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+"## Speaking style of Sreeram Kannan
+## Speech pattern of Sreeram Kannan
+uh good morning everybody Welcome to The
+reaking Summit it's my uh real pleasure
+to welcome you all here uh I'm sham uh I
+started this uh Ian layer project you
+know two and a half years back and it
+has been uh really exciting for us to
+see all the progress from there um what
+I'm going to do in today's uh talk is
+try to set the context for why we doing
+what we're doing what is our vision for
+what we want to build and how we can all
+partake in actually
+okay um how we can all work together in
+actually making this happen um as you
+can see the subtitle of this talk is the
+coordination engine for open Innovation
+um really this is where uh I want to
+give a little bit of uh orientation
+around this uh title um to start with uh
+you know if you think about it if you
+zoom out there are only certain kind
+kind of positive some games what's a
+positivism game you know when we're
+engaging in Collective action certain
+kinds of games are win- win or positive
+sum so that there's a net positive
+created out of these games and if you
+think about it fundamentally there are
+only two kinds of prototypical postive
+sum games number one is innovation
+Innovation is when you take something
+and make a resource out of a
+non-resource right you can take air and
+you make spectr from you take oil you
+make energy you take sand and you make
+silicon like these are innovations that
+transform like one kind of a resource to
+another you know a non-resource into a
+resource really um highly positive for
+everybody and Innovation is also like
+this that if I have an idea and you have
+an idea and we exchange it both of us
+have two ideas clearly positive sum
+unlike other resources which are finite
+and you cannot create more of so
+Innovation is one stere typical
+prototypical or postive some game
+there's another one which is also very
+powerful coordination coordination is
+when many parties come together and
+create something which is greater than
+the sum of the parts right if they work
+together if we all work together we can
+do something which is much bigger than
+what we can all do just going our own
+separate ways um and if you look at
+these two different types of posm games
+there's Echo of this structure
+everywhere that you look you know in
+working systems so you can think of like
+you know these two structures interlay
+and work together with each other in
+very powerful ways in different examples
+um and one example is let's say you know
+you take a country like the United
+States um on the you know or any you
+know successful country for that matter
+you'd see that basically the government
+acts as like a coordinatEigenLayer on top
+of which there is a free market a
+competitive economy which can be built
+on top of it which is you know akin to
+open
+Innovation and what we're aspiring to
+here is for to to do this for digital
+platforms essentially
+coordination
+via bringing decentralized trust who
+brings trust you know trust trust is
+created through like this decentralized
+Collective you know in our vision
+ethereum and EigenLayer work together to
+actually create this on top of which
+anybody can build arbitrary new digital
+platforms which can compose with each
+other and you know in our in our
+ecosystem we call this AVS you know
+actively validated services or you can
+also think of these as uh like a
+decentralized version of software as a
+service that we um we see in the cloud
+okay before I go in into explaining uh
+you know what all we can do with this
+kind of a platform I'm going to start
+with the basics like for some of you who
+may not be aware uh just a couple of
+minutes so I in I lay what we do is we
+bring together a variety of parties so I
+mentioned being a coordinatEigenLayer
+what does it mean to be a coordination
+layer you need to bring together
+different kinds of parties that work
+together to actually achieve a certain
+goal and in our case uh it is
+mainly the first side of this is stakers
+so what happens is in ethereum right
+what you do is you go and stake your e
+stake your e what does it mean to stake
+your e you put it into a contract and
+then make a promise that you will hold
+to the conditions and the Covenant of
+the ethereum protocol what EigenLayer
+does is to make
+this much more expansive so we call this
+reaking reaking is you stake your wreath
+and then you're adding on a additional
+conditions taking on additional
+covenants making additional promises uh
+that's what you you know it's now
+popularly called reaking in fact we're
+calling this the reaking summit but if
+you want to be really precise you would
+call it permissionless programmable
+staking that's really what it is what do
+I mean by that so you take the e that's
+staked in ethereum and then subject
+yourself to additional programmable sets
+of
+conditions so when you take it into I
+layer you're basically saying hey I'm
+going to run any kinds of new middleware
+Services actively validated Services
+whatever you want to call it but
+essentially what what you're doing is
+you're saying hey I'm I'm taking my eat
+and normally when I'm staking I'm
+promising that I'm running the ethereum
+protocol correctly but now I'm going to
+promise that I run all these Services
+correctly okay um and when somebody
+wants to build an ABS essentially
+they're talking we're talking about
+building two things
+number one they can build arbitrary
+software you know a container in which
+they can house and deploy arbitary
+software and a smart contract so I
+itself is a smart contract in ethereum
+but it allows anybody to build new smart
+contracts that talk to the IG ler
+contract any new middleware or AVS can
+build a new smart contract that talks to
+the a l contracts and this the AVS
+contract can SP ify the payment
+condition the slashing conditions and
+the registration conditions who can
+register how much do they get paid and
+how much should they get slashed so
+that's the overall structure of how you
+build uh how we are able to use Aon
+layer to actually take the underlying
+decentralized trust from ethereum and
+then Supply it to any kinds of new
+middlewares or services that can then be
+built on top you can think of this as
+the kind of open InnovatEigenLayer
+anybody can build these new new kinds of
+services okay so in the last slide I
+call this permissionless programmable
+staking right why is it programmable
+staking because you're staking and then
+other people permissionless can create
+these middlewares and services that can
+consume your staking and then create new
+kinds of services based on that so you
+can think of Ian lir as being a paradigm
+for programmable trust okay so you know
+at the base of all of this we have the I
+layer Shad security system they're
+calling it you another way of thinking
+about it is a Shad security system why
+are we calling it Shad security the same
+stake or the same pool of validators are
+actually sharing that security to a
+variety of different applications so
+that's another like model for thinking
+about this there are really two things
+that power this Shad security system on
+the one side we have the eat staking
+people can stake eat and this provides a
+certain amount of of Economic Security
+Economic Security means if you know that
+if your service is not run correctly you
+you will be able to slash a certain
+amount of
+e there's also a certain amount of
+decentralization you because you're
+borrowing the same set of node operators
+that you know run something like
+ethereum you can borrow the
+decentralization and this gives you a a
+certain amount of collusion resistance
+that these are distinct operators you
+know neutral set which which is actually
+participating to validate your service
+so these are the two dimensions of
+programmable trust that are uh created
+from the I lay ecosystem and now what
+can you do with this you can actually
+start uh building a variety of different
+things and one way to like root this
+thing is to take an analogy from like
+the pre crypto or the web2 world and you
+know you can think of in the cloud
+era the you know if if you think back to
+1995 and you want to build an
+application you have to build your own
+like you know server stack you have to
+build your own you know uh
+authentication payments database
+everything yourself as well as building
+whatever application you want this is
+what you would have done if you wanted
+to do web application development in
+1995 in 2023 that's not what you would
+do you would go basically use a cloud
+service you there is a bunch of software
+as a service solutions SAS Solutions on
+top like o like mongodb like um you know
+stripe all these things and then you
+know when you want to build an end user
+application you just concatenate these
+pieces correctly and then you can build
+whatever application you want leading to
+much higher velocity of innovation how
+can we kind of see an echo of this in
+the uh crypto
+world so you know one can start thinking
+about what kinds of you know the the
+middlewares and avss the actively
+validated services that can be built on
+top of won layer as something Akin into
+these SAS services and then end user
+applications can then build on top of
+these services so what I'll do next is
+give you like a little bit of idea of
+what kinds of services can be built on
+top of wag so you can categorize them in
+many different ways here are a few so
+number one is rollup services like
+categories of services so if you think
+about the ethereum road map one of the
+biggest things going on in the theum
+road map is the rollup Centric road map
+the idea that that is going going to be
+lots of rollups these rollups offload
+computation from ethereum and are able
+to therefore scale the whole ethereum uh
+stack and in the rollup era there's lots
+of rollup adjacent services that you
+know may be interesting and we're seeing
+a bunch of them being built you know
+we're building the first one ourselves
+Igan da the data availability service
+the way to think about this is when
+you're offloading computation you still
+need a place to publish the inputs and
+outputs of said computation
+you know if I publish the inputs and
+outputs of the computation anybody else
+can then verify that I'm doing the
+computation correctly so that's called a
+data availability or a data publishing
+system we're building Igan da as a data
+availability system on using IG layer
