In the last 2–3 years, Ethereum’s effort to shift from Proof of Work (PoW) to Proof of Stake (PoS) has been the most anticipated as it gave investors some good news to get through the crypto winter. Even before these upgrades towards a PoS system, the Ethereum foundation and the community have been building and improving the network through several improvements and hardforks to get to where it is today.

Roadmap of past hardforks and network upgrades on Ethereum

The Ethereum network’s transition to a Proof of Stake (PoS) model marks a revolutionary step in blockchain technology, emphasizing a more energy-efficient method of maintaining decentralization and network security — up to 99.95% according to the Ethereum Foundation. By allowing stakeholders to validate transactions based on the amount of Ether they hold and are willing to “stake,” PoS not only bolsters network security but also enhances scalability. Since then, we’ve witnessed the introduction of restaking through EigenLayer, which has rapidly ascended the Total Value Locked (TVL) rankings since its inception, resting at an impressive $15bn in TVL at the time of writing. This process permits ETH stakers to essentially “double” the use of their assets by validating Ethereum and other trust networks. However, these networks must be EigenLayer-compatible, and are referred to as Actively Validated Services (AVS).

About AVS

Currently, 13 AVS exist as listed on EigenLayer’s ecosystem page. Existing DeFi dApps need to go through quite a stringent process to become a valid AVS to receive restaked ETH through EigenLayer. However, once they do, developers are able to leverage Ethereum’s security layer and redirect their efforts and focus on developing the rest of their product.

In contrast to traditional staking or liquid staking where deposited ETH only benefits the Ethereum blockchain, restaked or liquid restaked ETH through EigenLayer secures both the Ethereum blockchain and the AVS listed. As of the M2 upgrade, AVS operators who are responsible for securing the network can choose which AVS to validate. Additionally, restakers can choose which operators to delegate their ETH to.

The AVS Ecosystem

Before we move along, we’d like to clarify some key terms that are often confusing to those unfamiliar with EigenLayer.

Actively Validated Services (AVS): As mentioned, these are dApps that benefit from restaked ETH having gone through EigenLayer’s process for onboarding AVS.

AVS Operators: Individuals or institutions that run slashable nodes to support AVS in exchange for pre-determined rewards.

Validators: These are the said nodes that are slashable and the infrastructure that allows EigenLayer restaking to work.

In essence, AVS Operators run Validators that help to benefit AVS on EigenLayer. All three components are enmeshed in an ecosystem that allows trust networks to benefit from Ethereum’s heavy security layer. Being the largest existing PoS chain, Ethereum is virtually resistant to 51% attacks as they would require a capital of $34Bn to perform.

In their whitepaper, Eigenlayer aims to solve 4 pain points for establishing trust networks.

• Bootstrapping (acquiring capital)
• Value leakage
• Capital cost
• Low trust (dApp security)`

Bootstrapping — a trust network that runs on some validation system requires participants to setup nodes to validate the network and commit network tokens as a stake. Bootstrapping becomes a problem for developers as they need to attract operators to setup nodes, buy tokens and stake. This takes away time and effort that could be used to develop the product

Value Leakage — With each trust network setup, users have to pay fees for validating transactions on those networks when they are used in addition to Ethereum.

Capital Cost — Validators weigh the opportunity cost of validating a new network with higher price volatility and unknown yield versus Ethereum which has lower yield but relatively stable price. New networks have to provide high enough yield to attract these validators and sometimes cause the payout to outweigh the data storage and network costs.

Low Trust — dApps rely on a stack of technologies such as the trust network which it is built on and oracles networks. These layers can be a point of attack and the risk of such attacks increase when these networks have a lower stake required to secure these middleware and trust pools. Imagine a dApp built on Ethereum but relying on an oracle network who’s total network value is $1M. An attacker needs only $510K to perform a 51% attack on the oracle network rather than $38Bn to attack Ethereum.

As for the Ethereum ecosystem, it benefits by having dApps that are more resilient and secure, allowing its already-vibrant ecosystem to thrive even further. In fact, restaking has already introduced a new wave of DeFi affectionately known as “LRTfi” in the space. These are various protocols building on top of EigenLayer’s technology to further benefit Ethereum users. An example of this is ETH liquid restaking, such as the service provided by Bedrock. This allows users to restake ETH without losing liquidity. From here, there is a whole ecosystem of rewards and further yield that can be generated through the likes of Pendle.

