Anatomy of Eigenlayer Tokenomics: A New Social Consensus Mechanism to Solve the Failure of ETH

Original author: Deep Tide TechFlow

k the call to come out, Eigenlayer finally announced the long details of its Token economy today, and announced that it will allocate 15% of the EIGEN Token to users who previously participated in the stake through linear unlocking.

Does the EIGEN Token itself have more long value, what is its use, and what impact can it bring to the stake and even the entire Ethereum ecosystem?

The answer lies in Eigenlayer’s 40-page White Paper on the Token Economy.

Unlike the general project introduction Token a few sketches of the release of Token, Eigenlayer spent a lot of time explaining the role of EIGEN Token and its relationship with ETH Token in detail, detail, and even some technical geeks.

The research team of Shenchao read through the White Paper and organized the technical points into easy-to-understand text to help you quickly understand the role and value of EIGEN.

Quick Facts

The function of the EIGEN Token and the problem to be solved

• Universality and Stake

Traditional Blockchain Token are often only used for specific tasks, such as ETH are mainly used for Block verification of Ethereum. This limits the scope and flexibility of the Token’s use.

The re-staking mechanism allows users to use their already staked ETH assets for longest tasks and services without unlocking or transferring them.

• Intersubjectively Verifiable

The white paper uses the word “intersubjectively,” which is very difficult to translate into Chinese, to describe complex network tasks: they are often difficult to verify by simple automated procedures and require the subjective consensus of human observers.

The EIGEN Token acts as a medium of “social consensus” in these tasks. In scenarios that require verification of different views, EIGEN can be used as a voting tool, and Token holders can influence network decisions through voting.

• fork Token Forking Tokens and Slashing

Disagreements on certain issues or decisions may arise in the network, and a mechanism is needed to resolve those differences and maintain the consistency of the network.

In the event of a major divergence, the EIGEN Token may undergo a fork, creating two separate versions of the Token, each representing a different decision path. Token holders need to choose which version to support, and unselected versions may lose value.

If a network participant fails to perform stake tasks correctly or misbehaves, the EIGEN stake Token may be cut as a penalty for their bad behavior.

EIGEN’s relationship with ETH

• Complement not replace: EIGEN Token is not meant to replace ETH, but to complement the existence of ETH.

ETH is primarily used for staking and network security as a universal target work Token. ETH stake support for the reduction of objective failures (e.g. penalties for verification Node incorrect verification)

EIGEN staking supports intersubjective fault mitigation (errors that cannot be verified on-chain, such as the price quoted by the Oracle Machine itself), greatly expanding the range of digital tasks that Blockchain can securely provide to its users.

EIGEN Token: Provides a new social Consensus Mechanism to deal with subjective errors that ETH cannot reach

If you want to know what the EIGEN Token does, you have to know what the ETH Token does.

Before the concept of Eigenlayer and re-staking, ETH could be seen as a “purpose-specific” work token. To put it mildly:

ETH Token used to maintain the security of the network and generate new Block, perform tasks related to Ethereum Blockchain maintenance, and cannot be used for anything else.

In this case, ETH is characterized by:

• Have a very specific purpose for work;
• Strong objectivity, such as Ethereum on-chain double-signature errors, rollup aggregation errors, you can judge through pre-written objective rules in the on-chain, so as to slashing a certain number of ETH to the validators.

With Eigenlayer, ETH is actually converted into a “universal target” work Token. To put it mildly:

You can take ETH and stake it to various tasks, such as new consensus mechanisms, rollups, bridges or MEV management solutions, etc., which are no longer limited to Ethereum’s own chain staking, which is also an important feature of Eigenlayer.

However, in this case, although the usage scenario has changed, ETH still has the following characteristics:

• The “objective” limit still exists, as cuts and slashing behaviors can only be applied to Ethereum on-chain objectively verifiable tasks.

But you have to know that not all errors in the encryption world can be attributed on-chain, and not all arguments can be solved by on-chain consensus algorithms.