+but there's lots of other rollup
+services that we're seeing emerging in
+uh on the I lay ecosystem for example uh
+rollups have a single Central sequencer
+which orders all the transactions can we
+instead build a decentralized
+sequencing infrastructure on top of Ian
+layer rollups take a certain lag before
+they settle onto ethereum you may want
+faster Bridges and there's a variety of
+different Bridges being built on Ian lir
+when how to handle the me that occurs in
+the um rollup ecosystem you may want to
+build all kinds of interesting me
+services for example I want to say build
+an encrypted mol for a rollup so which
+means you need a bunch of nodes these
+node needs needs to participate in some
+kind of threshold cryptography so that
+when you send a transaction no one node
+is able to actually see the transaction
+it's encrypted but then after the
+transaction is included then it you can
+actually decrypt it so you can build me
+services on EigenLayer and another
+category that we've seen emerge is
+watchtowers you know if you have not one
+or two or three optimistic rollups but
+thousands of optimistic rollups which is
+there we going towards you have to make
+sure that there are people who are
+actually watching what's going on in
+these rollups and trigger a fraud alert
+or a fault alert when such a thing
+happens you need a neutral set of nodes
+to do this so again you know a new
+category that we're seeing on
+ier so this is rollup Services another
+category which I I'm quite excited about
+personally is the family of
+co-processors how do you think about a
+co-processor you're sitting on ethereum
+and then let's say you want to run an AI
+application and then get the output of
+such AI application onto ethereum this
+would be an example of a co-processor
+you know you on ethereum you're in the
+evm programming environment but I want
+to access running all kinds of other
+outputs you know maybe you want to run a
+Linux machine uh and a program you know
+for which you made a commitment and then
+you want to say that hey if you run this
+program then this is the output and then
+bring it all back to ium to be an
+example of a co-processor you want to
+run a database a SQL query on a major
+database and then you want to say the
+inputs the outputs of said SQL query you
+want to bring it back to ethereum you
+want to run like a ZK service and then
+you want to bring you know the outputs
+of such cryptography all of these could
+be examples of co-process we're seeing
+many of these uh show up on ION
+layer the next category is you know new
+kinds of cryptographic methods um you
+know I'll talk about the ioner service
+which is a new uh service that we are
+building later but there are things like
+trusted execution environments I want to
+run like a trusted execution environment
+committee a trusted execution
+environment is a hardware device which
+has certain kinds of you know uh there
+is a little bit of trust assumption in
+the manufacturer like Intel and uh AMD
+and and Android all of these different
+Hardware manufacturers have different te
+environments but you know to be able to
+access te networks on you know on
+ethereum is a very interesting use case
+you know things like secret sharing I
+want to take a secret and encode it and
+send it through the network so that
+nobody has access to the secret but it's
+spread all through the network um you
+know more more General version of that
+is the secure multiparty computation or
+you know fully homomorphic encryption
+we're seeing all of these new categories
+emerge on EigenLayer um there's also
+other kinds of things that one can do um
+you know bring proofs of various kinds
+into uh the ethereum ecosystem what
+kinds of proofs am I talking about
+suppose you want to know like where a
+node operator is located a prove of
+location you may want to get uh an
+attestation that basically promises what
+the prove of location of a certain uh
+node operator is and and one way to do
+it is have a decentralized group of
+nodes which ping each other through the
+native peer-to-peer Network to actually
+then figure out what the Ping latencies
+are you you know there are systems like
+this being built proof of mashhood which
+is a new kind of idea from automata
+which is basically the idea that I want
+to know like how many distinct devices
+that you know somebody is logging in
+from a distinct machine a distinct Apple
+phone or a distinct Android uh you want
+to have proofs of identity I want to log
+into a https server and then you know
+get the authenticated certificate into
+ethereum you know there's a bunch of
+protocols like reclaim building this um
+there's also you know so all these other
+services are things you would want
+irrespective of the fact that these are
+particularly ethereum stakers right they
+need a certain amount of Economic
+Security they need a certain amount of
+decentralization but there's also the
+fact that because we're doing restating
+of e it's the ethereum block proposal
+that are participating in the ecosystem
+and you can start doing interesting
+things on the uh on the ethereum side
+for example managing me on the ethereum
+L1 you can start thinking about event
+driven actions whenever certain sets of
+things are triggered you have to
+actually you know for example whenever
+there's a liquidation then that
+liquidation has to be taken and these
+these kinds of event driven actions for
+example improve the usability of these
+platforms massively because you know
+imagine that like you're running a def
+platform and you need to calculate the
+time to uh you know you need to
+calculate how much over
+collateralization you you need it's
+basically the time to liquidation which
+is actually determining the over
+collateralization factor and by reducing
+the time to liquidation you can actually
+get very tight systems um another system
+which is you know new newly proposed is
+the idea of based sequencing where like
+you know from Justin Drake the idea that
+ethereum L1 itself can actually do uh
+ordering transactions for rollups but
+when you're doing that one of the things
+you may want to do is how do you get
+like fast pre-confirmation and if there
+is ethereum Stak by the block proposers
+on ethereum then and and they're restak
+on agal then you could basically start
+doing things like pre-confirmation they
+make a certificate that hey I am going
+to include your transaction and send it
+to you right away in an instant and then
+later if they don't they get slashed so
+these are the different examples I this
+is not an exhaustive list but the but
+the types of things that we starting to
+see on on Ion
+lay and the way we think about it is the
+systems that build natively on EigenLayer
+are like the SAS Services which means
+they are infrastructured pieces and end
+user applications will then concatenate
+a bunch of these pieces to actually
+build usable applications and we talking
+about how do you take crypto to a
+billion users one of the things you have
+to think about is what what set of like
+functionalities do they need and that's
+that's where we think that IG layer will
+play a role is the core functionality
+layer and then applications will just
+mix and match these different pieces to
+then get the end us of functionality
+that you want okay so that's a brief
+overview of what the scope of the
+project is and we're talking about to be
+the coordinatEigenLayer for open
+Innovation this is really what we mean
+many of these things we had no idea that
+these could be done on EigenLayer so these
+are all emergent you know lots of people
+here have actually come up with many of
+these different things and it's it's
+amazing for us to just sit and see that
+once you allow this coordinatEigenLayer
+what all can then emerge out of
+it okay
+so um in the next couple of minutes what
+I'll do is briefly touch upon what is
+the fundamentals of the shad secur
+system um when when people think about
+reaking they're thinking about something
+like hey I'm reusing the same e some
+kind of Leverage or some other concept
+and I just want to dispel some of these
+myths here so what is the core
+functionality of what is actually uh
+what i l is actually doing the first
+point is that Shad security is strictly
+better what do I mean by that so let's
+forget that we're reaking from ethereum
+to EigenLayer let's just imagine that
+inside I there's a certain amount of
+each stake but it's supplied to all
+these Services simultaneously right so
+one way to think about it is let's say
+you have $1 billion restak to 1,000
+services this is One World another world
+in which each service has $1 million
+state which world is
+better right to to attack anyone service
+in the other world you just need one uh
+1 million whereas to attack anyone
+service B the the same pool is restak
+across all these Services you need 1
+billion Capital as an attacker to go and
+attack any one service there is a
+certain rigidity a certain hardening of
+security when you pull security together
+we see this all all through the place
+right like this is why Nations
+coordinate you know you don't have City
+cities don't have armies Nations have
+armies sometimes even like many nation
+states coordinate to create alliances
+that actually work together it's exactly
+the same phenomenon Shad security is
+strictly better
+there is a little bit of downside in
+that which is in if you had segregated
+security you have something attributable
+to yourself each service has that 1
+million whereas in this you get a little
+bit of mixing together of pooling which
+is good but you know if you also wanted
+attributable security what we're doing
+in ier in in the upcoming version not in
+the version that is already live and
+launched uh but in the upcoming versions
+we are working on a design where you can
+also get attributable security what do I
+mean by that you know if you have $1
+billion stake there's potentially $1
+billion to be slashed and some service
+you know maybe there's a bridge which
+says hey I'm very very security critical
+you know if my service goes down or
+something gets compromised I need at
+least $100 million of insurance of the
+slash uh portion so instead of taking
+the slash portion right now what we do
+is we just burn it like ethereum does in
+our V2 what we'll do is we can actually
+give you a portion of that slash funds
+and the ability to buy this is called
+insurance and you pre- buby it and now
+you not only have the pooled security to
+attack any one service you need to be
+able to acquire the $1 billion of