As AVS continue to build on Ethereum through Eigenlayer, more value is brought in by these AVS and funnelled to the base layer of the chain as operators and users no longer have to pick between networks while also bringing more value to stakers.

The Concept and Operations of AVS

Candidates for AVS include modules that are not able to be deployed on top of Ethereum, some examples include oracles networks, keeper networks, data availability layers, bridges. To leverage Ethereum’s security, Eigenlayer provides the infrastructure for these modules to be adopted by Ethereum node operators. AVS are required to list out the software requirements and deploy the software to be downloaded for prospective AVS operators as well as deploy a smart contract listing the slashing terms and payout structure.

AVS operators are Ethereum validators who have been running their nodes for Ethereum, and have opted in to support AVS through Eigenlayer. They do so by changing their withdrawal credentials to Eigenlayer’s smart contracts to enable native Ether staking.

AVS are able to design their own consensus mechanism (i.e PoS, PPoS, DPoS), but they can rely on these AVS operators to run nodes and secure their trust network. This implies that trust networks will be able to enjoy security while the project’s team can focus more resources on building its intended features. Additionally, this reduces the value leakage from the Ethereum network as stakers and validators no longer have to pick between Ethereum and other projects. In return, stakers and validators are rewarded more yield from their staked ETH as AVS pay out rewards to these participants for securing their network.

Security and Risks Behind AVS

There have already been conversations questioning EigenLayer’s massive $15bn TVL and how that might be dangerous and could potentially drive TVL off a cliff due to excess. Some have speculated on solutions such as raising security budget requirements, but many believe that the best remedy would be increased utility, or onboarding more AVS. However, being such a nascent innovation, it’s difficult to really pin down whether this will be a problem and what the possible solutions might be, if any.

Where Proposal-builder-seperation was designed to prevent centralization risks of validators for staking, staking leapfrogs over that solution because of AVS operator’s ability to provide its services to as many AVS as it wants. To increase the portfolio of AVS services is to increase the yield a validator earns and hence pay to delegators. However, providing operational service isn’t as simple as “clicking buy or sell” on Robinhood.

1. Operators have to do the research to weigh the risk adjusted returns of running for an AVS which requires capital and resources.
2. Operators have to market their offerings to attract delegators, which requires capital and resources.
3. Operators will have to manage all these operations for running nodes for AVS which requires, yes, resources and capital.

Operators with better teams and are able to scale will be able to handle more services and hence more yield which would attract delegators. Additionally, delegators would be more inclined to stake with operators who seem to be more sophisticated and with bigger pockets. This results in a concentration of stake to a handful of validators and create centralization risks.

Operators deal with risks that need to be quantified and considered to have an idea of the risk adjusted returns for providing security to an AVS. Risks considered include, the maximum amount of stake slashed by an AVS, liquidity risk of the AVS token, marginal costs and risk of taking on more service provision to another AVS. Some suggest applying the principles of the Sharpe ratio.

Enzo protocol proposes finding the maximum loss possible for providing service to a specific AVS in their example, between 2% slash for downtime and 7% for double signing, maximum loss for providing to that AVS would be 7%. The summation of all the max loss provides an idea of the stake at risk for providing security to multiple AVS.

On the other hand, the total returns from this portfolio of AVS less the infrastructure costs for running operations can be considered the excess returns. Excess returns over the max loss risks can give a rough idea of risk adjusted returns specific to slashing risks.

This one example gives an idea of how one might look at the risks of taking on more service provision to AVS and what needs to be considered as an AVS operator.

As a leading blockchain infrastructure provider, RockX is committed to transparency and decentralization. Being an AVS Operator is no different. We are fully committed to security as an AVS Operator and pride ourselves on being fully responsible and transparent to our users. Follow us on X and LinkedIn for the latest ecosystem updates.

The Future of AVS

In EigenLayer’s mainnet announcement where they discussed future developments alongside their gradual mainnet rollout, it was mentioned that they are building a tool for AVS to onboard and integrate seamlessly.

With the launch of EigenDA, Eigenlayer plans to lay the foundation for its concept as operators register and begin to opt into the EigenDA. Eigenlayer mentions that there are many new AVS that are in the pipeline and preparing to launch. This will mean better innovation for the space as teams can care less about bootstrapping their protocol and focusing on providing their innovative solutions. As Eigenlayer continues to develop, more features will roll out for AVS to easily onboard, and to improve the ecosystem.

