a16z: Why Invest in EigenLayer

Written by: Ali Yahya, General Partner at a16z crypto

Compiled by: Karen, Foresight News

Few possess both the foresight and the potential to drive transformation. EigenLayer founder Sreeram Kannan is not only exceptionally talented and intelligent, but fundamentally, his vision for the future is so clear and compelling that it becomes instantly tangible when you talk to him. Sreeram has what I call the Promethean fire, driving new technologies to life and creating an entirely new future.

I first met Sreeram in 2019 when he was an associate professor at the University of Washington and had just begun his entrepreneurial journey. Sreeram made a lasting impression, and over the years, we have had many interactions with him and the world-class team he has assembled. In 2022, Sreeram delivered an inspiring talk on EigenLayer and EigenDA during our summer research fellowship, and last year, he and Soubhik, the research lead for the EigenLayer protocol, published a comprehensive overview of Slashing economics on our blog.

Today, we are excited to announce that we are leading EigenLayer's Series B funding round and are thrilled to work with Sreeram and the entire team to build a platform that opens new dimensions of innovation on Ethereum.

Background

To fully understand the scope of EigenLayer, we first need to broaden our perspective: we can start with Bitcoin.

Bitcoin is the first example built entirely on blockchain technology, originally intended as a means of payment, but it has gradually evolved into more of a store of value akin to digital gold, despite its extreme volatility.

The genius of Ethereum lies in its deconstruction of Bitcoin's monolithic approach to a single application by separating the consensus mechanism from the application logic built on top of it.

Ethereum enables developers to write their applications in the form of smart contracts, leveraging the pooled security and computational resources of the blockchain.

This single change has unleashed a vast design space for open innovation, and nearly everything we know and love today stems from this. It means that people can now build decentralized applications without having to launch their own blockchain.

Ethereum's advanced programmability is a significant breakthrough for a range of applications. However, it is not without limitations. As a developer, there are still many regulations that restrict what you can and cannot do.

For example, the code you write must be compatible with the Ethereum Virtual Machine (EVM), which remains a good computational model for certain lightweight applications due to Ethereum's block size and gas limits. But for other applications that may be more complex or require specific functionalities, the EVM may not be suitable.

In an ideal world, as a developer, you should have almost complete freedom.

If necessary, you should be able to write code for distributed services using any instruction set, have your own consensus mechanism, data propagation algorithms, block times, and gas limits, and even set requirements for validators based on your hardware needs (such as GPUs or trusted execution environments).

You can achieve all this without having to build your own blockchain network from scratch. Instead, you can build on the most secure programmable blockchain that already has a decentralized and secure validator set: Ethereum.

Enter EigenLayer

EigenLayer is a set of smart contracts on Ethereum that creates a bilateral market for the original crypto-economic security: on the demand side, it allows creators to write code that effectively extends Ethereum's capabilities. On the supply side, validators participating in Ethereum's consensus (if they happen to have the necessary capabilities and hardware) can choose to run these distributed services by re-staking ETH. Overall, EigenLayer is a decentralized and market-driven mechanism for extending Ethereum's capabilities.

The implications of this mechanism are profound. We believe that by further deconstructing the relationship between crypto-economic security and the EVM, EigenLayer has the potential to achieve a 100x innovation velocity in technologies such as consensus mechanisms, new virtual machines, decentralized oracles, bridges, and networks with specialized hardware, just as Ethereum achieved a 100x innovation velocity at the application logic level by introducing smart contracts.

We are very excited to work with Sreeram and his team to help realize this vision.