+capital but to if your service gets
+attacked you you know how much you can
+slash uniquely this this insurance is
+not over provisioned so you it is always
+guaranteed that you will be able to
+slash that muchoney
+so that's a superpower so you can both
+get the benefits of pool security and
+the benefit of attributable security you
+can also start seeing that there are
+economies of scale which is if you're if
+you're using an application the
+application is using several avss built
+on EigenLayer then you can you don't have
+to pay 5x if you're using five Services
+then you don't have to buy insurance
+separately for each of these five
+Services you just buy insurance once on
+igon lay so there is is an economy of
+scale and then finally there is an
+elastic scaling of security you know uh
+Amazon's called ec2 elastic compute
+right which is I don't know how much
+compute I'm going to need I'm going to
+go and buy it from a common pool and
+there is randomness of how much compute
+is needed by different people they go
+and buy the portion of compute that they
+want there is a similar phenomenon in
+ier which is the elastic scaling of
+security there is a large pool $1
+billion or whatever amount totally
+sitting as security
+now whenever like a different Services
+there are lots of different Services
+each service needs a randomly varying
+amount of security why because you know
+I'm running an E2 USD bridge when
+there's a E2 USD price volatility people
+might want to use more of that there is
+a BTC to Sol like Bridge or something
+else also sitting on top of EigenLayer then
+you want different amounts of security
+for each of these across time and by
+having a single layer through which you
+can buy sh security actually make makes
+it much better okay
+so um what I'm going to do from here is
+just go through the
+um let me just uh run this through I'm
+not going to talk about all these things
+um I want to basically go here talk
+about our timeline of what we building
+and when we're going to deploy it
+um
+so the um right so the earlier we had
+divided the EigenLayer launch road map
+into three different stages and stage
+one was stakers stage two was going to
+be operators and stage three was going
+to be services and instead we've rivid
+it it now you know in our current launch
+plan in a different way stage one which
+is already live is EigenLayer staking
+like you can restake your e natively or
+using liquid staking tokens stage two
+instead of only launching ing for you
+know operators what we're trying to do
+is we're going to launch the entire
+ecosystem IG layer you can have stakers
+there's operators people can launch
+Services Igan da or data availability
+service all of them will go live except
+the economic part payments and slashing
+except the economic part everybody all
+the different sites can come together
+and start creating useful
+Services um and in stage three we're
+going to add payments and slashing so
+that's our road map currently
+and you know we are on the stage one is
+already on the main net uh we will have
+a stage two test net coming soon you
+know definitely this quarter hopefully
+much
+earlier
+um which will go on Main net next
+quarter and then the stage three follows
+that so that's the current launch road
+map of uh Ian ler we're really excited
+about all these different uh new things
+that can be done across the different
+sides of ecosystem stakers operators you
+know um people building new avss rollups
+consuming a DA lots of interesting
+things happening there uh you'll hear
+about some of them today um thank you so
+much for listening to the first
+talk"
+"Q: I saw Vitalik’s blog post about overloading the consensus layer, and how restaking, in his view, could pose systemic risks to Ethereum. I'm curious to hear your take on his take?
+Kannan: One of the things I think he wants to kind of lay out is that, “Hey don't externalize, and don't create something that, assuming that if the protocol goes wrong, Ethereum is going to fork around it.”
+I think that is a pretty reasonable position from Ethereum, that you build protocols and the protocols have to internalize social consensus rather than externalize it to Ethereum.
+So I read it as to not overload Ethereum social consensus, which is used only for forking the chain. And don't assume that you can build a protocol that, and because you're too big to fail, Ethereum can fork around that. So that's how I read it.
+And I think it's a pretty obvious statement in our view. But I think it has to be said, somebody has to say it, so it's good that Vitalik went out and said it.
+Because what we don't want is for calls to deploy code that is not properly audited, doesn't have internal security controls, and then the Ethereum community has to now work hard to figure out how to retrieve it.
+I think a lot of people after reading the article have been talking a lot about restaking risks.
+I want to make it super clear: anything that restaking can do, already liquid staking can do, so I view restaking as a lesser risk than liquid staking.
+
+Q: Can you expand on that?
+Kannan: Basically, you can take a liquid staking token and then deposit it into complex DeFi protocols, or you could just deposit it into validating a new layer 2, or a new oracle or any of these things.
+So anything that restaking can do, liquid staking can already do. Because you know, you have the LSD [short for liquid staking derivative] token, and you can do anything with it. And one particular thing you could do with that is, of course, go and validate another network.
+So I view restaking as just one particular use case of liquid staking, but actually reducing the risk of that one particular use case.
+
+Q: Why do you think restaking is having a moment in the news?
+Kannan: I don't know. I'm glad people are talking about it. Of course, anything that adds new rewards to stakers is something interesting.
+I said anything that could be done with EigenLayer could be done with LSTs, but people didn't know what to do with these LSTs.
+They were doing exactly the same thing that people are doing with ether, which is lending, borrowing, the same set of DeFi parameters.
+I think one thing that EigenLayer did is by creating this new category, that validation, if I can borrow the Ethereum trust network to do new things: I can build a new layer 1, I can build a new like oracle network, I can build a new data availability system, I can build any system on top of the Ethereum trust network, so it internalizes all the innovation back into Ethereum, or aggregates all the innovation back into Ethereum, rather than each innovation requiring a whole new system.
+So I think that narrative is quite attractive.
+
+Q: I was just reading the news about EIP-7514, which is a short term solution for solving the overcrowdedness of validators, by limiting entries of new validators. How does that affect an EigenLayer?
+Kannan: I think mostly, it means the same thing for EigenLayer that it means for liquid staking protocols, that there is going to be a smaller rate at which new validators can enter.
+There's a long entry queue right now, and people don't want to wait that long.
+And making it slower is going to just make the new growth of LSTs slower. But I understand fully that this is a super important thing for Ethereum to be conservative and not have an overflow of validators that may not be able to be handled by the consensus layer.
+But in the long term, if the total staking of Ethereum cannot grow, one of the things that happens is the total yield or the return that stakers are getting is bounded by the Ethereum staking, whereas in the presence of restaking there is a possibility for them to get some of these additional rewards. Other than that, it's pretty similar.
+
+Q: You were making the point that EigenDA is just like in-house AVS (actively validated service) – explain what it is:
+Kannan: What we decided is, in order to keep this system of shared security, in order to keep EigenLayer as decentralized as possible, we want to make sure that there is a highly scalable data system at its backbone. And that's what EigenDA is, it's a highly scalable data availability system, built on the same ideas that underpin the Ethereum roadmap, particularly what is called danksharding.
+Our view is that building an Ethereum-adjacent data availability layer requires first principles thinking, whereas Celestia and Avail are built to be chains by themselves.
+If you're building a data availability system adjacent to Ethereum, you'd want Ethereum validators to participate. So that's just one part of the story. Of course, EigenLayer enables that.
+But then you go beyond that, and then you see, “Oh, it's not just you want to get the Ethereum nodes to participate.”
+Ethereum already has consensus built in, and Ethereum gives you the ordering of the various transactions. So you should build the data availability system, which doesn't need its own ordering.
+Whereas all the existing other protocols like Celestia and Avail, are basically chains that have to do their own ordering; we built a system which doesn't have internal ordering; all ordering is done on Ethereum.
+
+Q: Liquid restaking tokens - once your liquid staking tokens are locked on EigenLayer, they become illiquid?
+Kannan: That’s correct, the problem that the liquid restaking tokens are trying to solve is, can I just have a restaked position, and then still keep it liquid. So you can take that receipt token of liquid restaking and then transfer it.
+We are not building this kind of liquid restaking but other people are building liquid restaking on top of them.
+
+Q: I think your comment was, you want to use the Ethereum shared security for as many things as possible. I'm curious, now that there's also people building on the back of what y'all are doing, is there a natural limit to how much that you know, Ethereum can support?
+Kannan: This is a similar kind of question that one could ask already at the applicatEigenLayer of Ethereum: How many applications on Ethereum are smart contracts and how many smart contracts can be built on top of Ethereum?
+So it's the same thing with EigenLayer because people staking and running new applications, but now they do it much more flexibly and programmably with these aliases on top of EigenLayer, all contribute back to Ethereum. Their ETH staking increases rewards, ETH itself potentially increases in value because of all these additional use cases.
+So over time, this can start to accommodate more and more.
+But there's absolutely a limit."
