EigenLayer Operator Panel: Building Sustainable Success with Incentives

As EigenLayer’s decentralized restaking protocol continues to grow, the future of decentralized applications will largely depend on operators balancing cutting-edge performance with rigorous trust and security.

Ava Protocol recently organized a virtual discussion titled “Incentives for EigenLayer Operators and Actively Validated Services (AVS).” It explored the challenges and opportunities faced by EigenLayer operators as they navigate innovative, new models for restaking and validation. The discussion comes at a crucial time as EigenLayer continues its phased rollout, with operators, delegators, and developers all playing an essential role.

Moderated by Ava Protocol founder and CEO Chris Li, the expert panel included representatives of some of the top EigenLayer operators, including Clem Oh from Nethermind, Soufia Trabelsi from Kelp DAO, Vincent Ferretti from Validation Cloud, and Yanshu Yadav from Luganodes — each of them bringing a unique perspective.

Rewards & Resilience

Much of the conversation focused on how the EigenLayer ecosystem can achieve sustainability. Operators need to invest in infrastructure and resources while also staying competitive in terms of fees, and will require sustainable reward structures in order to maintain high-quality services.

The economics of AVS rewards are crucial. While EigenLayer has launched, its rewards and slashing mechanisms are not yet active, with implementation expected later in 2024. Soufia Trabelsi, Kelp DAO’s head of partnerships, highlighted the positive impact of introducing rewards.

“Once we start seeing these rewards kick in, I think it’s going to have a very net positive effect on the ecosystem in general,” she said. “I think it's going to reinstall confidence as to why these restakers were intrigued in the first place.”

Fees & Market Dynamics

Clem Oh, product manager at Nethermind, explained the current state of operator fees and how he sees the future taking shape."At the moment, the operator fees are fixed at 10%, but there are definitely plans on introducing variable operator fees,” he said. “What will happen is a natural free market will form where operators need to make sure that their infrastructure is efficient and cost effective, so that the fees that they're charging are not too high.”

Operators could offer premium services for higher fees in this free market, Clem explained, differentiating themselves by setting fees based on performance and service tiers.

“They could also charge higher fees for, say, premium SLA and support monitoring, alerting on call, and so on,” he added. This approach to services could help create a more diverse and specialized roster of operators, improving the overall quality of services within EigenLayer.

Trust & Confidence

Vincent Ferretti, director of partnerships at Validation Cloud, emphasized the importance of building trust and a strong user base by prioritizing delegators’ returns, while also looking toward service expansion in the future.

“Our first priority is delegators are getting the return that they need. That's the most important on our end,” he remarked. “Once we get to a point where we can start to scale up and potentially raise fees, we will introduce more features, more premium services.”

Soufia also acknowledged the symbiotic relationship between operators and restakers, reflecting the need for a balanced approach that benefits all participants.

“If we look at who are the major stakeholders right now in the Eigen ecosystem, the operators and restakers kind of feed off of each other, right?” she observed. “The more delegation an operator has, the more revenue they can potentially make. So from that respect, at the end of the day, mathematically, it has to make sense for operators to stay on and for delegators to delegate.”

Performance & Accountability

The activation of slashing will also provide a powerful incentive for operators to maintain high standards of service and reliability.

“When slashing comes in as well, that will be a massive factor in evaluating which operators are the most reliable,” noted Clem.

Yanshu Yadav, dev relations and growth lead at Luganodes, expanded on this point, emphasizing the importance of performance metrics in building the good standing of operators.

"Operators should be rewarded based on their performance metrics and uptime, reliability, and all those things, which builds up the reputation over time," he said.

Yanshu also echoed the importance of balancing validation with viable rewards.

"These operators incur various costs, including service and engineering costs, dev ops team, operational and legal costs,” he said. “It's essential to ensure that these operators are also fairly compensated."

A Growing Community

With rewards and slashing on the horizon, EigenLayer’s ecosystem is approaching a critical point that will bring heightened accountability and new opportunities for restakers while reinforcing EigenLayer's foundational security. As the community grows, operators, restakers, and developers will all help to shape the ecosystem’s direction.

The panel discussion reflected the community’s focus on balancing operator sustainability, delegator returns, and overall ecosystem health as we move forward. It’s exciting to think about operators working to distinguish themselves with their performance, consistency, and innovative services. Looking ahead, our collective success depends on building a thriving, competitive marketplace that rewards performance and encourages responsible participation, ultimately combining the best of innovation and security.