EigenDA: Revolutionizing Rollup Economics

Article author: Kairos Research, article translation: Block unicorn

Foreword

Today, EigenDA is the largest AVS (Data Availability Service), leading other platforms in terms of both re-staking capital and the number of independent operators. The current re-staking capital exceeds 3.64 million ETH and 70 million EIGEN, totaling approximately US$9.1 billion, involving 245 operators and 127,000 independent staking wallets. As more and more alternative data availability platforms are launched, it becomes increasingly difficult to distinguish the differences between them, their unique value propositions, and how the value of the protocol is accumulated. In this article, we will take a deep dive into EigenDA and explore the unique mechanisms that make up its design, while also examining the competitive landscape and analyzing possible development trends in this market space.

What is Data Availability?

Before diving into EigenDA, let’s first understand the concept of Data Availability (DA) and its importance. Data availability refers to ensuring that all participants (nodes) in the network have access to all the data needed to validate transactions and maintain the blockchain. DA is part of the traditional monolithic architecture we see - in short, execution, consensus, and settlement all rely on DA. Without DA, the integrity of the blockchain would be seriously threatened.

The reliance on DA by all other parts of the stack creates a bottleneck for scaling, which is why we see the emergence of the Layer 2 roadmap. The future of L2 came into being after the introduction of Optimistic Rollups in 2019. L2 execution occurs off-chain, but still relies on Ethereum's DA to maintain Ethereum's security guarantees. With this paradigm shift, many people realized that the advantages provided by L2 could be further improved by building specific blockchains or services that focus on improving the limitations of the monolithic architecture's DA layer.

While some specific data availability (DA) layers have emerged that have the potential to reduce fees through competition, and further experiments have been carried out, the DA problem is still being solved on the Ethereum mainnet through a process known as "Dank Sharding". The first part of Dank Sharding was implemented via EIP-4844, which introduced transactions that carry additional data blocks, which can be up to 125 KB in size. These data blocks are committed using KZG (a type of cryptographic commitment), which ensures the integrity of the data and is compatible with future data availability sampling. Prior to the implementation of EIP-4844, rollups used calldata to submit rollup transaction data to Ethereum.

Since the prototype of danksharding was launched in the Dancun update in mid-March, there have been 2.4 million data blocks with a total size of 294 GB, and more than 1,700 ETH in fees paid to L1. It is important to note that the EVM cannot access the data of the data blocks and will automatically delete them after about 2 months. Currently each block can hold up to 6 data blocks, totaling 750 KB. For non-technical readers, if the data block space is filled up three blocks in a row, then you have the equivalent of a GameCube memory card of data, which is really nostalgic.

This limit is indeed reached several times per day, indicating that there is a high demand for block space on Ethereum. While the base block fee on Ethereum is around $5 at the time of writing, we should be careful to remind ourselves that this fee is tied to the price of ETH, as is most DeFi activity. Therefore, in periods of rising ETH prices, there will be more activity, which in turn will lead to an increase in demand for block space. Therefore, in order to cope with the increase in DeFi activity or open up the network to meet never-before-seen use cases, the costs of data availability must be further reduced. There is still a strong incentive to reduce these costs in order to encourage continued growth in user activity.

How does the Eigen DA work?

EigenDA is built on the simple principle that data availability does not need to be resolved by independent consensus, so EigenDA is structurally designed to scale linearly, as the main role of operators is just to handle data storage. To explain in more detail, there are three main parts in the EigenDA architecture:

• Operators

• Dispers

• Retrievers

EigenDA's Operators are the parties or entities responsible for running the EigenDA node software, who are registered in the EigenLayer and have been entrusted with a stake. You can think of them like node operators in a traditional proof-of-stake network. However, instead of burdening consensus, the role of these operators is mainly to store data blocks associated with valid storage requests. In this context, a valid storage request is a request for which a fee has been paid and the data blocks provided match the KZG commitment and proof provided.

