The Block - Eigenlayer with Sreeram Kannan

In this episode of The Block which took place on August 7, 2024, Larry Cermak from the Block hosted Sreeram Kannan from EigenLayer to discuss the origins of EigenLayer, the concept of verifiable digital commons, challenges in blockchain coordination, the token launch experience, the long-term vision for building humanity’s coordination engine, and more! Read our notes below to learn more.

Background

Larry Cermak (Host) – CEO of The Block

Sreeram Kannan (Guest) – Director at UW-Blockchain-Lab and Founder of EigenLayer

EigenLayer – a protocol built on Ethereum that introduces restaking, a new primitive in crypto-economic security

Sreeram’s Journey to Innovating with EigenLayer

Sreeram shares that his background includes a PhD in peer-to-peer wireless systems and experience in genomics at the University of Washington. He recounts how his interest in peer-to-peer networks reignited in 2017-2018 when he recognized the potential of Bitcoin and blockchain technology to solve trust issues, which he saw as a key factor in human coordination and cooperation. This realization led him to shift his focus to the crypto space.
Sreeram describes how his motivation to innovate at the core protocol layer of blockchain technology, rather than just at the application layer, led to the creation of EigenLayer.
He explains that while permissionless innovation was thriving at the application level, he saw a need for similar innovation at the infrastructure level. EigenLayer was conceived to allow developers to build decentralized protocols without needing permission from large communities, like those in Bitcoin or Ethereum.
Larry asks if Sreeram ever considered starting a Layer1 blockchain or if he always intended to build on top of existing systems like Ethereum.
Sreeram says that initially, his team considered integrating their work into Bitcoin or Ethereum. However, the complexity and slow adoption process within these communities led them to consider starting their own Layer1 blockchain. They even developed a blockchain called Trifecta before realizing that building a Layer1 was not just about the technology but also about building an ecosystem, which required skills beyond just protocol design. This experience reinforced the need for a platform like EigenLayer, which would allow distributed systems builders to innovate without needing to build an entire ecosystem.

Building the Digital Commons: Sreeram’s Vision for Open and Verifiable Digital Spaces Through EigenLayer

Larry asks Sreeram about his motivations when deciding to focus on certain projects, particularly whether he was driven by ideology, impact, or the potential for value capture in layer and layer-2 solutions.
Sreeram explains that his main motivation has always been about building what he calls the “digital commons,” inspired by the concept of common spaces in the physical world that are accessible to everyone. He highlights the need for digital spaces that are equally accessible and not controlled by a central authority.
Sreeram mentions that while he would be happy if Bitcoin or Ethereum used the EigenLayer protocol, his primary interest lies in continuous innovation and building new protocols, rather than just seeing his work become a default part of existing systems.
Larry then references the launch of Eigen on the mainnet and asks Sreeram to elaborate on the vision of “verifiable digital commons” and how EigenLayer fits into this vision.
Sreeram explains that digital commons refer to open and verifiable digital spaces that anyone can use, much like public infrastructure in the physical world. He contrasts Bitcoin, which enforces digital property rights, with Ethereum, which he views as a financial commons allowing the creation of various financial protocols. He highlights that the key features of these systems should be openness and verifiability, rather than just decentralization for its own sake.
Sreeram continues by explaining that EigenLayer allows users to stake their ETH or other assets to make credible, verifiable commitments to run various services correctly. This enables the creation of a wide range of decentralized protocols with strong guarantees.
He clarifies that while EigenLayer is often seen as a restaking protocol, its core purpose is to enable open innovation and coordination. The focus is on ensuring that these protocols are verifiable on-chain, and if something is verifiable off-chain but not on-chain, that presents a challenge that EigenLayer seeks to address.
Sreeram talks about the challenges of bringing off-chain data, like oracle data, onto the blockchain in a verifiable manner. He uses the example of an oracle providing information about the current president of the United States to highlight the importance of verifiable off-chain data for blockchain applications.

Off-Chain Coordination and Majority Collusion: Forking and Consensus in Decentralized Systems

