What You Need to Know About EigenLayer
DRW's Foray into Crypto | Crosschain Innovation: Socket & Bungee Exchange
GM, this is your Daily Bolt briefing.
In this edition, we’ll be giving you a briefing on EigenLayer. EigenLayer brings “decentralized trust“ to DeFi. It does this by leveraging Ethereum’s security and bringing it to L2s and other scaling solutions. With ETH Cancun around the corner promising to lower fees and increase volume on these L2 chains, staying up to date on L2 security is a must.
In this edition we’ve also included abridged briefings including:
Socket, a cross-chain messaging protocol with serious institutional adoption, including an exclusive integration with Coinbase’s upcoming Base chain.
Don Wilson, Founder of DRW Trading, a well-known trading firm with crypto subsidies Cumberland and Digital Asset Holdings.
Stay alert, stay informed.⬇️
1/ blocmates-Introduction to Bungee, Socket and Future of Infrastructure
Preview: In this episode of blocmates, Grant invites VC from Socket and Bungee to introduce the protocol and discuss his vision for blockchain infrastructure. Click here to listen to the full episode (51 mins).
Read our Note (5 mins) and save 46 mins.
Here are some key takeaways:
VC introduces Socket as a cross-chain messaging protocol that aims to simplify the process of interacting with different blockchains for both users and developers.
He says that Socket acts as a bridge aggregator, handling all aspects of bridging between different blockchains, including security, speed, cost, and chain/token support.
He mentions that the goal of Socket is to make blockchain applications truly chainless, and therefore users and developers wouldn't need to worry about which blockchain they're currently interacting with.
According to VC, Socket removes away the complexities of interacting with different blockchains, allowing users and developers to focus on the application itself rather than the underlying blockchain infrastructure.
He says that Socket wants to remove barriers to entry for liquidity and users.
He says that GMX uses Socket to allow users from any chain to mint GLP on Arbitrum and Avalanche directly using any token.
VC says that Socket is a top-five contract deployed on all layer-2s deployed. He adds that 7/10 of the top applications on Optimism use Socket for bridging.
He says that 82% of wallets and portfolio applications use Socket, including Zapper, Rainbow Wallet, Sequence Wallet, Coinbase Wallet, and Metamask.
VC mentions that Coinbase uses Socket exclusively for bridging inside the Coinbase wallet. Socket will have to be integrated on Base on day one to give Coinbase Wallets access to the Base chain.
VC says that Bungee is a decentralized exchange (DEX) that utilizes the Socket protocol for cross-chain messaging.
He says that this allows Bungee to operate across multiple blockchains, increasing its accessibility and utility. VC believes that Bungee is like Uniswap but swaps can be made across any chain.
2/ 1000x Podcast - How to Spot Trading Opportunities with Don Wilson
Preview: In this episode of 1000x Podcast, Avi Felman and Jonah Van Bourg are joined by Don Wilson to discuss Don’s trading career, DRW’s exploration of blockchain technology, and more! Click here to listen to the full episode (53 mins).
Read our Note (11 mins) and save 42 mins.
Here are some key takeaways:
Don Wilson is the Founder of DRW Trading, a global trading firm that deals with a wide range of asset classes.
Don Wilson shares that his team had debates about the significance of Bitcoin and blockchain technology back in 2013 before many others were discussing these topics. They decided to form Cumberland to provide liquidity in Bitcoin and Digital Asset Holdings to focus on blockchain applications.
Jonah Van Bourg asks Don how he has managed to navigate various market cycles and stages of market maturation between traditional finance and crypto. Don distinguishes between two types of cycles – market structure cycles and hype cycles – and emphasizes that basic risk management is crucial for surviving both.
Don notes that Bitcoin and other cryptocurrencies are particularly difficult to trade because they can be considered negatively convex instruments, meaning that when hype and adoption increase, so does the perceived value of Bitcoin. Conversely, when the price of Bitcoin falls, interest declines along with the perceived probability of Bitcoin replacing gold as a store of value.
Don mentions that AI is a consequential technology and he is keenly observing its evolution. He expresses that the recent advancements in Language Model Technology (LLM) are interesting and have the potential to impact nearly every aspect of life.
3/ The Chopping Block - What You Need to Know About EigenLayer
Preview: In this episode of Unchained, hosts Haseeb Qureshi, Tom Schmidt, Tarun Chitra, and Robert Leshner are joined by EigenLayer Founder Sreeram to discuss his vision for providing "decentralized trust" to new projects on Ethereum. Click here to listen to the full episode (58 mins).
Read our Note (13 mins) and save 47 mins.
Here are some key takeaways:
Haseeb compares EigenLayer to a game where policemen on Ethereum protect only government buildings. But with EigenLayer, these policemen (validators) can use their badges (stake) to protect all the stores (network services) in town.
Robert compares EigenLayer to the concept of merged mining from the earlier days of cryptocurrencies, where miners could mine for Bitcoin and its clones simultaneously using the same resources. Similarly, while validating Ethereum, validators can also validate new L2s, optimistic rollups, and other additional blockchains.
Tom says EigenLayer helps solve the chicken-and-egg problem when starting a new coin, where a coin needs to be valuable to be transacted on, but won't gain value until it's used for transactions. EigenLayer allows a new coin to leverage the mature and secure Ethereum network to bootstrap its own security.
Tarun states that while smart contracts enforce certain state transitions and restrictions on Ethereum, they don't guarantee complete control as validators have extra rights such as adding, reordering, or removing transactions. With EigenLayer, developers can ensure stricter rule enforcement by validators, who are rewarded for following these rules and penalized for not.
Sreeram describes decentralized trust as the raw material of crypto, which Ethereum refines into blockspace. Traditional applications consume this blockspace and pay for the decentralized trust. EigenLayer allows the consumption of raw, decentralized trust by providing a marketplace for it, letting anyone program at a very low level, and allowing validators to make commitments to validate various services. In this marketplace, trust suppliers (node validators) meet trust consumers (service builders), which allows these builders to borrow aspects of decentralized trust from an existing ecosystem instead of having to create their own.
Haseeb mentions a post by Vitalik, "Don't overload Ethereum's Consensus" The post raises concerns about the experimental approaches trying to leverage Ethereum's security model, its stakers, and its social consensus. It questions whether Ethereum could become non-neutral and opinionated due to external pressures.
Robert thinks the post highlights risks too much and ignores potential benefits. He believes the negative view is that Ethereum validators may be influenced or distracted by outside incentives, while the positive side could be a powerful Ethereum validator network that helps the ecosystem.
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