In short, KZG commitments allow you to associate a piece of data with a unique code (commitment) and subsequently use a special key (proof) to prove that the given data is indeed the original data. This ensures that the data has not been changed or tampered with, thus maintaining the integrity of the data block.

Disperser is the "untrusted" service mentioned in the EigenDA documentation and is hosted by EigenLabs. Its main responsibility is to act as an interface between EigenDA clients, operators, and contracts. EigenDA's client makes a dispersal request to the disperser, which encodes the data using Reed-Solomon, which facilitates data recovery, and then calculates the KZG commitment of the encoded data block and generates a KZG proof for each block. Subsequently, the disperser sends the data block, KZG commitment, and KZG proof to the EigenDA operator, who then returns the signature. The last step of the disperser is to aggregate these signatures and upload them to Ethereum in the form of call data to be sent to the EigenDA contract. It is worth noting that this step is a necessary prerequisite for punishing potentially misbehaving operators.

The last core component of EigenDA is the Retriever, which queries EigenDA operators for data blocks, verifies that the data blocks are accurate, and then reconstructs the original data blocks for users. While EigenDA hosts a retriever service, client rollups can also choose to host their retrievers as an add-on to their sorters.

Here is how EigenDA works in action:

1. The rollup sorter sends a batch of transactions as data blocks to the EigenDA decentralizer's sidecar (design pattern).     

2. The EigenDA Distributor sidecar performs erasure coding on the block, splits the block into multiple fragments, generates KZG commitments and multi-reveal proofs for each fragment, and distributes the fragments to the EigenDA operator, who returns signatures proving the storage.

3. After aggregating the received signatures, the Distributor registers the block on-chain by sending a transaction containing the aggregated signature and the block metadata to the EigenDA Manager contract.

4. The EigenDA Manager contract verifies the aggregated signature with the help of the EigenDA Registry contract and stores the result on-chain.

5. Once the block is stored off-chain and registered on-chain, the Sequencer publishes the EigenDA Block ID in a transaction to its Inbox contract. The length of a Block ID does not exceed 100 bytes.

6. Before accepting a block ID into the aggregated inbox, the inbox contract consults the EigenDA manager contract to confirm whether the block is certified as available. If certified, the block ID is allowed into the inbox contract; otherwise, the block ID is discarded.

In simple terms, the sorter sends the data to EigenDA, which slices, stores, and checks that it is secure. If everything is OK, the data is passed and continues to be transmitted. If it does not meet the requirements, the data is discarded.

Competitive Landscape

When looking at the competitive landscape of data availability (DA) services from a broader perspective, EigenDA clearly outperforms other services in terms of throughput. As more operators join the network, the expansion opportunities for potential throughput also increase. Moreover, when considering which alternative DA service is most "Ethereum-compliant", it is not difficult to see that EigenDA is undoubtedly the best choice.

While Celestia offers groundbreaking innovation in its Data Availability Service (DAS), it is difficult to consider it a fully Ethereum-aligned service, and while such alignment is not mandatory, it certainly has implications for clients deciding which services to use (such as rollups). Celestia has also implemented interesting strategies related to its light node architecture, which may allow for larger blocks and thus more data in each block, subject to certain conditions.

Celestia appears to be very successful in terms of operations in reducing the costs of rollups, which are also passed on to end users. However, despite this meaningful and far-reaching innovation, they have made little real progress in terms of fee accumulation, even with a fully diluted valuation of billions of dollars (~$5.5 billion at the time of writing). Celestia launched last Halloween, and since then, 20 independent rollups have integrated its DA service. Across these 20 rollups, they have released a total of 54.94 GB of block space data, enabling the protocol to collect 4,091 TIA, worth about $21,000 at current prices. However, in the interest of fairness, it is important to point out that the accumulation of fees is paid to stakers and validators, and that the price of TIA has fluctuated over time, reaching as high as 19.87, so the actual dollar amount may vary. Using secondary data, we can estimate that the total fees in USD are more likely to be around $35,000.

