Why EigenLayer's Shared Security Model is Incomplete

EigenLayer delegates slashing logic to individual Actively Validated Services (AVSs), creating a patchwork of security. This fragments the cryptoeconomic guarantee, as an AVS's slashing conditions are only as strong as its own code and governance.

• No Universal Standard: Each AVS must design its own slashing logic, leading to inconsistent security models and potential vulnerabilities.
• Operator Risk: Operators face unpredictable, non-standardized slashing risks across different AVS portfolios, complicating risk management.

Restaked ETH is not natively liquid, creating a capital efficiency ceiling. While Liquid Restaking Tokens (LRTs) like ether.fi's eETH or Kelp's rsETH solve this, they introduce a new systemic risk layer.

• Derivative Risk: LRTs are claims on a claim, adding smart contract and oracle dependency risks to the security stack.
• Yield Compression: LRT protocols must manage AVS rewards and slashing penalties, creating complex yield engineering that can obscure underlying risks.

The model assumes operators will correctly verify and execute all AVS tasks. However, without sufficient rewards, rational operators may skip verification (Verifier's Dilemma), degrading security. Furthermore, the architecture is vulnerable to Maximum Extractable Value (MEV) extraction at the AVS layer.

• Asymmetric Incentives: Low-margin AVS tasks may go unverified, creating silent failures.
• MEV Leakage: AVS sequencers or relayers can become centralized MEV capture points, undermining decentralization.

Projects like Babylon highlight a core limitation: EigenLayer's security is siloed to Ethereum. Babylon enables Bitcoin timestamping and staking to secure external chains and AVSs, creating a multi-asset security base. This exposes EigenLayer's reliance on a single asset's social consensus.

• Cross-Asset Security: Leverages Bitcoin's higher hash power and distinct failure model for diversification.
• Competitive Primitive: Challenges the notion that Ethereum restaking is the only viable shared security layer.

EigenLayer's slashing mechanism is a binary, high-stakes penalty. For a network with hundreds of AVSs, this creates a systemic choice: slash a major operator and risk a TVL death spiral, or avoid slashing and render security guarantees meaningless.

• No Gradual Penalties: Unlike Cosmos' unbonding periods, faults trigger catastrophic, immediate loss.
• Correlated Risk: A slashing event on one AVS could trigger mass exits, collapsing security for all others.

Capital efficiency drives stake to the largest, lowest-cost operators. This recreates the validator centralization problem Ethereum fights, now at a meta-layer.

• Barrier to Entry: New AVSs will be forced to use the same ~5 dominant operators for economic viability.
• Single Points of Failure: A bug or malicious act by a top operator compromises security across dozens of AVSs simultaneously.

EigenLayer treats all restaked ETH as homogeneous security. In reality, an AVS for a high-value DeFi oracle and one for a social media dApp have radically different risk profiles and slashing conditions.

• Misaligned Incentives: Stakers optimize for yield, not the specific security needs of each AVS.
• Adversarial AVS Design: AVSs are incentivized to design weak slashing conditions to attract cheap, generic security, creating a race to the bottom.

AVSs are not isolated. A critical failure in one (e.g., a corrupted data feed from a oracle AVS) can propagate to dozens of dependent protocols (lending, derivatives, stablecoins) secured by the same operator set.

• Shared Fault Lines: The model aggregates capital but also correlates technical and logical risk.
• No Isolation Guarantees: Contrast with app-chains (Cosmos, Polkadot) or dedicated rollups, which contain blast radii.

Restaked ETH is trapped in a trilemma between liquidity for stakers, security for AVSs, and safety for Ethereum. Fast unbonding (liquidity) weakens AVS security. Strong slashing (security) risks Ethereum's stability if mass exits occur.

• Withdrawal Queue Bottleneck: A crisis could see stakers trapped for weeks, amplifying panic.
• Ethereum L1 as Backstop: Systemic failure ultimately falls back to Ethereum's social consensus, a risk it never opted into.

Shared security is meaningless without shared, verifiable execution. EigenLayer provides cryptoeconomic security but offloads the hard problem of fault proof and state verification to each AVS.

• AVS-Specific Overhead: Every AVS must build its own complex fraud/validity proof system, a massive engineering burden.
• Contrast with AltLayer & Babylon: They integrate restaking with rollup stacks or Bitcoin timestamps, offering more complete security primitives.

EigenLayer outsources slashing logic to individual AVS developers, creating a critical trust bottleneck. The system's security is only as strong as the weakest AVS's slashing conditions.\n- No Universal Standard: Each AVS defines its own Byzantine fault rules, leading to inconsistent security models.\n- Operator Liability: Operators face slashing risk from buggy or malicious AVS code, not just honest validation.

Shared security does not equal shared liveness. EigenLayer's permissionless operator set can lead to coordination failures for AVSs requiring fast, deterministic finality.\n- No Enforced Commitments: Operators can freely opt in/out of AVS tasks, jeopardizing service continuity.\n- Free-Rider Problem: High-value AVSs subsidize the security of smaller ones, but liveness for critical tasks (e.g., oracle updates, fast bridges) is not guaranteed.

Restaked ETH is a generalized collateral, not purpose-built security. This creates misalignment between slashable value and the actual cost of a failure for a specific AVS.\n- Correlated Collateral: A catastrophic slashing event in one AVS could trigger a mass unbonding event, destabilizing all others (systemic risk).\n- Weak Cost-of-Corruption: For low-value AVSs, the cost to attack the service may be far less than the total restaked ETH, breaking crypto-economic security assumptions.