What is EigenLayer & LRTs
What is EigenLayer
EigenLayer stands as a pioneering protocol on the Ethereum network, introducing a concept known as restaking—a novel primitive in cryptoeconomic security. This innovation facilitates the reuse of ETH on the consensus layer, enabling users to stake ETH natively or with a liquid staking token (LST). By opting into EigenLayer smart contracts, users can restake their ETH or LST, extending cryptoeconomic security to additional applications on the network and earning supplementary rewards.
In simple terms, EigenLayer allows users to stake their ETH to enhance the security of various Actively Validated Services (AVS). These services encompass a range of critical functions such as bridges, oracles, and sidechains, with the promise of more innovative applications on the horizon.
How do Liquid Restaking Tokens (LRTs) Work
Liquid Restaking serves as the gateway to the EigenLayer ecosystem, strengthening the security of Actively Validated Services (AVS) and offering superior yield compared to traditional ETH staking.
Liquid Restaking protocols collaborate with sets of Node Operators, allowing them to opt into securing different AVSs and earning additional fees. Each protocol may employ distinct restaking strategies to determine the combination of AVSs they secure.
By staking ETH into these Liquid Restaking protocols, users receive Liquid Restaking Tokens (LRTs). These tokens, akin to reward-bearing tokens like cTokens, represent the deposited native ETH or LSTs. Stakers not only earn ETH rewards from the Beacon chain but also enjoy additional rewards by participating in the restaking process on AVSs.
In essence, Liquid Restaking Tokens (LRTs) encapsulate the innovative approach of EigenLayer, providing users with an avenue to maximize their rewards while actively contributing to the security and functionality of the broader restaked network.
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