Current Aggregation Landscape and EigenDA Positioning

Pricing for EigenDA was recently announced, including an "on-demand" option and three different pricing tiers. The on-demand option is priced at 0.015 ETH/GB and offers variable throughput, while "Tier 1" is priced at 70 ETH and offers 256 KiB/s of throughput. When looking at the data availability (DA) landscape on Ethereum mainnet today, we can make some assumptions about the potential demand for EigenDA and how much revenue it could potentially generate for re-stakers.

As of now, there are approximately 27 rollups that publish blocks of data to Ethereum L1, which is collected from queries. Each block of data published to Ethereum (after EIP-4844 is implemented) is 128 KB in size. Across these 27 rollups, a total of approximately 2.4 million blocks of data have been published, totaling 295 GB of data. Therefore, if all of these rollups used pricing of 0.015 ETH/GB, the total fees would be 4.425 ETH.

At first glance, this may seem like a problem. However, it is important to note that rollups vary widely in their unique offerings and architectures. Due to design differences and different user bases, their individuality results in widely varying numbers of blocks published and fees paid to L1.

For example, for the rollups analyzed in this study, how many blocks (number + GB) each rollup uses and the fees are as follows:

From this analysis alone, 6 rollups have fees that exceed the level 1 pricing threshold to choose EigenDA, but it does not seem to make sense for them from a pure data throughput perspective. In fact, using EigenDA's on-demand pricing still directly reduces costs by an average of about 98.91%.

This therefore leaves re-stakers and other ecosystem stakeholders in a dilemma. The cost reductions provided by EigenDA are beneficial to both L2 and its users as it will lead to better profits and revenue, but this does not give re-stakers who want EigenDA to be a leader in re-staking rewards confidence.

Another explanation, however, is that EigenDA's cost reductions promote innovation. Historically, cost reductions have often been an important catalyst for growth. For example, the “Besamir process” for steel is an innovative technology that has significantly reduced the cost and time required to produce steel, enabling the mass production of stronger, higher quality steel at an 82% lower cost. One could argue that similar principles apply to DA services, and that the introduction of multiple DA service providers will not only significantly reduce costs and be strengthened through competition, but will also inherently spur innovation in high-throughput rollups, expanding previously unexplored design boundaries.

For example, Eclipse is an SVM rollup that just started publishing blocks 28 days ago, but already accounts for 86% of Celestia’s total block share. Its mainnet is not yet open to the public, and while these use cases are likely primarily intended to test the robustness of the technology, it shows us the potential of high-throughput rollups and suggests that they will have significantly more DA consumers than most rollups we see today.

Summary and Conclusion

So where does this leave us? Based on the goals set by the team in the blog, to achieve EigenDA’s $160k/month revenue goal, using level 1 pricing of 70 ETH/year, and assuming an average ETH price of ~$2,500, you would need 11 rollups as paying customers. From our analysis, about 6 rollups have exceeded 70 ETH on L1 since EIP-4844 went live in early March. As we discussed, on-demand pricing will still reduce costs by ~99% for these rollups, but ultimately throughput demand will determine whether they choose to use EigenDA.

Beyond that, we are likely to see demand spurred by creating multiple high-throughput rollups (e.g. MegaETH) to reduce costs. In the future, these high-performance rollups may also be deployed by Rollup-as-a-Service (RaaS) providers such as AltLayer and Conduit. However, in the short term, some work is still needed to reach the $160,000 per month revenue target, which will be the break-even cost, assuming only 400 operators support EigenDA. Overall, EigenDA opens up new potential design possibilities that have great value-added potential, but it is not entirely clear how much value EigenDA will capture and return to re-stakers. Nonetheless, we believe EigenDA is well-positioned for market share as a data availability service provider and look forward to continued attention on one of the most well-known AVS.