a16z: Why we invested $100 million in EigenLayer

Press: In the latest news, encryption VC a16z announced an investment of US$100 million in the liquidity re-pledge protocol EigenLayer. Ali Yahya, a16z partner, posted an article explaining why a16z invested in EigenLayer. 0xjs@金financetranslation.

Founders with a vision and plan that change everything are extremely rare. I recognized that EigenLayer founder Sreeram Kannan was not only brilliant, but fundamentally his vision for the future was so clear and compelling that when you spoke to him, it immediately became reality. Sreeram possesses what I call the Promethean flame; he is committed to bringing a new technology to life first and foremost because of the future it creates.

I first met Sreeram in 2019, when he was an associate professor at the University of Washington and starting his entrepreneurial journey. Sreeram made a huge impression and since then we have had a lot of contact with him and the world-class team he has assembled over the years. In 2022, Sreeram gave an eye-opening talk on EigenLayer and EigenDA as part of our Summer Research Fellowship, and last year he and EigenLayer Protocol Research Lead Soubhik published a comprehensive review of the cryptoeconomics of slashing on our blog Overview.

Today we are pleased to announce that we have led EigenLayer’s Series B financing. We are excited to work with Sreeram and the entire team to build a platform that unlocks a new dimension of open innovation on top of Ethereum.

Background

It’s difficult to fully understand EigenLayer without first narrowing down the scope. In the beginning there was just Bitcoin, the first example of an entire blockchain built for a single application, which at the time was ostensibly payments, but has since become more like digital gold – a store of value , albeit volatile.

The genius of Ethereum is to unbundle the Bitcoin approach to a single application by separating consensus from the application logic built on top of it. Ethereum enables developers to write their own applications in the form of smart contracts, taking advantage of the blockchain’s pooled security and computing resources. This change alone freed up a huge amount of design space for open innovation, which resulted in nearly everything we know and love about that space today. This means that people can now build decentralized applications without needing to launch their own blockchain.

Ethereum’s higher level of programmability brings huge freedoms to a whole host of applications. However, it is not without limitations. It still places a lot of demands on what you can and can't do as a developer. For example, the code you write must be compatible with the Ethereum Virtual Machine (EVM), which is still a good computing model for certain applications - those that are lightweight enough to fit into Ethereum's Block size and gas limits - but not for others who may be heavier or need special features.

In an ideal world, as a developer you should have almost complete freedom. If desired, you should be able to build a decentralized service using code from any instruction set, your own consensus mechanism, your own data dissemination algorithm, your own block times and gas limits, and even your own validator hardware requirements (eg GPU or Trusted Execution Environment). You will be able to do all of this without having to launch your own blockchain network from scratch. Instead, you’ll be able to build on top of the already decentralized and secure validator set of the most secure programmable blockchain: Ethereum.

Eigenlayer

EigenLayer is a set of smart contracts on Ethereum that creates a two-way market for original cryptoeconomic security: on the demand side, it allows customization of decentralized services Creators write code that effectively extends Ethereum’s capabilities. And, on the supply side, validators participating in the Ethereum consensus (if they happen to have the power and the required hardware) can choose to run these decentralized services by re-mortgaging ETH to them. The end result is EigenLayer, a decentralized and market-based mechanism for extending the capabilities of Ethereum.

The significance of this is far-reaching. We believe that by further decoupling cryptoeconomic security from the EVM, EigenLayer has the potential to enable 100x faster innovation in technologies such as consensus mechanisms, new virtual machines, decentralized oracles, bridges and networks with specialized hardware, Just like Ethereum has unlocked 100x faster innovation at the application logic level by introducing smart contracts.  

We are excited to partner with Sreeram and the team to help them realize this vision.