Solutions Behind AVS

These AVS bring to the table a multitude of innovative solutions and middleware for developers aiming to bring more applications to the space. Where Eigenlayer has provided the infrastructure to remove the 4 big problems faced by these trust networks. These trust networks now have better freedom to focus on their solutions such as decentralized sequencers, coprocessors or security reporting. Generally these AVS provide middleware solutions for dApps to develop more secure, efficient, interoperable and decentralized products.

Being an official AVS Operator, RockX is proud to be supporting EigenDA and Brevis coChain AVS. Much like becoming an AVS at this very early stage of EigenLayer’s development, it takes a lot of preparation to become an AVS Operator. There is a full list of requirements, both hardware and software, to get started being an AVS Operator on EigenLayer’s documentation page. To simplify it, at the bare minimum, operators must satisfy delegation and system requirements, and satisfy a Protocol Service Level Agreement (SLA).

A simpler approach would be to simply delegate ETH to an existing AVS Operator such as RockX. Having over 13,300 validators and nearly 426,000 ETH staked, RockX is a leading member in the native restaking community. Furthermore, RockX has an impressive zero-slashing record that few can boast, giving you greater peace of mind when delegating to their validators. Our previous blog on EigenLayer’s M2 upgrade might give you a clearer picture of what it is that AVS Operators and EigenLayer do.

Brevis coChain AVS and RockX

In April 2024, Brevis announced the launch of Brevis coChain AVS on Mainnet with 29 operators opted in. RockX is proud to be one of the 29 operators mentioned.

Brevis is a smart ZK coprocessor that empowers smart contracts to read the full historical on-chain data from any chain and then run customizable computations in a completely trust-free way. Brevis coChain introduced a new “propose-challenge” ZK Coprocessor model. In this “propose-challenge” model, the proposer can generate and submit coprocessing results on-chain without completing the entire ZK proof computation. Brevis coChain is a PoS network that accepts coprocessing requests from smart contracts and optimistically generates coprocessing results through PoS consensus. These PoS-generated results are submitted to blockchains as “proposals” that are subject to be “challenged” via ZK proofs. If no challenge is initiated, the results can be used by dApps directly without incurring ZK proof generation costs. Brevis coChain AVS has launched with EigenLayer on Mainnet and introduced a new ZK Coprocessor architecture that combines the benefits of crypto-economic security and Zero Knowledge proofs into one model.

As a node operator for Brevis coChain AVS, RockX will work alongside other operators in coprocessing to generate optimistic outcomes for requests originating from smart contracts and dApps, utilizing EigenLayer’s restaking infrastructure. The collaboration of Brevis coChain and RockX leverages the security and decentralization of Ethereum while significantly lowering costs, reducing latency, and increasing scalability.

“We’re excited to join forces with Brevis to bring even more innovation to the blockchain world. This partnership will make the Ethereum ecosystem stronger, more efficient, and accessible. By combining Brevis’ cutting-edge technology with RockX’s reliable infrastructure, we can help developers create better, more secure applications. This collaboration is a big step forward for us, and we’re looking forward to seeing the positive impact it will have on the wider blockchain community.”

• Zhuling Chen, CEO, RockX

RockX Native Restaking Solutions

A top 10 operator on EigenDA by TVL, RockX is going all out on restaking. As an experienced staking service provider currently providing staking solutions for over 20 Proof-of-Stake blockchains and a highly experienced and professional team with members that have been in the crypto industry since 2017, delegators may rest assured that their assets are in safe hands. Furthermore, high-profile crypto institutions such as Amber Group are established clients of RockX. Throw in their clean slashing track record, and you’ve got a restaking solution you know you can trust.

Their April highlights thread on X also reveals that they have recently surpassed $1.1bn in TVL in staked ETH, and are further expanding their staking solutions to include bitcoin. If you’d like to learn more about their staking offerings, you may refer to their X thread on their staking service or go straight to their staking portal to find out more.

Conclusion

AVS can be any trust network that needs to be secured. Many of these include middleware that is utilized by dApps to function and build functional products for regular users. As Eigenlayer introduces a way to remove one major headache from these trust networks, teams will be able to direct more efforts towards providing innovative and secure solutions.

Shaping the future of permissionless innovation and with the emergence of AVS solutions (besides EigenDA), RockX fully supports this initiative. As an AVS operator and one of the leading multi-asset restaking protocol leaders, we are excited about the opportunities of restaking/staking utility and our constant commitment to decentralization and security, and continuously supporting the AVS community.

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