in the Figment app soon and can be done in EigenLayer’s dApp in the meantime.  
• 3. Full withdrawals: If you wish to stop re-staking and exit your ETH validators, you will have a similar process as the rewards claim process. You will need to exit your validators in the Figment app, and then do the withdrawal from your EigenPod in EigenLayer’s dApp. Again, this functionality will be available in the Figment app soon.  

Restaking Rewards

As mentioned above, re-staking is a way of enabling ETH holders to earn multiple reward streams from one staked asset. It’s important to understand how the two main reward types will work.  

ETH Staking Rewards: ETH staking rewards will work the same as they do with traditional ETH staking except that consensus layer rewards will be sent to your EigenPod rather than directly to your withdrawal address. We have outlined the process for withdrawing them in the steps above. Your execution layer rewards (MEV and tips) will still be sent directly to your withdrawal address with no claim necessary.  

AVS Rewards: The mechanism for distributing rewards from AVSs to re-stakers (and to Operators) has not been released by EigenLayer yet, so it is not clear how this will work.  

EigenPoints: All re-staked ETH also earn points, called EigenPoints, based on how much is staked and how long it is staked for.  Users will accrue points as long as you maintain your re-staked ETH position.

Staking Ethereum with Figment 

Figment believes EigenLayer is an important part of the Ethereum ecosystem and has been engaged with the protocol’s development for some time. Figment’s involvement includes:

• Being a member of the operator working group, testing EigenLayer and EigenDA,
• Partner with liquid restaking protocols such as Renzo and Rio 
• Offering white-label solutions for unique staking strategies. 

Figment is the leading provider of staking infrastructure. Figment provides the complete staking solution for over 500 institutional clients, including asset managers, exchanges, wallets, foundations, custodians, and large token holders, to earn rewards on their digital assets. 

Figment’s Protocol team has extensive Ethereum knowledge intended to help dive into the specifics such as rewards and staking information. Head here to learn more about Ethereum staking.

FAQ

• Who will choose the AVSs that I can support?

• • • The Operator chooses which AVSs are supported and has the ability to change them at any time.  This means it is imperative to work with a trusted Operator Like Figment.  While Figment supports many AVSs, we will never change the lineup of AVSs registered with the Operators available via the Figment app.  You can be positive that your exposure and risk profile will never change unless you choose to delegate to a different Operator. If you require that a custom set of AVSs be run for your re-staking portfolio please contact us. 

• Does Figment control who I delegate my re-staked ETH to?

• • • No, the Operator choice is completely up to the re-staker. However, it is important to choose a trusted Operator like Figment as the Operator has the ability to change the supported AVSs at any time, effectively altering the re-staker’s risk profile. Figment promises to communicate openly and frequently about which AVSs we support and will not change the AVSs registered with the Operators available in the Figment app.

• Can I choose how my delegation is distributed amongst the AVSs supported by my chosen Operator?

• • • No, you can not. Delegation is all or nothing – all of the stake associated with a given delegation is exposed to all of the AVSs supported by the chosen Operator. If you require that a custom set of AVSs be run for your re-staking portfolio please contact us.

• How can I view the EigenPod associated with my wallet?

• • • The EigenLayer dApp can be used to confirm the contract address of your EigenPod if you would like a secondary source for verification.

• Does Figment charge fees on AVS rewards?

• • • Yes, but as the AVS rewards mechanisms are not yet released we can not provide details on the rate at this time. As the EigenLayer team releases details on how rewards will work we will announce our approach to fees.

• Does Figment charge fees on EigenPoints?

• • No, no fees are charged on EigenPoints

The information herein is being provided to you for general informational purposes only. It is not intended to be, nor should it be relied upon as, legal, business, or investment advice. Figment undertakes no obligation to update the information herein.