+"the most successful outcome for i l
+would be web 3 offers a brand new petri
+dish our job is to buy Great Tech at
+great prices AI is also libertarian
+enable use case that people haven't been
+able to do today the next hundreds of
+millions of players they will come to
+the market through mobile my personal
+reason why I could be bullish in the
+next five months
+is hey everybody welcome back to another
+episode of The Block runch podcast I'm
+your host Jason Choy I'm the founder of
+the angel fun tangent um and everything
+we discuss on this show is not Financial
+advice and not reflective of our
+respective company opinions now one of
+the biggest busws of this year is
+reaking and the go-to project in this
+vertical is obviously EigenLayer now
+today even before the launch of the
+token Ian leer has already attracted
+almost $8 billion in funds deposited
+this makes it the fourth largest
+protocol by total value locked according
+to defi Lama so already I'm getting a
+lot of messages from people saying it's
+either the most most transformative
+thing to happen to ethereum but also
+increasingly more people are talking
+about potential systematic risk that
+comes with the concept of reaking so as
+an angel investor in igen ler these are
+the questions that I've also thought a
+lot about over the past few months so
+I'm really really excited and grateful
+for siram the founder of EigenLayer to
+come on the show to chat with us today
+so welcome to the show man hey thank you
+so much Jason really excited to be here
+looking forward to dive into uh the
+depths of the project absolutely so I
+actually stayed up last night and I went
+through a lot of your tweets and a lot
+of the transcripts for your podcast
+interviews and I realized there's
+actually so so much to go over but I
+guess before we dive into the meat there
+i' love to kind of di the clocks back a
+little bit with start with the origin
+because I know you've been interested in
+PP networks before 2008 uh and doing
+your PhD there and then you moved on to
+computational genomics I think later and
+then stumbled in the crypto in 2017 and
+I heard that you almost began your
+journey by building on cardano first so
+I'm curious you know how did you go from
+that to deciding to build this kind of
+reaking idea yeah no actually like we
+didn't you know we didn't Begin by
+trying to build on cardano uh the story
+goes back even further so you know in in
+2017 2018 you know around end of 2017
+actually when I got to uh know about
+blockchain my first reaction was you
+know is this some kind of like a
+speculative bubble that you know and
+last time you know I worked on
+peer-to-peer wireless networks that
+didn't turn out well
+so I I was a bit skeptical of the whole
+premise because you know centralized
+systems are more efficient and they have
+a way to like outrun decentralized
+systems so that was the kind of starting
+point but you know the when it turned
+for me is when we realize that uh
+blockchains can basically help us
+coordinate in the absence of trust and
+just like the internet is the
+information super iway blockchains and
+crypto could be our coordination super
+iway way that was the kind of like
+operating model and and once I could see
+that okay actually if if trust is so
+Central if we can have a neutral
+decentralized source of trust that can
+be like really valuable but you know the
+the particular problems we are working
+on at that time was you know how do you
+scale a consensus protocol what
+properties can a consensus protocol have
+you know how would you build uh data
+availability or an oracle or other
+systems with various properties what is
+the game theory for some of these things
+what are the mathematical guarantees
+this was kind of how we got introduced
+into it and the obvious kind of thing we
+wanted to do was to get like you know
+Bitcoin or ethereum to use some of these
+ideas and you know we were so far away
+from the space and had no real uh
+connections that we found it quite
+difficult to kind of understand like and
+and interact with the crypto space and
+uh you know it appeared that the most
+kind of like uh the the only way we were
+seeing that people from the academic
+background where getting into blockchain
+and crypto was actually going and
+starting hey you know here's a new
+consensus protocol I'm going to build a
+layer one blockchain around it and we
+thought okay there's no other way this
+is the only way to like take an idea at
+the level of a consensus protocol
+because you can't build it as a smart
+contract on ethereum because the whole
+point is to change the way that the the
+nodes come into
+consensus and so I said okay maybe we
+should build our own like you know uh
+layer one and we were actually you know
+we took a very purist approach and we
+said like let's first actually build the
+whole system before we even do a fund
+raise so we had a project called
+Trifecta where we built the block built
+a blockchain you know we were running it
+on 100 nodes at that time there's an MIT
+crypto economic summit video where we
+demonstrated running at like you know
+hundreds of thousands of transactions
+per second but that project never
+launched and that's why you know if if
+you're a listener and wondering where is
+this trifecto blockchain it doesn't
+exist it was uh
+it it it it only has had a uh short
+Lifeline you know lifetime as a kind of
+proof of concept so I because you know
+we the questions that we got asked from
+investors and other people was hey okay
+you you got these 100,000 transactions
+per second where is the user base where
+is the ecosystem how are you going to
+build all of this out and I said I don't
+know you know if blockchain's a thing
+you know fast blockchain is a thing and
+here is the thing that actually does it
+and from from that point actually you
+know one of the things that I realized
+is kind of like a fundamental problem
+for starting a new like you know decent
+L protocol is the source of trust right
+I couldn't just take it and throw it on
+top of ethereum if it was like that that
+would have been so amazing right like I
+just just like you write a smart
+contract and throw it on ethereum Let
+the blockchain like supplies the trust
+so this is when I came up with this
+model that you know it's very simple
+once you state it basically like a
+general purpose smart contract
+blockchain is like selling trust and
+earning fees in return for selling trust
+and selling trust to whom to
+Applications right so applications are
+choosing to live on top of a blockchain
+because it's consuming the trust okay so
+once I understood this economy the
+question was like how can we do this
+more generally like you know more than
+just smart contracts can we kind of like
+take the same set of nodes same
+economics and some more transfer it and
+we Tred all kinds of things can you
+build it on bitcoin you know can you
+build it on ethereum uh and the the
+original set of ideas we had were not
+really related to reaking it was some
+kind of like a complex cryptoeconomic
+game but the the core idea was hey now I
+know I can run a different virtual
+machine on top of a different different
+blockchain what would I do with that and
+this was you know in 2021 and one of the
+things we knew we could do was to run
+evm on nonm blockchains and so this was
+the kind of starting point of the kind
+of ion lay project is we said oh let's
+bring evm to all the non evm blockchains
+and you know as a starting point we we
+took cardano because cardano was
+probably it had a barly functional smart"
+"contract programming environment at that
+time and what that meant was and and it
+was very difficult for developers to
+build on top of it so if we had evm
+easily virtualized on top of Gano that
+would be like a cool thing and you could
+do this on any blockchain you know it
+was not specific to cardano but it was a
+starting point for what we could do but
+you know as we were thinking about it
+one of the things that clicked to me was
+if the fundamental thing is
+your you want to have a common source of
+decentralized trust then building on
+distinct source of decentralized trust
+is replicated effort rather than
+aggregated effort and so the obvious
+place which was powerful and Central for
+us to build was ethereum and so we
+wanted to then like think about what we
+would build on top of ethereum and at
+that time I actually had no good idea
+for what to build on ethereum and the
+the story is you know I had a an
+interaction with uh uh Kyle samani of
+multicoin and you know pitching this
+this idea that you can actually do
+virtualization of evm or non evm
+blockchains and Kyle in his
+characteristic style said you know evm
+is a piece of you know star I don't want
+you know you should not be working on
+that and I'm like okay
+and then uh you know I said oh no but
+you could run like arbitary virtual
+machines on top of ethereum too like if
+you wanted and then he said no this is
+some kind of an optimistic type rollup
+it it will never work I said like why
+would it work because optimistic rollups
+are going to be very
+expensive and I went back and we sat
+down with the team and we were trying to
+understand this peculiar statement I
+didn't know at that time went through
+all the optimistic rups this is 2021 and
+found that the fees was much higher
+and I thought ZK rollups should be more
+expensive because I have to give a ZK
+proof so why is an optimistic rollup
+more expensive it was because of data
+availability and all the costs were
+going into publishing data on ethereum
+and so we then said oh yeah you know now
+it all fit together we had been doing
+research on data availability for many
+many years before that so we said I know
+how to scale data let's just build that
+so we said okay we're building on
+ethereum we'll build data availability
+on top of it so now we have a killer
+application so that that was the
+beginning of how we decided to build on
+ethereum but also know we wanted to
+build on etherum we just had didn't have
+a good use case you know at that time
+you know we didn't know what programming
+environment would be interesting I had
+all these like high level pictures where
+I'd say oh you can build AI you can
+build like databases you can build like
+gaming you know environments all these
+things but you know you have to start
+somewhere where you know there is Market
+traction and we found that with data
+availability so that's the origin of Ian
+da and EigenLayer on on ethereum add to