Larry discusses the challenges of off-chain coordination in decision-making processes, noting that relying on humans or groups often leads to issues.
Sreeram explains that while many systems rely on a majority consensus to verify outcomes, this can be problematic because majorities can sometimes collude or make incorrect decisions.
He highlights the importance of creating systems that function even if the majority is wrong. He points to Ethereum’s ability to reject invalid blocks even if the majority of validators approve them, which prevents the network from accepting incorrect data.
Sreeram introduces the concept of “intersubjective work,” where decisions based on social consensus or observable off-chain events are handled within the system. In EigenLayer, they address the risk of majority collusion by allowing the forking of the $EIGEN token itself rather than forking the entire blockchain. This approach provides a way to impose penalties on those who act against the agreed-upon rules without disrupting the underlying network.
Larry asks how contentious decisions are handled when there isn’t a clear consensus.
Sreeram highlights the importance of minimizing contention by clearly defining pre-agreed conditions for forking. He notes that in rare cases where contention arises, participants must demonstrate a significant commitment to their stance by burning a portion of their current $EIGEN tokens to initiate a fork. This ensures that only serious disagreements lead to forks, and the system can continue to operate even if a split occurs.
Larry raises concerns about the practicality of forking tokens, especially for exchanges.
Sreeram explains that EigenLayer addresses this by separating staking from DeFi activities. Staking involves forkable tokens, while DeFi uses solid tokens that remain consistent across forks. This separation allows the system to handle forks without disrupting financial activities.

Collaborating with Ethereum Foundation: Sreeram’s Journey and Addressing Community Concerns

Larry asks Sreeram about his close collaboration with the Ethereum Foundation researchers and the value he finds in working with them.
Sreeram explains that his engagement with the Ethereum Foundation began in February 2022 after attending ETHDenver. He realized that the Ethereum community shares the same fundamental principles he values, such as decentralization, permissionless innovation, and public goods.
This alignment led him to fully commit to building on Ethereum. He also mentions that the researchers have been generous with their time and feedback, which has been crucial in guiding the development of their project.
Larry follows up by noting that many protocols try to work with Ethereum researchers, but the researchers are selective about who they engage with. He asks Sreeram why he thinks they chose to work with him.
Sreeram attributes this to a combination of factors, including his research background, his resonance with Ethereum’s core values, and his openness to feedback. He highlights that his team takes the feedback seriously and has made significant adjustments to ensure they don’t overload Ethereum’s consensus or create risks for the network.
Sreeram details how they addressed three major concerns: avoiding social consensus overloading by not promoting forking, preventing computational overload by developing a horizontally scalable data system (EigenDA), and managing economic leverage through innovations like StakeSure and attributable security. He underscores that their commitment to building on Ethereum is not just talk—they’ve made considerable efforts to align with the network’s principles and protect its integrity.
Larry brings up the fact that some within the Ethereum community were unhappy about Ethereum researchers working with Sreeram’s team, creating contention.
Sreeram acknowledges this and explains that in a decentralized community like Ethereum, such disagreements are inevitable and reflect the community’s commitment to principles. He believes these discussions are necessary and ultimately beneficial, as they help clarify and solidify the community’s values and policies.

Challenges, Reflections, and Long-Term Vision: Token Launch and Future Aspirations

Larry asks about the challenges faced by Sreeram and his team over the last five years, particularly focusing on the difficulties surrounding the token launch and the community’s high expectations.
Sreeram acknowledges that the original token launch was indeed challenging, especially dealing with the community’s perception of bribing Ethereum and the complexities of coordinating across organizational boundaries.
He explains that transitioning from a small startup mentality to being viewed as an incumbent in the space brought its own set of difficulties. The sudden shift in expectations required the team to adapt quickly, especially in maintaining transparency and trust within the community.
He admits that some of the decisions, although well-considered, were not communicated effectively, leading to confusion and dissatisfaction.
Larry then asks Sreeram to evaluate the success of the token launch on a scale of one to ten, considering the high expectations and subsequent disappointment from some community members.
Sreeram reflects on the situation, stating that while there were definitely areas that could have been handled better—particularly in terms of transparency—he believes that the long-term success of the project is more important than the initial reception of the token launch. He points out that the project’s time horizon is 30 years, and what matters most is building a solid foundation for the future.
Sreeram highlights that overhyped launches with unrealistic valuations are not always beneficial and that a more measured growth trajectory is preferable.
Larry concludes by asking what Sreeram hopes to achieve in the next 10 to 30 years, beyond token valuation, and what would make him feel accomplished when looking back.
Sreeram shares his vision of building “humanity’s coordination engine,” a system that allows for both global coordination and long-term alignment of interests. He contrasts this with the current monetary system, which enables wide-reaching interactions but lacks long-term alignment, leading to various societal issues.
Sreeram envisions a future where systems of memory and enforcement on the blockchain enable new models of coordination, such as income-sharing for education and incentivizing long-term health outcomes. He likens this to a digital system of karma, where actions are tracked and rewarded over time, ultimately creating a robust digital commons. In 30 years, achieving this vision would be his measure of success.

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Show Information

Medium: YouTube (Video)

Show: The Block

Show Title: Eigenlayer Founder Reveals Vision for Humanity’s Permissionless Coordination Engine

Show Date: August 7, 2024