Author: TechFlow of Deep Tide

After much anticipation, Eigenlayer has finally released more details about its token economy today, announcing the allocation of 15% of EIGEN tokens to be distributed to users who participate in restaking in a linear unlocking manner.

Does the EIGEN token itself have more value? What specific uses does it have? What impact can it have on restaking and the entire Ethereum ecosystem?

The answers can all be found in the 40+ page token economic whitepaper released by Eigenlayer.

Unlike typical token economic introductions that only include a few token release diagrams, Eigenlayer has devoted a significant amount of effort to explain in detail, with some technical jargon, the role of the EIGEN token and its relationship with ETH.

The research team at Deep Tide has carefully reviewed this whitepaper and summarized the technical highlights into easy-to-understand language to help you quickly grasp the role and value of EIGEN.

Key Points Overview

Functions of the EIGEN Token and the Problems It Aims to Solve

1. Universality and Restaking

Traditional blockchain tokens are usually only used for specific tasks, such as ETH being mainly used for Ethereum block validation. This limits the token's utility and flexibility.

Through the restaking mechanism, users can use their already staked ETH assets for multiple tasks and services without needing to unlock or transfer these assets.

2. Intersubjectively Verifiable

The whitepaper uses the term "Intersubjectively" to describe some complex network tasks that are difficult to verify through simple automated programs and require subjective consensus from human observers.

The EIGEN token serves as a medium for "social consensus" in these tasks. In scenarios requiring verification from different perspectives, EIGEN can be used as a voting tool, allowing token holders to influence network decisions through voting.

3. Forking Tokens and Slashing

There may be disagreements within the network regarding certain issues or decisions, requiring a mechanism to resolve these disagreements and maintain network consistency.

In the event of significant disagreements, the EIGEN token may undergo forking, creating two independent token versions, each representing a different decision path. Token holders need to choose which version to support, and the unselected version may lose value.

If network participants fail to properly execute staking tasks or engage in improper behavior, EIGEN staked tokens may be slashed as a punishment for their misconduct.

Relationship Between EIGEN and ETH

• Supplementary Rather Than Replacement: The EIGEN token is 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 the reduction of objective faults (such as penalties for validation nodes making mistakes).

EIGEN staking supports the reduction of intersubjective faults (errors that cannot be verified on-chain, such as incorrect price reports from oracles), significantly expanding the range of digital tasks that blockchain can securely provide for users.

EIGEN Token: Providing a new social consensus mechanism specifically for addressing subjective errors beyond the capabilities of ETH

If you want to understand the role of the EIGEN token, you first need to understand the role of the ETH token.

Before the concept of Eigenlayer and restaking, ETH could be seen as a "specific-purpose" working token. In other words:

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

In this scenario, the characteristics of ETH are:

1. A very specific working purpose;

2. Strong objectivity, meaning that errors such as double signatures on the Ethereum chain or errors in Rollup aggregation can be identified on-chain through pre-defined objective rules, leading to penalties for validators in the form of ETH.

With Eigenlayer, ETH has essentially been transformed into a "general-purpose" working token. In other words:

You can restake ETH in various tasks, such as new consensus mechanisms, Rollup, bridges, or MEV management solutions, not limited to staking on the Ethereum chain alone, which is an important function of Eigenlayer.

However, in this scenario, despite the change in usage, ETH still exhibits the following characteristics:

• "Objective" limitations still exist because reduction and penalties can only be applied to objectively verifiable tasks on the Ethereum chain.

However, not all errors in the crypto world can be attributed on-chain, and not all disputes can be resolved through on-chain consensus algorithms.

Sometimes, these non-objective, difficult-to-prove, and highly controversial errors and issues significantly impact the security of the blockchain itself.

For an extreme example, consider an oracle reporting 1 BTC = 1 USD. This data is fundamentally incorrect, and no on-chain contract code or consensus algorithm can identify it. Furthermore, penalizing validators with ETH is ineffective in this case, because:

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

The price of an asset, the availability of a data source, the correct operation of an AI interface… These are issues that cannot be resolved through on-chain consensus and require more of a "social consensus" reached through subjective discussions and judgments.

Eigenlayer refers to these types of issues as "intersubjectively attributable faults": a set of faults with broad consensus among all reasonable active observers in the system.

Therefore, the EIGEN token has found its purpose - to provide a complementary new social consensus mechanism beyond ETH, to maintain network integrity and security, specifically addressing these "intersubjective" faults.

Specific Approach: EIGEN Staking, Token Forking

ETH continues to serve as a general-purpose working token, while EIGEN serves as a general-purpose "intersubjective" working token, complementing each other.

If a validator stakes ETH and objective faults occur, the staked ETH can be reduced 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 reduced and penalized.

Let's consider a specific scenario to see how EIGEN comes into play.

Suppose there is a decentralized reputation system based on Eigenlayer, where users can rate service providers on the platform. Each service provider will stake EIGEN tokens to demonstrate their reputation.

Before this system begins, two essential stages are required:

1. Setup Stage: Coordinated rules among system stakeholders are encoded to determine how subjective disputes should be resolved;

2. Execution Stage: The pre-agreed rules are executed in an obvious manner, preferably locally.

In this system, users can execute the conditions they have pre-agreed upon.

So, if a service provider is deemed to have provided false or misleading services, the platform's community consensus mechanism may trigger a challenge, leading to a token forking event, resulting in two versions of the EIGEN token - EIGEN and bEIGEN.

Now, users and AVS can freely decide which version to respect and value. If it is widely believed that the staked token holders have behaved improperly, then users and AVS will only value the forked tokens, not the original tokens.

Therefore, the original EIGEN tokens of malicious stakers will be slashed and penalized through this forking mechanism.

This essentially constitutes a social consensus arbitration system to resolve disputes that cannot be objectively handled on the Ethereum chain.

It's also worth mentioning that for users and other stakeholders, you don't need to worry about the impact of this "fork."

Generally, after a token fork, you must make an overall choice, which also affects the use of your tokens elsewhere.

However, Eigenlayer has created a barrier between the use cases of EIGEN in CeFi/DeFi and EIGEN staking. Even if bEIGEN is affected by intersubjective forking disputes, EIGEN holders using it for non-staking applications don't need to worry because they can redeem bEIGEN's fork at any time in the future.

Through this forking isolation mechanism, Eigenlayer not only enhances the efficiency and fairness of dispute resolution but also protects the interests of users who are not involved in the dispute, ensuring the overall stability of the network and the security of user assets while providing powerful functionality.

In Summary

It is evident that the intersubjective staking and dispute resolution mechanism of EIGEN complements the objective staking mechanism of ETH by addressing subjective disputes and faults that were previously impossible to handle on Ethereum, unlocking a wide range of previously unattainable AVS and providing strong cryptographic economic security.

This may open the door to innovation in areas such as oracles, data availability layers, databases, AI systems, game virtual machines, intent and order matching, MEV engines, prediction markets, and more.

However, based on the roadmap provided in its whitepaper, the current use cases of EIGEN are still in a very preliminary stage, more like a fully formulated concept but far from actual implementation.

With users being able to officially claim EIGEN tokens after May 10, whether the envisioned use value of EIGEN can effectively support the changes in token market prices remains to be seen.

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