+this what happened was we said like
+let's go to eat Denver you know we're
+going to eat Denver now next week but
+this was you know
+2022 and go to Denver and hang out with
+all the people that I didn't know
+anybody there I actually know zero
+people in in ethereum at that time and I
+connected with the vi of ethereum which
+was you know decentralization
+permissionless Innovation censorship
+resistance it felt like this community
+had a set of principles that they're
+anchoring on rather than you know either
+individuals or expediency towards profit
+or even a product which felt very
+different to me I came back and told a
+friend who was working in Google at that
+time like imagine somebody just goes to
+a Google conference they're not a Google
+stock owner they're not a Google like
+you know programmer they're not even a
+Google really like application developer
+they just feel like they're a Google
+person at the end of a Google conf
+that's how I felt at the end ofen and so
+we decided to build on ethereum after
+that I yeah I think the the three
+biggest lessons that I've learned over
+the past years of investing in the space
+is that ethereum's greatest exports are
+three things right it's the liquidity of
+ethereum is the programmability of if
+evm and the ideology of ethereum and it
+sounds like to me that when I first saw
+I L I thought okay this is actually a
+project that helps expand this you know
+vastly beyond just the ethereum chain
+itself and I know you describe I as a
+generalized mechanism for anybody to
+build arbitrary distributed systems on
+top of the ethereum trust Network and
+when my Normie Friends Ask me okay what
+the hell does that mean I basically
+explained to them well you can stake
+your eth and not just validate for the
+eth network but for you know any project
+that chooses to borrow the security of
+this uh you know of this stake so I was
+actually quite fascinated because uh I
+feel like I've seen the similar ideas
+before in like polka do or Cosmos this
+idea of like shared security so how much
+of the inspiration came from observing
+what is being done on other chains what
+work what didn't work I would say that
+uh at least our own Journey was uh from
+we started from looking at
+Bitcoin uh where we we were looking at
+hey you know can you borrow trust from
+Bitcoin and the set of ideas we got
+exposed to was mostly merge mining the
+idea that you have a mining common
+mining uh Power and a lot of energy is
+expended on mining can you reuse that
+mining for other like securing other
+blockchains this idea was called Mudge
+mining back in in the day and I think
+even Satoshi wrote about it in one of
+their no Bitcoin talk or whatever and
+the thing
+is um we looked at merge Mining and one
+of the big incentive problems in merge
+mining is if you merge mine Bitcoin and
+some other altcoin the problem is you
+can attack the altcoin with impunity
+because I you know if you if there is an
+attack on the other chain it doesn't do
+anything to my mining equipment or like
+my Bitcoin price is not affected by the
+attack that happens on this other chain
+or coin so the crypto economics of
+Bitcoin is very uniquely tied to bitcoin
+itself which is that I have invested
+this bunch of money in like buying the
+mining hardware and therefore if I do
+some big harm and a majority tries to do
+an attack then my mining Hardware may
+become useless you know because you know
+the the the BTC is not valuable anymore
+so this was not the case for you know
+merge Mining and so the realization came
+from when you do staking the Dynamics
+are quite different because staking
+comes with slashing the equivalent of
+slashing is like going and finding out
+which miners behave badly and then
+burning their mining equipment right
+like that's not even thinkable as a as
+as a possible strategy right uh but the
+thing with staking is stake is
+intrinsically like you know on the chain
+and therefore you can burn the stake for
+misbehaviors on on the chain and this
+was such a powerful concept and then we
+realized that if you had a general
+purpose staking mechanism you can
+transfer the cryptoeconomic trust to
+arbitary other services much more easily
+we didn't know about much of the other
+other stuff like poka do or even layer
+tws or you know what was going on in
+Cosmos or avalanch at that time but of
+course later as you start exploring
+these ideas you find oh yeah you know"
+"these these other things are on this
+vicinity and what we I think have built
+is the most generalized system for shat
+security which is more General than all
+the other systems in in the flexibility
+with which trust can be offered and
+shared so that that's how I would phrase
+it in relationship with some of the
+other systems like any networks or
+protocols there's many different
+stakeholders so obviously there's rakers
+who are staking their eth and then also
+choosing to provide security with that
+stake to other applications there's The
+Operators that run the network but I
+think the concept of the AVS is quite
+interesting and not something that you
+know many people in crypto have kind of
+really come across before EigenLayer so
+can you help us explain you know what
+exactly are these abs maybe that's a
+good SEC way to talk about the the
+origins of IG da as well yeah um ABS is
+actively validated services it's a term
+that we co to explain what types of
+things can be built on EigenLayer because a
+lot of people look at EigenLayer you
+know at least right now in in the
+context of some kind of a D5 protocol it
+was never intended to be a D5 protocol
+it was intended to connect stakers and
+operators to innovators people inventing
+new distributed systems and
+decentralized protocols to borrow and
+share the the trust and security and we
+had to come up with an umbrella term you
+know people usually think of these as
+chains but we think chain is a very
+restrictive and a narrow way of thinking
+uh so we think of these as services and
+why service right like you know in in
+the cloud there is an analogous thing
+called software as a service right
+software as a service is you write a
+piece of software throw it on AWS or
+Google cloud and let it run there and
+you know as people are using the
+software you know you pay for the cloud
+but you also make money and if the unit
+Economics work then you're actually
+making money as a SAS but the most
+important thing for me in the structure
+of SAS and Cloud was how much open
+Innovation that actually enabled because
+you have the cloud and you don't have to
+think about all the hardware and like
+how to run it and how to scale it and
+how to Prov the enough amount of like
+compute to actually run your services
+what happens is you have uh a very
+powerful system where anybody can come
+and innovate and build new SAS services
+and put it on top of the internet this
+led to Super specialization very very
+narrow specialized SAS services that
+were built and lots of lots of people
+all around the world like you know in
+places which could not compete on the
+hardware basis could compete purely on a
+software basis and this is a very
+interesting important thing that
+happened with the internet and so if you
+think of what is the analog analogous
+thing that can be done on on top of the
+the crypto blockchain infrastructure
+that's what an AVS an actively validated
+service an actively validated service is
+a service that you uh you know write and
+it is anything that requires
+decentralized validation right and these
+decentralized validated services are
+then like managed by EigenLayer to make
+sure that all the node operators opt in
+the enough stake is backing it like how
+much particular attributable economic
+commitment has been backing that service
+all of this accounting is managed by Aon
+layer but as a Creator as an innovator
+you can just write the service and put
+it on top of like uh EigenLayer so that's
+the category of uh actively validated
+Services it includes something like
+running a new layer one chain but not
+exclusively running a chain you may be
+running very specific services and you
+know what might that service be to take"
+"you know usual examples it might be to
+run an oracle which fetches data from
+the internet has a group of nodes agree
+that that's the correct data and then
+put it on top of a blockchain it may be
+a a bridge which reads data from another
+chain and then moves it on top of
+another chain it may be a um you know an
+AI service you may be sitting on
+ethereum and you want to request some AI
+inputs and you know you need to run an
+AI inference to actually adjust the
+prices or something on top of your Unis
+swap pool so these are all examples of
+services there may be other like much
+more nuanced and specific services that
+show up on I which we already seeing for
+example uh we see things like prove of
+location proof of location is I want to
+know where these nodes are placed can I
+run a decentralized service to know the
+location of these other either operators
+or users in a decentralized manner and
+how might the decentralized nodes know
+it by sending Network latency
+information like you know I send a
+packet when do I receive it back if I
+can receive it back within like you know
+30 milliseconds it must be close to one
+of my locations
+and if many many nodes can do it and
+parallel and triangulate where the nodes
+are so that's a really interesting kind
+of piece of information so prove of
+location is that that's an example of a
+service but we've seen all kinds of
+different Services I would say like 20
+categories of services that are kind of
+building on top of EigenLayer so that's
+the ABS actively validated service is a
+category I can go into some of these
+examples but that's a high level uh
+overview yeah and given how diverse
+these use cases can be I'm curious uh
+and this is something that a lot of
+people are discussing as well in terms
+of the security assumptions because you
+mentioned the concept of slashing so
+let's say if someone is reaking for like
+20 different applications one of those
+applications happen to do something bad
+and you know the validator has to be
+slashed uh what does that process look
+like and you know how do we how do we
+think about the implications for the
+entire kind of uh you know EigenLayer
+stack the uh the way to think about it
+is
+slashing is encoded into smart contracts
+that talk to the EigenLayer contract
+whenever a Staker is opting into a new
+AVS they're basically opting
+specifically into an AVS contract and
