“As an innovator, you don’t need to bring trust. You only need to bring your innovation, and the blockchain bringing the trust is such a mind-bending idea that enables a whole new generation of people to come in and create systems.”
Nothing could embody the spirit of blockchain better than these words from Sreeram Kannan, a career academic who gave up tenure to build a blockchain product that could very well be what the Web3 ecosystem needs to enable mass adoption.
Sreeram is the co-founder and CEO of EigenLayer, a new crypto-economic security feature built on Ethereum that increases capital efficiency. The same principle that attracted him to a career in academia is what brought him to blockchain: innovation can lead to the next step for human civilization.
In the first episode of Beacon Podcast Web3 Unlocked’s third season, Sreeram discusses getting into Web3, how EigenLayer came about, and more.
Disclaimer: The views expressed in Beacon Podcast Web3 Unlocked are those of our guests solely, and none of this is financial advice.
Inspiration to work in Web3
Sreeram’s interest in Web3 goes back to his driving principle that things in life are interesting only because they are positive-sum games that are win-win across different parties.
He says there are two kinds of positive-sum games: coordination and innovation!
“Coordination and innovation are the two fundamental pillars that help nonzero-sum games. I think crypto is the coordination superhighway just like we think of the internet as the information superhighway.”
To coordinate, we need to bind ourselves to automatic and enforceable commitments, and crypto enables us to do that, says Sreeram. Essentially, as you unlock more coordination, you can unlock more innovation.
“My thesis of crypto and blockchains is how it enables the coordination superhighway and how it enables permissionless and open innovation where anybody can come and innovate without themselves having to be trusted.”
Journey from academia to Web3
Sreeram had been contemplating the path of entrepreneurship for many years. He joined academia because he recognized it as a place where creativity and discoveries could flourish. However, the advent of cryptocurrency presented an even more compelling opportunity.
“What I found with crypto is this opportunity that not only can I go out and innovate, we can also build frameworks on which anybody can innovate on a common platform.”
It aligned with Sreeram’s belief in democratizing innovation, which resonated deeply with him. He noticed that individuals from diverse backgrounds, without established reputations or access to exclusive resources, were able to make significant contributions to blockchain.
This starkly contrasted with fields like AI, where contributions often favored those with access to state-of-the-art infrastructure and expertise. The decentralized nature of crypto and its emphasis on trustless systems enables individuals to build innovative services without the need for established reputations.
This realization prompted him to shift his focus from merely theorizing about innovation to actively participating in its creation within the crypto ecosystem.
Early days in crypto
The first product Sreeram started working on in blockchain was Trifecta with two other professors. They intended to convince major blockchains like Bitcoin or Ethereum to adopt their technology, but that did not happen for various reasons.
Despite developing a working blockchain, securing funding proved difficult. This experience highlighted the importance of considering the adoption curve and charting a path for incremental adoption rather than expecting a wholesale transition.
From this experience, Sreeram says, he understood the need to prioritize what people want rather than simply building something interesting. Understanding user needs and addressing pain points is crucial for successful product development.
Sreeram’s next project was an NFT marketplace, and he saw that it could be much bigger than what people can make it out to be:
“As we build it, you start uncovering the problems […] and how you bridge an NFT, which got us into the problem of bridging. How do you know an NFT price? How do these price Oracles work? We’re finding all these interesting questions…”
And so, they decided to think about a meta solution that solves all these problems: “It led us to this idea that hey, we should build a mechanism which is just crossed as a service, and then people can build an oracle as an execution environment and all these other things.”
EigenLayer emerged from this learning process, and Sreeram realized his expertise was more in infrastructure than consumer dynamics, which convinced him to work on this new product. They recognized the need for a cross-chain solution to address common issues encountered by blockchain developers, such as bridging, oracles, and AI integration.
The problem that EigenLayer solves
Blockchain solutions are distinguished from non-blockchain solutions by their reliance on decentralized trust. This decentralized trust serves as the foundation for the crypto economy. This “borrowing decentralized trust” concept allows innovators to leverage trust without establishing their reputation.
Developers often need access to the raw form of decentralized trust rather than the distilled version provided by Ethereum block space. EigenLayer addresses this need by providing a mechanism to share Ethereum’s security substrate with other systems.
Sreeram explains that EigenLayer’s core concept is restaking, which allows stakers to make additional promises beyond adhering to the Ethereum protocol. This enables permissionless programmable staking, allowing stakers into commitments made by developers. Sreeram hopes this would give developers a platform to build their own innovative systems.