Sometimes, these non-objective, difficult to verify, and longest controversial errors and problems significantly affect the security of the Blockchain itself.

As an extreme example, the Oracle Machine quotes 1 BTC = 1 USD. This data is wrong from the source, you can’t identify it with any objective contract code or consensus algorithm on the on-chain; and if something goes wrong, you slashing the validator’s ETH won’t help, to put it bluntly:

You can’t sanction an off-chain subjective error with an objective on-chain solution.

The price of an asset is longest, whether a data source is unavailable, whether an AI interface program is running correctly … These questions on-chain impossible to Consensus and solve, and more long, a kind of “social Consensus” is needed to arrive at the answers through subjective discussion and judgment.

Eigenlayer calls these kinds of problems intersubjectively attributable faults: a set of faults where there is broad Consensus among all reasonably active observers of the system.

As a result, EIGEN Token has a place to come in---- providing a new and complementary social Consensus Mechanism beyond the ETH to maintain cyber integrity and security. Specifically to solve this “between subjective” failures.

How to do it: EIGEN stake, Token fork

ETH is still a work Token as a universal target, but EIGEN will complement each other as a universal “subjective” work Token.

If validators stake ETH, some objective failures occur, the ETH of the stake can be cut and slashing;

Similarly, you can stake EIGEN, and when some subjective failures occur (cannot be judged directly on the on-chain, and subjective judgment processing is required), the staked EIGEN can be cut and slashed.

Let’s take a specific scenario and see how EIGEN works.

Suppose there is a Decentralization Reputation System based on Eigenlayer where users can rate service providers. Each service provider stakes EIGEN Tokens to show their credibility.

Before this system begins, there are 2 phases that are necessary:

• Setup phase: Coordination rules between system stakeholders are coded to give rules for how a subjective dispute should be resolved;
• Enforcement phase: Enforce pre-agreed rules in a self-evident manner, preferably locally.

In this system, users can enforce the conditions they have agreed to in advance on their own.

Then, if a service provider is perceived to be providing a false service or misleading users, the platform’s community Consensus Mechanism may trigger a challenge to form a fork Token event that turns into two versions of EIGEN Token— EIGEN and bEIGEN.

Now, users and AVS are free to decide which one to respect and value. If there is a general perception that the slashed stakers are misbehaving, then users and AVS will only value the fork Token, not the original Token;

Then, the original EIGEN Token of the malicious stake will be cut and slashed through this fork.

Therefore, this is equivalent to a socially Consensus adjudication system to resolve disputes that cannot be objectively handled by ETH on-chain.

It’s also worth mentioning that for users and other stakeholders, you don’t care about the impact of this “fork”.

Generally speaking, after a Token fork, you have to choose it in general, which also affects the use of your Token elsewhere.

But EIGEN creates an isolation barrier between the CeFi/Decentralized Finance use case and the EIGEN staking use case, and even if bEIGEN is affected by the inter-principal fork dispute, any EIGEN holders who use it for non-stake applications need not worry because it can redeem the fork of bEIGEN at any time later.

Through this fork isolation mechanism, Eigenlayer not only improves the efficiency and fairness of handling disputes, but also protects the interests of users who do not participate in disputes, thereby ensuring the overall stability of the network and the security of user assets while providing powerful functions.

Summary

It can be seen that EIGEN’s inter-subject stake and dispute resolution mechanism complements the subjective disputes and failures that ETH cannot handle as a on-chain stake mechanism, unlocks a large number of AVS on the Ethereum that were previously impossible, and has a strong encryption economic security.

This could open the door to innovation in Oracle Machines, data availability layers, databases, AI systems, gaming virtual machines, intent and order matching and MEV engines, prediction markets, and more.

However, judging from the roadmap given in its white paper, the current use cases for EIGEN are still in a very early start-up phase, more like a complete concept but far from actual implementation.

As users can officially claim EIGEN Tokens after May 10, let’s wait and see whether the use value envisioned by EIGEN can effectively carry changes in the market price of Tokens.