EigenLayer Announces Pledge Agreement to Provide Services for Cosmos Ecosystem
EigenLayer has announced that it will provide services for the application chains in the Cosmos ecosystem. With the launch of new network projects in the future, these projects will be able to enjoy the flexible architecture of Cosmos SDK and the security provided by Ethereum, which will contribute to the innovative development of both ecosystems.
Background: Cosmos and Ethereum Facing Similar Challenges
MEV
Composability
EigenLayer to Serve the Cosmos Ecosystem
Reducing barriers to innovation using Cosmos
Strengthening the competitiveness of projects based on Cosmos SDK
Diverse community discussions and evaluations
Ignas: Devaluation of ATOM Tokens
yyy: Contributing to the prosperity of the Cosmos ecosystem
Cosmos and Ethereum Complement Each Other Thanks to EigenLayer
Cosmos and Ethereum are both facing similar challenges. MEV has been an important issue for Ethereum since 2020, as indicated by its roadmap. The project plans to introduce PBS design in the future to minimize the negative impact caused by MEV. Currently, the compromise is to use the MEV-Boost external protocol developed by Flashbots.
In the Cosmos ecosystem, MEV is also a key issue. Due to the customizability of each Cosmos chain, there are various solutions. For example, Osmosis is experimenting with profit-sharing methods for block arbitrage, Skip proposes a decentralized builder and proposer design using Block SDK, and Fairblock is experimenting with new mempool design solutions.
Cosmos has always prioritized interoperability due to its modular nature. The Inter-Blockchain Communication (IBC) protocol, which aims to solve interoperability challenges through cross-chain lightweight client verification, has been continuously developed since 2016 and was activated in 2021, ensuring the security of over 1,000 IBC connections.
On the other hand, Ethereum has encountered obstacles in interoperability as the number of Layer2 and application chains increases. Currently, due to its variable sequencer design, cross-Layer2 lightweight client verification is challenging. However, the deployment of decentralized sequencers (such as Espresso) has begun to address this issue.
Perhaps Cosmos can help Ethereum. In the past, directly applying the Cosmos stack to Ethereum has been technically challenging, but the Layer2 ecosystem now provides an opportunity for relevant experiments.
It can be observed that Ethereum and Cosmos have similar goals, so is there a chance for them to complement each other and solve problems together?
Reducing barriers to utilizing Cosmos for innovative projects
Many of Cosmos’ innovations involve using validators to perform additional work. However, maintaining validators that provide strong economic security for application chains in the ecosystem is still a challenge, as network security is fragile due to low token value.
EigenLayer’s strength lies in providing Ethereum’s network security to external networks through re-pledging ETH. It can be seen that Cosmos and EigenLayer can complement each other perfectly, thanks to this collaboration.
Future application chains created using Cosmos SDK can quickly enhance network security using EigenLayer. By combining the good blockchain foundation provided by Cosmos SDK with the security provided by EigenLayer, the threshold for launching decentralized network projects will be lowered.
Using Cosmos SDK to create networks with Ethereum security
EigenLayer strengthens the security of Cosmos application chains
In the future, developers will be able to launch new PoS networks or PoA networks with budget limitations using Ethereum’s security. Network launch and token issuance can be separated (and possibly not required).
Projects like Lay3r and Ethos originally aimed to connect Ethereum’s economic security and liquidity with Cosmos, and now this can be done more easily, even without token issuance.
The Binary Builders project, which maintains Cosmos SDK, can also enhance its value. By introducing liquidity and security into Cosmos through EigenLayer, any project that wants to utilize Cosmos SDK to build networks can succeed more easily (without requiring liquidity but with a good technical framework), making Cosmos SDK more attractive.
Cryptocurrency researcher Ignas believes that this collaboration will have a negative impact on the value of the native token ATOM. The key issue with the ATOM token has been the value capture problem. Since the Cosmos Hub does not share security with other blockchains built using Cosmos SDK, the ATOM tokens staked on the Cosmos Hub do not have value for networks like Osmosis and Injective, making it difficult for the prosperity of other ecosystems to reflect on the ATOM token.
Therefore, the Cosmos core team developed Interchain Standards (ICS) to provide shared security for blockchains built on this framework. Currently, two networks, Stride and Neutron, have been constructed on top of this. Just when ICS might bring a glimmer of value capture opportunity to the ATOM token, EigenLayer, which brings Ethereum’s security to the Cosmos ecosystem, emerges. So who still needs ICS? Therefore, in the long term, the impact on the ATOM token might be negative.
Web3 Caff researcher yyy believes that although ICS will indeed face severe direct competition, it may not have a significant impact on the price of the ATOM token. On the other hand, the advantages of building blockchains on the Cosmos ecosystem will become more significant with EigenLayer. By providing a solid consensus foundation through Cosmos SDK and utilizing the security provided by EigenLayer, many more competitive projects will be created in the long term, ultimately having a positive impact on the governance token ATOM in the Cosmos ecosystem.
Ethereum and Cosmos initially had different goals, but their paths are gradually overlapping. Both face similar technical challenges, such as MEV, liquidity fragmentation, and composability. EigenLayer can deepen the connection between the two ecosystems, enabling them to complement each other and collectively solve the aforementioned problems.
Cosmos has flourished as a center for many projects and design experiments due to the flexibility of Cosmos SDK, while Ethereum serves as a secure settlement layer. EigenLayer can complement the strengths of both and enhance the development of both ecosystems, bringing more innovations.
In the short term, it may not benefit ATOM and make ETH more valuable. However, in the long term, both ecosystems will benefit.
Cosmos
EigenLayer
Ethereum
Further reading:
A detailed explanation of the opportunities and risks associated with liquidity re-pledge token (LRT) projects
Apart from EigenLayer, what are the recent re-pledge projects (Restake)?