+the AVS contract specifies the
+conditions of registration the
+conditions of payment and the conditions
+of slashing so basically who can come in
+what's the POs to incentive what's the
+negative incentive to do this stuff and
+those are encoded in the AVS contracts
+and so now when um when a Staker opts
+into a bunch of avss what they're
+actually saying is I'm opting into these
+bunch of conditions of like positive and
+negative incentives and I need to do
+this bunch of work to actually keep up
+my uh positive incentives and if the
+contracts if the slashing conditions are
+return in code on ethereum Smart
+contracts and you know for a moment
+let's assume there are no code
+programming errors which we have to deal
+with but you know then essentially what
+you're saying is you're opting into
+rigid objectively verifiable slashing
+conditions which are return in code on
+ethereum and what that means is if I
+know that I'm running the software
+correctly I won't get slashed by this
+you know by this contract in fact I may
+even run a piece of code we call an
+anti-s slasher what an anti slasher does
+is whenever I issue a signature it
+checks that this signature will not
+trigger slashing you know before it
+issues the signature and so this kind of
+an anti- slasher can be run locally and
+so you know that you will not get
+slashed if you actually if the contracts
+are correctly return so that's the first
+level which is as a Staker you're opting
+into objectively verifiable rigid
+conditions return as smart contracts on
+ethereum so the trust model is very
+similar to the other kind of trust model
+when you're going and opting into a Unis
+swap or a or any of these kinds of D5
+protocols but to protect users even more
+we have another layer of protection
+because we know that code can sometimes
+be buggy and we see this all the time in
+crypto like sometimes you know a
+protocol has a buggy code and then like
+suddenly people lose their funds and
+this is something we are taking a
+cautious approach to and the way we take
+the cous approach is by actually having
+what we call a slashing veto committee
+this is a committee of external parties
+you know experts in kind of protocol
+design who can actually vet whether the
+contract triggered the slashing for a
+you know on on on the actual protocol or
+it was a bug that LE led to the slashing
+if it is adjudicated as a bug slashing
+does not happen so therefore slashing
+requires two distinct things the
+objective contract to trigger the
+slashing and the kind of human committee
+to approve it otherwise slashing is not
+fulfilled so we you know in the balance
+of powers between stakers and avss we
+lean on protecting stakers because you
+know know stakers are basically like
+underwriting the system with their own
+like Risk and the the guarantee we want
+to give to a Staker is if you are not
+malicious you will not be slashed so
+slashing is there only
+for absolutely attributable attributable
+actions that the Staker or operator took
+which are malicious not for regular
+operations where they made a
+configuration mistake or the the program
+had a bug or anything like that so
+because you know when you're building a
+pon system where anybody can come in and
+participate you need to protect the
+system against like malicious actors INF
+infiltrating the system so you need a
+system of kerma like positive or
+negative incentives to keep the system
+going and that's what Igan does is make
+sure that as a Staker you don't have any
+incentive to try to like attack the
+system whereas also make sure that avss
+you know have no agency to attack the
+system even if they put in a buggy C
+firstly they to put in smart contract
+code not like you know have arbitrary
+adjudication conditions but smart
+contract code and then even then there
+is a back stop in terms of a common
+slashing V committee my guess is that a
+lot of people who are kind of you know
+concerned about systemic risks that Ian
+ler could introduce are almost confusing
+the concept of reaking with the concept
+of rehypothecation because they see this
+concept play out a lot in defi where
+somebody has a bunch of collateral and
+they use that to margin to do some sort
+of lending or borrowing and then they
+use the stuff they borrow to margin
+again and borrow more and more and more
+but this is something fundamentally
+different than that right so if if you
+do get slash it's not like everything
+just like every single app that's tied
+to that St suddenly just like collaps
+and and stop functioning right just to
+just to make that very clear to our
+listeners yeah absolutely I think there
+are lots and lots of differences I think
+to take the kind of comparison between
+the two two things you just laid out
+imagine you take uh you know people are
+thinking by reaking into 100 protocols
+is the same as like you know taking 100x
+leverage position actually these two
+concepts are not at all related and the
+easiest way to see it is if you take a
+100x you know margin landing position if
+the market price of that asset moves 1%
+you will get liquidated you will lose
+your entire position whereas if I opt
+into 100 protocols and I don't act
+maliciously on any of them I will never
+get slashed it's a completely different
+thing"
+"the basic principle and I think when
+vitalic was discussing a recently I
+think the two kind of uh areas to look
+out for that he mentioned were the
+security and the centralization aspect
+so I think we talked a lot about the
+security aspect what are some
+considerations that we should have when
+we think about the centralization that
+Ian L might or might not introduce
+yeah I think this is a much much more
+nuanced topic you know I'm glad you
+brought this up um there are various
+layers of decentralization that you know
+protocols uh you know like ethereum may
+want to have and you know the most I
+think direct is operator
+decentralization does EigenLayer
+contribute to more pressures for
+operators to centralize maybe there are
+only like a few operators when there are
+lots and lots of services that need to
+be oper opted into and you
+know the answer to this is you know
+in in the structure that we are building
+in igon we want to minimize the pressure
+to centralize so this is a kind of like
+an operating principle that we are
+taking in building EigenLayer and you
+know if a different team was building
+EigenLayer they would operate on maybe
+different principles but like I said we
+came into the space because of like you
+know particular ularly building on
+ethereum because of the shared values
+and so one of the particular things we
+do is can we try and encourage Services
+which do not require a lot of
+computational effort and this is how Ian
+da the first service is built on IG on I
+layer IG da is built to be horizontally
+scalable which means as you increase the
+number of nodes the system's performance
+keeps increasing rather than the I need
+to have a lot of node requirements on
+each node to satisfy a certain amount of
+bandwidth so for example systems like
+salana scale by vertical scaling each
+node needs to have more and more in
+order to actually do well and IG da
+scales horizontally which means the
+total performance of the system is the
+product of the amount of bandwidth
+available in a node times the number of
+nodes so you can increase it by like
+increasing the performance of a node or
+you can increase it by increasing the
+number of nodes and because the system
+is horizontally scaling decentralization
+itself becomes
+scalability the more nodes you have the
+more bandwidth you have and therefore
+you can scale so this is a principle
+that we used to build
+igda okay beyond that what can we do to
+encourage decentralization and I think
+over time what will happen is there will
+be services that require more
+centralized you know operations that'll
+be Services which will require more
+decentralized operations and you know I
+give us this example this secret sharing
+imagine I have a secret and I want to
+store it in a decentralized network so
+each node has a little bit of the secret
+if all the nodes were just the same
+party it was all just coinbase like
+running hundreds of nodes then I don't
+get any secret sharing benefit is the
+same guy just like running 100 nodes and
+storing portions of the secret so if I'm
+running a secret sharing Network I
+actually want
+decentralization and so one of the
+really powerful things we're building
+with EigenLayer is expressivity and
+flexibility for a service to specify
+that they only want let's say more
+decentralized operators how do they know
+which operators are more decentralized
+they can choose to use the Oracles of
+their choosing to decide which are more
+decentralized and which are more
+centralized maybe something as simple as
+I want to exclude all the exchange nodes
+and I want to exclude all the major lstd
+nodes maybe a thing that somebody wants
+to do so there are lots of expressivity
+in the lay platform and if decentralized
+trust actually has utility which is what
+we all believe you know EigenLayer creates
+a market place for the decentralized
+nodes to potentially even more earn more
+than centralized nodes because you know
+you can't go to ethereum today and say
+like hey I'm going to pay a transaction
+fee but this transaction fee only goes
+to home stakers that's not a thing like
+your transaction fee goes to whoever
+picks up the transaction and like Minds
+it but on IG layer you can actually do
+it you can actually say like hey I only
+want to build an oracle which uses the
+home
+stakers and you know so we will find out
+the market value of decentralized trust
+by actually allowing EigenLayer to exist
+and our thesis is you know there is
+enough interesting things to be built
+that decentralized trust has a real
+value and actually for the first time
+very first time in ethereum
+decentralized nodes could earn something
+more than centralized notes till now all
+is the centralized nodes are better yeah
+that's actually a huge reason why I was
+very excited to invest in N layer is
+because one of my big thesis is I
+believe crypto is the best way to create
+a market for anything um and I think
+this is the first market for actual
+decentralized trust you can actually put
+a value like a dollar amount fee value
+on how much people want to pay different
+type of stakers and what sort of
+centralization they actually want to see
+beyond the posturing you see on Twitter
+because now people can put the money
