How will the EigenLayer connect the Cosmos and Ethereum ecosystems to create more value through complementarity?
EigenLayer, a collateralization agreement, announced that it will provide services for 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 are facing similar challenges
MEV (Miner Extractable Value)
Composability
EigenLayer’s service to the Cosmos ecosystem
Reducing barriers to innovation for projects utilizing Cosmos
Enhancing the competitiveness of projects based on Cosmos SDK
Diverse community discussions and evaluations
Ignas: Depreciation of ATOM token value
yyy: Contributes to the prosperity of the Cosmos ecosystem
Cosmos and Ethereum complement each other through EigenLayer
Cosmos and Ethereum are both facing similar challenges. MEV has been an important issue for Ethereum since 2020, as shown in its roadmap. It plans to introduce PBS design in the future to minimize the negative impact of MEV, and currently relies on the MEV-Boost protocol built by Flashbots as a compromise.
In the Cosmos ecosystem, MEV is also a critical issue. Due to the customizability of various Cosmos chains, there are various solutions. For example, Osmosis is experimenting with profit-sharing methods for block arbitrage, Skip proposes a decentralized builder and proposer design for Block SDK, and Fairblock is experimenting with new mempool design solutions.
Due to its modular nature, Cosmos has always prioritized interoperability. Its blockchain communication protocol IBC has been continuously developed since 2016, aiming to solve the challenges of interoperability through lightweight cross-chain client verification. It has been enabled in 2021, ensuring the security of over 1000 IBC connections.
In contrast, Ethereum has encountered obstacles in interoperability as the number of Layer2 and application chains continues to increase. 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 attempt to solve the problem.
Perhaps Cosmos can provide assistance to Ethereum. In the past, directly applying the Cosmos stack to Ethereum has been difficult due to technical issues, but the Layer2 ecosystem now provides an opportunity for related experiments.
It can be observed that Ethereum and Cosmos actually have similar goals. Is there a chance for them to complement each other and solve problems together?
Reducing barriers for projects to utilize Cosmos innovation
Many innovations in Cosmos involve utilizing validators to perform additional work. However, it is still a challenge for application chains in the ecosystem to maintain validators with strong economic security, as network security is vulnerable due to low token values.
EigenLayer’s strength lies in providing Ethereum’s network security to external networks through ETH collateralization. It can be discovered that Cosmos and EigenLayer can complement each other perfectly, and this cooperation has been achieved.
In the future, application chains created based on Cosmos SDK can quickly enhance network security using EigenLayer, combining the strong blockchain foundation provided by Cosmos SDK with the security provided by EigenLayer, reducing the threshold for launching decentralized network projects.
Using Cosmos SDK to build 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 (possibly even without token issuance).
Projects like Lay3r and Ethos originally aimed to connect Ethereum’s economic security and liquidity with Cosmos, and now this can be easily achieved, even without token issuance.
The project Binary Builders, which maintains Cosmos SDK, can also further 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 and having a good technical framework), making Cosmos SDK more attractive.
Crypto researcher Ignas
believes
that this cooperation will have a negative impact on the value of the native token ATOM.
The key issue that the ATOM token was criticized for is the value capture problem. Since the Cosmos Hub does not share security with other blockchains built using Cosmos SDK, the ATOM tokens staked in the Cosmos Hub do not have value for networks like Osmosis and Injective, and the prosperity of other ecosystems is difficult to reflect on the ATOM token.
Therefore, the core Cosmos team developed Interchain Standards (ICS) to provide shared security for blockchains created based on this framework. Currently, two networks, Stride and Neutron, have been built on it.
ICS may finally bring a glimmer of value capture opportunity for the ATOM token, but now EigenLayer suddenly appeared and brought Ethereum’s security to the Cosmos ecosystem. Who still needs ICS then? Therefore, in the long run, it may have a negative impact on the ATOM token.
Web3 Caff researcher yyy
believes
that although ICS businesses will indeed face severe direct competition, it may not have a significant impact on the price of the ATOM token, as the current effectiveness of ICS on the token price is not clear.
Instead, due to EigenLayer, the advantages of building blockchains on the Cosmos ecosystem will become more significant. By providing a solid consensus foundation through Cosmos SDK and utilizing the security provided by EigenLayer, it will create many more competitive projects in the long run, ultimately having a positive impact on the governance token ATOM in the Cosmos ecosystem.
Ethereum and Cosmos initially had different goals, but the paths of these two ecosystems are gradually overlapping. Both face similar technical challenges, such as MEV, liquidity fragmentation, and composability. EigenLayer can deeply connect the two and strengthen the development of both ecosystems, leading to more innovation.
In the short term, it may not benefit ATOM and make ETH more valuable. However, in the long run, both ecosystems will benefit.
Cosmos
EigenLayer
Ethereum