“It seemed to me, logically, that the right way to build a growing, thriving economy is to have specialized layers, each of which specializes in one function. You can concatenate them all into an end-user experience or an end-user application. That’s the vision that we are building right now.”
How does EigenLayer work?
The modular roadmap for Ethereum aims to offload computation from the main chain to improve scalability. Data availability is crucial to the modular roadmap, requiring a dedicated data publication layer.
EigenLayer’s data availability (Eigen DA) layer offers significant scalability advantages over existing solutions. It targets a throughput of 10 megabytes per second, far exceeding Ethereum’s current capacity, and envisions scaling to gigabytes per second throughput within the next four years.
Eigen DA facilitates on-chain computation of high-throughput use cases, such as social media and gaming applications. It introduces a reserved data availability layer, ensuring guaranteed access to data for specific users.
Eigen DA is expected to launch on testnet within the next couple of months and on the main net in Q1 of next year.
EigenLayer’s longterm goal
Sreeram says that his decision to focus on EigenLayer instead of continuing with the NFT marketplace was driven by a desire to maximize impact:
“Startups are these magical things that transfer a linear amount of work into exponential impact; you only do a linear amount of work, but you want an exponential impact.”
Choosing the right exponential game is crucial for startup success. While the NFT marketplace was innovative, Sreeram recognized that EigenLayer has a potentially much more exponential impact.
So why not work on both at the same time? Sreeram cautions that scattering efforts across multiple chains reduces each project’s potential impact.
This is also the reason for deciding to build EigenLayer on Ethereum rather than make it a cross-chain layer: “Because if you build something in another chain, you have a different community, different user base. All of these things fragment into completely different things. Instead, focus all the energy on the one product and build it all on Ethereum.”
Building a diverse team as a Web3 Founder
It is essential to build a diverse team with different backgrounds and skill sets when it comes to building for success. This is especially true with blockchain, says Sreeram:
“I think it’s really important that crypto has this essentially contrarian nature that people who are not crypto-native or digital, you may miss them if you don’t pay attention to them.”
With a diverse team of complementary expertise–academia, business, execution–EigenLayer created a well-rounded team that values and honors each member’s unique strengths and fosters them.
“We’re not all the same. How do you build a team where each person operates in their zone of strength? We built a cohesive team that pushes everybody towards their strength. Bad teams bring everybody down to their worst trait, and great teams try to push everybody to operate in their zone of strength. We try to construct this as a culture in the company by endowing autonomy and ownership to people.”
Web3-specific founder qualities
For Sreeram, one of the most significant discoveries he thinks is crucial is X, formerly known as Twitter. X plays a vital role in the crypto ecosystem as a central hub for discussions, debates, and idea sharing among developers and builders.
It serves as a “shelling point” where attention is focused, allowing for the dissemination of ideas and the ability to influence others.
Sreeram also thinks finding a community whose values align with your own is important. Ethereum’s values of credible neutrality, censorship resistance, and permissionlessness resonated with Sreeram, giving him a sense of belonging he did not feel before; it felt like “coming home.”
Advice to Web3 founders
Sreeram believes everyone should actively engage with the broader crypto community of builders to gain insights into real-world problems and priorities.
The academic community often focuses on theoretical security, while the industry prioritizes speed and practicality. Engaging with the industry can help academics bridge this gap and develop more relevant solutions.
He also says that founders should focus on building useful products and attracting users. Impressing customers is more valuable than impressing investors. For EigenLayer, Sreeram initially funded from his own pocket, giving him valuable discipline and a sense of ownership, allowing for more focused development.
This also meant that EigenLayer could focus on building for customers rather than investors in its initial approach, says Sreeram:
“The best way to raise money is not to go to investors, but actually try to be adopted by customers. As a consequence, you get investors who want to participate.”
EigenLayer got inbound requests from investors, which is how they began the fundraising process. The reason EigenLayer decided to proceed was to enhance customer trust by showing that they had long-term viability.
Sreeram tells me that EigenLayer is in a new product category that does not have direct competition currently. While other projects offer similar services, such as staking platforms and data availability systems, EigenLayer has several unique features that set it apart from the competition.
EigenLayer is an attestation layer that provides data availability and bridging services to rollups. This makes EigenLayer a complementary product to liquid staking protocols, as it can be integrated into their workflows.
Eigen DA also leverages Ethereum’s security to power its data availability. This makes EigenLayer more attractive to rollups and other projects that need a secure data availability solution.
“That’s where I think Eigen DA is different. It’s an Ethereum-native system that goes all the way down to code design philosophy. Eigen DA does not do any block ordering or other things needed to run a chain. It is, in theory, an attestation layer. We just attest that the data is available and put it on Ethereum.”
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