+with their mouth this so I'm very
+excited for that um and I love to kind
+of talk about the commercial aspect as
+well because one Trend that I saw in the
+past few years is you know projects
+verticalized into their own
+infrastructure so you see Taps like dydx
+becoming their own chain you see some uh
+you know guilds or games like Merit
+Circle you know verticalized into their
+own chain so it seems like the market is
+almost rewarding projects for becoming
+infrastructure for
+verticalized to ig layer since you know
+IG layer is basically telling everybody
+that hey you don't need to do that you
+can just simply use existing security
+from ethereum so from a commercial angle
+you know what drives founders of you
+know abss of apps to use EigenLayer
+versus becoming an L1 or L2 themselves
+the way to think about it
+is if you are an AVS founder what are
+the choices on the table option one
+build with your own like token and your
+own trust Network and option to build on
+top of an existing trust Network like
+ethereum I and you know deploy your
+service and you know in the simplest
+world one would say maybe a lot of avss
+would want to get started off as the
+second one which is you know um use uh
+ethereum and and you know find product
+Market fit and then maybe like go and do
+their own
+thing"
+"and you know maybe this analogy
+that I recently came up with may be
+useful imagine you go into a store you
+know you go into a mall and then there
+is this main store that says that hey
+you have to put up a deposit you know if
+you come and steal anything here you
+will lose your deposit and then you know
+I come in and say hey anyway the main
+store you're putting up a $100 deposit
+to enter why don't you make a promise
+that you know with this $100 you will
+not steal anything even on the other
+smaller stores in the mall they say yeah
+you know now it's in your control to not
+steal at the mall right like it's very
+different from taking a margin lending
+or any other kind of like financial
+position so the risk is endogeneous to
+the Staker except smart contract risk
+and smart contract risk is just
+pervasive in all of blockchains and
+that's just what it is right and even
+that we are trying to build a very
+cautious govern system in the beginning
+over time these governance features can
+be removed but that's the trade-off that
+we're taking is be cautious in
+protecting the stake so you know to take
+another like mental model that people
+have which is I think very erroneous
+when 100 Protocols are sharing common
+stake the model is oh you know maybe
+there's no risk from the Staker side
+maybe there's a risk from the protocol
+side or from the AVS side and I think
+this is also erroneous and the reason is
+if there are 100 protocols Each of which
+can sustain $1 billion staking on their
+own let's say that's the 100 protocols
+and so which means they're paying some
+amount of fee which is sustaining that
+amount of State in that platform now if
+you aggregate all of this and create a
+$100 billion pool this can be restak
+across 100 protocols the fee is
+identical to the previous world because
+you know you're paying the same fee and
+you're able to sustain $100 billion now
+to attack any one protocol you need 100
+billion doar rather than requiring $1
+billion security has this nonlinearity
+where the the more stake you need to do
+an attack the more stake you need to
+actually profit out of and Escape in
+real world with all this kind of crazy
+stuff becomes impossible there is no
+liquidity on an exchange there is no you
+know tornado or whatever to go and hial
+transactions it's simply not possible to
+pull off an attack Beyond a certain
+scale so there's hardening of security
+that actually happens at scale so that's
+the the other I think model which is
+missing because when people are thinking
+about 100 protocols sharing the same
+stake they're thinking the amount of
+Stak is going to remain the same as the
+number of protocols increases but that's
+not the case as more and more protocol
+bring more and more fees the amount of
+stake will keep increasing so this is a
+market equilibrium and and another
+feature that we're building with IG
+layer is what we call attributable
+security when 100 Protocols are sharing
+a common pool of let's say 100 billion
+dollars of stake there may be one
+protocol which says hey you know I just
+not only want to have this PO olded
+security but I also want to have unique
+attributable security just to myself
+which means even if all the protocols
+get attack simultaneously I should be
+able to slash and redistribute let's say
+$10 billion because I'm coinbase I want
+to you know be very sure I want to be
+able to re you know slash and
+redistribute $10 billion on my own you
+can do this on EigenLayer EigenLayer
+gives you an ability to express both
+unique attributable security as well as
+pool Security in a common system and the
+power of pool security is very similar
+to why like nation states have like
+security functions cities don't have
+security functions is because there is a
+hardening of security at scale so that's
+ um so one of the things we did as
+you know we thought through like what
+are the incentives of the F you know of
+the protocols we know that crypto runs
+on incentives if the incentive is not
+aligned people are not going to come and
+build on top of us one of the things we
+did is to break the binary choice
+between hey I stake my own token or I
+get security from ethereum we support
+natively what we call dual staking dual
+staking means I as an ABS can borrow
+trust from two
+distinct parties one is stakers of my
+own token whose whose interests are
+directly aligned with like the protocols
+well-being because you know they have
+exposure to the token and a neutral high
+value Quorum which is coming from
+ethereum so you have we have this dual
+Quorum model which is a very popular
+model among the many AVS even if they're
+launching on a single eorum to begin
+with over time they have the idea to
+actually build their own other Corum and
+instead of forcing a binary choice where
+we say Oh either you choose your your
+own token Corum or you choose you know
+the Eid Korum you can say oh I'm sending
+80% of the fees to the E Korum and 20%
+to my own Quorum today and over time I'm
+going to maybe spend send more to my
+Corum and less to ethereum maybe at some
+point I may even send zero to the
+ethereum cor and send all the value to
+myself so what this means is specific
+specifically if you try to use some kind
+of a discounted cash flow model to try
+to Value like an AVS you know uh token
+you might say that the total value that
+can be accured by the AVS because you
+have and the thing is this decision
+between how much value goes to the AVS
+token versus how much value goes to eth
+is decided by the avss governance which
+which will be in their own native token
+so the at the end of the day EigenLayer
+is continuous and pure optionality like
+you have the option to use e if it is
+beneficial to you you have the option to
+opt out if it is beneficial to you and
+what this does is it makes it breaks
+this binary choice and in in this world
+the value of the AVS token with igon
+layer is actually only greater than the
+value in the absence of wagon layer
+because adding an option to consume
+additional Security in a way that you
+can opt in and out as needed doesn't
+increase your like uh you know uh cost
+basis so that's the first first thing is
+the dual token model basically like
+completely breaks this artificial
+tradeoff and makes it very very smooth
+for people to like borrow as much
+security as they need to keep their
+platform in in continuous utility okay
+so in in this case one of the downstream
+questions I get is hey does it mean that
+over time uh you know services will
+launch on eorum and eventually just
+migrate on their own and you know this
+is really a question of whether igen
+layer is viable not only as a
+bootstrapping platform for avss but also
+as a continuous service platform for
+avss and so it's incumbent on us to find
+ways to create synergies across these
+avss in a way that they actually want to
+stay rather than they are stuck with us
+and you know we have this you know
+entrenched Monopoly to like keep this
+platform going and there are many
+interesting ways we can actually do it"
+"and one way you know I pointed to
+examples of the cloud early on and one
+of the really powerful things Amazon's
+cloud is called ec2 which is elastic
+Cloud compute right an elastic compute
+is the idea that I can borrow as much
+computer as I want and EigenLayer is
+elastic scaling of security you know if
+Amazon's ec2 like ion is es2 and es2 is
+basically elastic scaling of security
+which is you can borrow how much
+security you want and so why is this
+meaningful imagine a Bridge you know
+who's doing a weekly transaction volume
+of like you know anywhere between 10
+million and 200 million okay so now how
+much security do I need if I have to
+provision security separately for the
+bridge I need to provision worst case
+200 million so I need to have 200
+million of security just for my bridge
+but in the EigenLayer worldview there is
+this common huge pool of security I can
+randomly pull the amount of security
+that I want exactly like the cloud which
+am across all the services creating a
+big compute platform from which you can
+pull the amount of compute that you want
+randomly and that's exactly what happens
+with I so this reduces dramatically the
+cost of security because you're not over
+provisioning for the worst case you're
+you're consuming security just in time
+how much you need this is one benefit of
+EigenLayer there's also all kinds of other
+benefits where what happens is if a Dap
+consumes multiple EigenLayer Services I
+want an AAL I want a DA I want some
+other thing instead of paying for
+security separately for each of these
+Services they can just pay one time
+because the same pole of security is
+backing all of these services so there
+is an economy of scale in Igan lay that
+actually incentivizes services that kind
+of are mutually synergistic to stay
+together so these are you can create
+almost what what I call like a uh X
+Market bundling like instead of BU you
+know somebody could have thought and
+said oh let let me create a new
+middleware which is an oracle plus da
+plus AI together but like who knows how
+to build an oracle plus da plus AI
+together in today's market condition
+like figuring out how to build one is
