Secure Your $EIGEN: How to Choose the Best Validator

Castle Capital Research Report

Author

ericonomic
May 15, 2024 • Est. Reading Time: 7 minutes

⚔️ A Call to Arms

Think you have what it takes to enter the Castle and contribute to research, community initiatives, due diligence analysis, and advising/servicing projects in the space? Or maybe you want to upskill and shadow community members who have already walked a successful path as an intern?

If you've claimed $EIGEN, you might be asking yourself: what now?

Everyone has the same question, so we decided to do some research to find our whether staking EIGEN is convenient and where are the best places to do so.

Here's the TLDR in simple words from our research:

What is $EIGEN?

In their words: “A Universal Intersubjective Work Token”. Pretty easy to understand, huh?

In simpler words, it’s a token that can be used for tasks that require people to decide whether something was done correctly. 

Let’s consider a practical example regarding the price of BTC, which is provided by an oracle: imagine the current price of BTC is $65k, but when you request it from an oracle, it tells you that the price is $1k. While obviously wrong, this cannot be verified on-chain, as it requires external observation from users or validators. 

To resolve this intersubjective fault, a mechanism is needed where the community can agree that the oracle's report was wrong. This is the core mechanism built by Eigen Layer (EL), similar to a Proof of Stake but for managing off-chain information instead of on-chain information.

Let's dive deeper into why this is needed.

Why $EIGEN?

At first, we thought all this was a pretext to launch a token. Why can't you just use ETH to solve these Intersubjective Faults? Turns out, there is a reason: Ethereum’s security model relies on objective faults, not subjective. It cannot automatically verify that the oracle's price report was wrong, as it lacks the capability to compare on-chain data with real-world data and make a judgment.

What’s an objective fault?

Imagine that a validator of the Ethereum network signs two different blocks at the same block height. This fault is detected through the blockchain, which keeps track of all signed blocks. Since each block height can have only one valid block, signing two different blocks at the same height is a clear violation.

For Actively Validated Services (AVS) -a project that requires constant checking and validation to ensure it works correctly- that only need to handle Objective Faults, ETH should be enough, but when AVS’ also need to handle Intersubjective Faults (e.g. an oracle) an additional layer of verification is required.

Why is the EIGEN token necessary? Can't we just use $ETH to solve intersubjective faults? While theoretically possible, using $ETH for this purpose would introduce significant risks to the Ethereum network, such as overloading its social consensus and increasing the chances of massive ETH slashing. EIGEN, on the other hand, protects ETH from these additional risks and serves as an aggregator of validation power for new networks that need to solve intersubjective faults.

This leads us to the following question: if you received $EIGEN tokens from the airdrop, what can you do with them right now? The main option is to stake them. But the big question is, where?

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Where to stake $EIGEN

Before staking, users should understand the key factor leading to the choice of a validator:

  • Reputation and track record: Look for validators with a proven history of reliability and integrity. If the validator performs poorly, your $EIGEN might be slashed.

  • Restake concentration: The more assets staked with one validator, the more centralized EL becomes, and the smaller your share of the rewards.

  • Registered AVS: Validators choose the AVS they want to secure and, in exchange, in the future, those AVS will reward these validators with tokens, points, or other incentives.

  • Fees: when AVS’ start rewarding stakers with their tokens/points, validators will earn a percentage of those rewards (i.e. fees), so the higher the fees, the fewer rewards you’ll earn.

  • Additional benefits: Some validators might reward you with their own tokens or additional rewards.

TLDR: The sweet spot is choosing a safe validator with a good track record and experience that also secures AVS you’re interested in (for example, because they’re good projects and don’t have a token yet) and doesn't charge too many fees.

Here’s a list of interesting validators:

All the projects contain a hyperlink that directs to theEigenLayer staking page.

  • P2P.org :

    • Track record: more than 6 years of experience in this field, $23M raised.

    • Interesting tokenless projects: OpenLayer, Xterio, Witness Chain

    • Additional rewards: none

  • InfStones :

    • Track record: more than 6 years of experience in this field, more than $100M raised

    • Interesting projects: OpenLayer, Xterio, Witness Chain

    • Additional rewards: $1M giveaway + InfStones Loyalty Points

  • EigenYields :

    • Track record: no track record found, X account opened on April

    • Interesting projects: OpenLayer, Xterio, Witness Chain

    • Additional rewards: EigenYield points

Many people are delegating to the AltLayer validator because they anticipate a future $ALT token airdrop for delegators. However, since over 10.5% of the delegators are already delegating there and AltLayer also needs to reward its own network, the distributed rewards might not be substantial.

It goes without saying that there are many other interesting validators that may perform well or even better than the ones listed above. However, it's your duty to do your own research (DYOR), keep track of them and their news, and choose the best one.

Brought to you by Ericonomic

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Virtually yours,

The Castle

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