After much anticipation, Eigenlayer has finally released more details about its tokenomics today, announcing the distribution of 15% of EIGEN tokens to users who previously participated in restaking, with the tokens unlocking gradually over time.

What value does the EIGEN token hold? What is its purpose? How can it impact restaking and the broader Ethereum ecosystem?

All answers can be found in Eigenlayer’s comprehensive 40-page tokenomics white paper.

Unlike typical project introductions that offer a few token release diagrams, Eigenlayer has gone to great lengths to thoroughly and meticulously explain the EIGEN token’s role and its relationship with ETH tokens, with a touch of technical geekiness.

The research team at Deep Tide has read through this white paper and translated the technical details into simpler language to help you quickly grasp the purpose and value of EIGEN.

Key Points Overview

Functions and Problems Addressed by EIGEN Tokens

Universality and Restaking

Traditional blockchain tokens are usually designed for specific tasks, such as ETH, which is mainly used for block validation on Ethereum. This limits the token’s use and flexibility.

The restaking mechanism allows users to leverage their already staked ETH assets for multiple tasks and services without unlocking or transferring them.

Intersubjectively Verifiable

The white paper introduces the term “Intersubjectively,” a concept hard to translate into Chinese, to describe complex network tasks that are difficult to verify through simple automated programs and require human consensus.

EIGEN tokens are a medium for “social consensus” in these tasks. In scenarios needing verification from various perspectives, EIGEN can be used as a voting tool, allowing token holders to influence network decisions through voting.

Forking Tokens and Slashing Mechanisms

In a network, disagreements on certain issues or decisions can arise, necessitating a mechanism to resolve these conflicts and maintain consistency.

For major disagreements, EIGEN tokens might fork, creating two independent token versions, each representing a different decision path. Token holders must choose which version to support; the unsupported version may lose value.

If network participants fail to perform staking tasks correctly or act improperly, their staked EIGEN tokens might be slashed as a punishment.

Relationship Between EIGEN and ETH

Complementary, Not Replacement: EIGEN tokens are not meant to replace ETH but to complement it.

ETH is primarily used for staking and network security, serving as a general-purpose working token. ETH staking supports slashing for objective faults (e.g., penalizing validators for incorrect verifications).

EIGEN staking supports slashing for subjective faults (errors that cannot be verified on-chain, like incorrect oracle prices), significantly expanding the range of digital tasks the blockchain can safely handle.

EIGEN Tokens: Introducing a New Social Consensus Mechanism to Address Subjective Errors Beyond ETH’s Reach

To understand the role of EIGEN tokens, it’s essential to first understand the role of ETH tokens.

Before the concepts of Eigenlayer and restaking, ETH was seen as a “special-purpose” working token. Simply put:

ETH tokens are used to maintain network security and generate new blocks, performing tasks related to the maintenance of the Ethereum blockchain and cannot be used for other purposes.

In this context, ETH characteristics are specific working purposes;

Strong objectivity, such as double-signature errors on the Ethereum chain or errors in Rollup aggregation, which can be identified on-chain through predefined objective rules, thus penalizing validators with a certain amount of ETH.

With Eigenlayer, ETH is transformed into a “general-purpose” working token. Simply put:

You can restake ETH into various tasks, such as new consensus mechanisms, Rollup, bridges, or MEV management solutions, no longer limited to Ethereum’s chain staking, which is an important feature of Eigenlayer.

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

“Objective” limitations remain because slashing and penalties can only be applied to objectively verifiable tasks on the Ethereum chain.

It’s important to note that not all errors in the crypto world can be attributed to on-chain and not all disputes can be resolved through on-chain consensus algorithms.

Sometimes, non-objective, difficult-to-verify, and highly controversial errors and issues significantly affect the blockchain’s security.

For example, an oracle reports 1 BTC = 1 USD. This data is incorrect from the source, and no on-chain objective contract code or consensus algorithm can identify it. If a problem occurs, penalizing the validators’ ETH is useless. Simply put:

You cannot use an on-chain objective solution to sanction an off-chain subjective error.

An asset’s price, a data source’s usability, an AI interface program’s correct operation… These issues cannot be consensually resolved on-chain and need a “social consensus,” achieved through subjective discussion and judgment.

Eigenlayer calls these issues intersubjectively attributable faults: a set of faults widely recognized among all reasonable active observers of the system.

Therefore, EIGEN tokens come into play - providing a supplementary new social consensus mechanism outside of ETH to maintain network integrity and security, specifically addressing these “intersubjective” faults.

Specific Practices: EIGEN Staking, Token Forking

ETH remains the general-purpose working token, but EIGEN will serve as the general “intersubjective” working token, forming a complement.

If validators stake ETH and some objective faults occur, the staked ETH can be slashed and penalized;

Similarly, you can stake EIGEN, and when intersubjective faults (which cannot be directly judged on-chain and require subjective judgment) occur, the staked EIGEN can be slashed and penalized.

Let’s consider a specific scenario to see how EIGEN works.

Suppose there is a decentralized reputation system based on Eigenlayer where users can rate service providers. Each service provider stakes EIGEN tokens to demonstrate their credibility.

Before this system starts, two essential stages are required:

• Setup Stage: The rules for resolving subjective disputes are encoded by system stakeholders.
• Execution Stage: Pre-agreed rules are executed locally in an unspoken manner.

In this system, users can execute their pre-agreed conditions themselves.

If a service provider is considered to provide false services or mislead users, the platform’s community consensus mechanism may trigger a challenge, resulting in a token forking event, creating two versions of EIGEN tokens - EIGEN and bEIGEN.

Now, users and AVS can freely decide which one to respect and value. If people generally believe the slashed stakeholders behaved improperly, users and AVS will only value the forked token, not the original one;

Thus, the malicious staker’s original EIGEN tokens will be slashed through this forking method.

This mechanism acts as a social consensus adjudication system to resolve disputes that cannot be objectively handled on the ETH chain.

It’s also worth noting that users and other stakeholders don’t need to worry about the impact of this “forking.”

Generally, after a token fork, you must make an overall choice, which also affects your token usage elsewhere.

But EIGEN creates an isolation barrier between CeFi/DeFi use cases and EIGEN staking use cases. Even if bEIGEN is affected by intersubjective forking disputes, any EIGEN holder using it for non-staking applications does not need to worry because they can redeem the forked bEIGEN at any time in the future.

Through this forking isolation mechanism, Eigenlayer not only improves the efficiency and fairness of dispute resolution but also protects the interests of users not involved in disputes, ensuring network stability and user asset security while providing strong functionality.

Summary

It can be seen that EIGEN’s intersubjective staking and dispute resolution mechanism complements ETH’s on-chain staking mechanism, which cannot handle subjective disputes and faults, unlocking a vast array of previously impossible AVS on Ethereum, with strong cryptoeconomic security.

This could open doors for innovations in oracles, data availability layers, databases, AI systems, game VMs, intention and order matching, MEV engines, prediction markets, etc.

However, according to the roadmap provided in its white paper, the current use cases of EIGEN are still in a very preliminary start-up stage, more like all concepts are formulated but far from being practically executed.

As users can officially claim EIGEN tokens after May 10, it remains to be seen whether the envisioned utility of EIGEN can effectively influence the token market price.

Disclaimer:

1. This article is reposted from [TechFlow], and the copyright belongs to the original author [Deep Tide TechFlow]. If there are any objections to this repost, please contact the Gate Learn team, and the team will handle it as soon as possible according to the relevant procedures.

2. Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.

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