+already a huge lift so the EigenLayer
+allows postmarket bundling of these
+Services into like useful things that
+Services can consume reducing the cost
+basis as well as offering a consumer
+segment across these different Services
+just like you go to AWS and you have a
+bunch of SAS services and you just hook
+into like five you know a statistic is a
+typical web2 app has 15 SAS Services
+integrated in the back end something
+like that could happen on IG and I think
+another kind of under uh explored
+incentive for developers to stick around
+with i l long term is the fact that it
+enables kind of New Primitives to be
+built and one such new primitive that I
+came across on your Twitter is this idea
+of like co-processors for instance um
+and you kind of talked about this idea
+of like intelligent defi as well which
+is you know not something that at least
+I don't think you can build without ion
+layer so can you kind of break us down
+you know what exactly is a C- processor
+and what did you mean by intelligent
+defi yeah um a a Cod processor is kind
+of like a layer two system but Layer Two
+normally you think of as like a chain so
+this is one of the reasons I don't like
+the chain terminology so imagine I'm
+sitting on ethereum and I'm writing a
+smart contract program and you know
+maybe I'm on Unis Swap and and you know
+one of the things I want to do is
+instead of doing passive liquidity
+provisioning which is I just put it into
+a pool and you know fix a certain price
+level at which I'm provisioning
+liquidity instead I want to dynamically
+move around the liquidity right but then
+the question is who is doing it are you
+an active participant are you a passive
+participant what is going on and what
+might happen is somebody may come up
+with a machine learning or AI protocol
+which takes the history of all the
+transactions and moves around the
+liquidity like provisioning Spectrum
+right based on you know these hard
+inputs on the blockchain imagine that I
+can actually get high integrity
+provision of this service which means
+when the service says that this is the
+right like you know if I ran this AI on
+this history and this is the output I
+get and it's absolutely correct if you
+had this access and what you could do is
+you could write you know in uh in your
+D5 program that hey I'm I'm a passive
+provider but I'm provisioning liquidity
+to this AI protocol and you know I'm
+just hands off after that point and the
+AI like sits and keeps adjusting your
+like you know liquidity range and this
+is a really like interesting service if
+it could be built but it's not possible
+to write this in evm or you know you
+know fit it into the small gas limit of
+ethereum but if I had an EigenLayer
+service that I can sit and call on on
+top of like ethereum the these nodes run
+the AI service offchain and you know
+sign off on the in the output of this AI
+service and then put it on top of
+ethereum back it with a certain amount
+of Economic Security now you have a
+rigid input that the protocol can take
+and move around this liquidity based on
+that this becomes really really powerful
+because now you know we called you know
+this thing smart contracts right and you
+know smart contracts you know as they
+exist today are rigid but not that smart
+not that intelligent right you know
+smart means like oh is it an agent is it
+like doing complex like you know
+adaptations you have to write it in
+simple easy code like you know in Unis
+swap has this curve called XY equals K
+which is like the first kind of simple
+programmatic thing that one might think
+of and what if instead like you had a
+complex
+expressivity while not giving up
+rigidity or correctness how can I get
+smart and you know accurate execution
+simultaneously and that's what Ian layer
+promises there are other Technologies
+like ZK proofs which could give you this
+but they're very very expensive today
+you know running a ZK proof may be as
+expensive as 100,000 times just running
+the software you know this is this is
+possible for simple applications but
+when I'm when you're talking about
+running complex AI this cost just like
+blows up out of control whereas on IG
+layer you don't incur such a cost so
+that's that's the idea of cryptoeconomic
+co-processors I'm going to link your
+Tweet in the show notes below as well
+for anyone who wants to check out this
+idea because I think this is one of the
+more interesting directions that dii can
+take that can really Revitalize um now S
+I think my last question for you just to
+wrap this up is uh let's assume that
+there are many parallel realities and
+we're able to zoom out and see all these
+realities and in one reality we have IG
+layer at its most successful and then
+one where everything's gone wrong
+something has you horrible happen
+something horrible has happened so what
+would EigenLayer look like in these two
+Universe like what is the most kind of
+successful outcome you can see and the
+least successful outcome for EigenLayer
+the most successful outcome for IG layer
+would be that you know it it accelerates
+this whole crypto Vision which is that
+we can actually enable anybody to come
+and build new and interesting services
+on top of a common coordinatEigenLayer"
+"and so what the means is you have this
+Rich world of not only like you know we
+talk about end users owning assets but
+also developers owning the platform or
+like working on immutable platforms on
+which they're building their projects so
+their long-term source of sustenance is
+actually like really rewarded so many
+people coming and building new
+interesting Services you know a rich and
+vibrant economy of consumption of these
+services to build things like the open
+metav ver to build our decentralized AGI
+to build things like you know secure uh
+private homomorphic encryption all kinds
+of interesting things running on top of
+this common substrate so that's what the
+most successful interesting world for
+looks like what is the most catastrophic
+thing that can happen uh we think about
+this a lot you know because we want to
+make sure that we maximize the
+likelihood of the successful outcome and
+minimize is the likelihood of the
+catastrophic outcome what would a
+catastrophic outcome be something got
+hacked right and you know people lost
+money I think that would be a
+catastrophic outcome uh we we take a lot
+of precaution to try to ensure that
+that's very unlikely but in blockchains
+you know you we don't know these are new
+and new systems so there's always some
+risk that you know nobody understands so
+that's that's one one aspect that could
+be some smart contract problems in the
+uh uh in the EigenLayer ecosystem that
+leads to you know some kind of loss of
+funds okay the other catastrophic
+outcome I can Envision is something
+happening not in EigenLayer but some
+like you know layers on top and one kind
+of a layer on top is this
+financializatEigenLayer where something
+like you know there is this whole
+ecosystem of liquid reaking tokens and
+what they do is they take people who
+have staged uh you know in the IG layer
+protocol and issue like a receipt token
+which is representing their position in
+EigenLayer this itself I think is not at
+all harmful like having a liquid
+representation of your token actually
+buffers the system quite heavily because
+when somebody has if you don't have a
+liquid reaking position what might
+happen is if somebody uh has a staged
+position and wants to go and
+collateralize it to like do Ling or
+borrowing or whatever and they get
+liquidated then the only way to like
+clear off their loan is to go and
+withdraw from Ian lay and from ethereum
+their stake and this leads to like you
+know uh pressures into the protocol into
+the IG protocol as well as into ethereum
+itself and what a liquid reaking token
+does is by issuing a fungible
+representation which is a token that can
+just be that change hands instead of you
+know actually going and withdrawing it
+actually buffers the risk out of the
+deeper layers of the stack but what we
+see happening which might be a risk to
+the financialized infrastructure on top
+is people taking leverage on top of
+their liquid reaking positions you know
+when people are worried about leverage
+in igen lay this is the place we should
+focus on is are people lending and
+borrowing against their liquid reaking
+tokens in a kind of unmeasured you know
+way you know ideally there is no
+leverage but at you know in practice
+leverage should be be kept very minimal
+and this is where I I would urge The
+Lending protocols for example to urge
+caution when estimating the value of a
+liquid reaking token instead of like
+pegging it at it will always be one as
+to one to eat they should take cautious
+approach so that people don't take
+excess risk and externalize it onto
+other parties who may then have lent
+their eath into these Landing protocols
+and so on so that's the place where I
+can see some kind of financialization go
+wrong this is one of the reasons we
+don't necessarily either build these
+liquidy staking tokens or you know
+Landing platforms but we do want to urge
+all the users to exercise caution at
+these layers to minimize this kind of an
+outcome yeah well s I'm really
+appreciative of how candid you are with
+this and I look forward to seeing you
+make sure that the Universe we live in
+is the first one and not the second one
+um so thank you so much for coming on
+the show and we're going to put your
+socials in the show notes below as well
+so for listeners at home or if you're
+watching this on YouTube just click on
+the drop Dr down and you can follow
+instram on Twitter so thank you so much
+for coming on absolutely really enjoyed
+this conversation Jason hey thanks for
+supporting another episode of The Block
+wrench podcast if you've enjoyed this
+episode please give us a festar rating
+on Spotify and apple podcast or whatever
+platform you're listening to this on it
+really helps us a lot or if you prefer
+YouTube you can subscribe to our Channel
+on YouTube as well to not miss an
+episode I'd love to hear from you guys
+as well and I personally make sure to
+read every single comment on YouTube or
+tweets that are directed at me so feel
+free to leave a comment there let us
+know what project you want us to bring
+on or what trends you want us to talk
+about or tweet at me at Mr Jason Troy or
+at theblock crunch on the platform
+previously known as Twitter currently
+known as X and thank you so much for
+supporting and I'll see you in the next
+episode"