> For the complete documentation index, see [llms.txt](https://safu-protocol.gitbook.io/safu/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://safu-protocol.gitbook.io/safu/safuusd-an-example-of-a-product-you-could-built-on-top-of-safu/context-blackrock-and-eigenlayer.md).

# Context: BlackRock and EigenLayer

#### BlackRock BUIDL Fund

The BlackRock USD Institutional Digital Liquidity Fund (BUIDL) represents a significant innovation in finance as the first tokenized fund issued on a public blockchain. Managed by Securitize Markets, BUIDL allows qualified investors to earn U.S. dollar yields by subscribing to the fund through a digital platform. This fund is a pioneering example of bringing traditional finance instruments, like U.S. Treasury bills, onto the blockchain, combining the reliability of the world’s most trusted financial asset with the transparency and accessibility of Ethereum.

On July 8, BUIDL became the first on-chain U.S. Treasuries fund to surpass $500 million in assets under management, highlighting its rapid adoption and appeal to investors seeking a blend of traditional security with modern technology. BUIDL exemplifies what is considered nearly risk-free in finance: the combination of U.S. Treasury bills—an asset class renowned for its safety and liquidity—with the management expertise of BlackRock, the world’s largest asset manager.

#### EigenLayer

EigenLayer is a protocol built on Ethereum that introduces the concept of restaking, a novel approach to cryptoeconomic security. Restaking allows users who have already staked ETH on Ethereum’s consensus layer to opt into EigenLayer smart contracts, thereby extending the security provided by their staked ETH to other applications within the network. This mechanism enables the aggregation of cryptoeconomic security, facilitating the validation of new applications being developed on Ethereum.

EigenLayer's potential lies in its ability to leverage the security of Ethereum's consensus layer to support a wide range of additional services and protocols. By allowing the restaking of ETH, EigenLayer creates a more versatile and secure environment for the development of decentralized applications, making it a crucial component in the ongoing evolution of the Ethereum ecosystem

**EigenLayer Architecture Overview**

![image.png](https://prod-files-secure.s3.us-west-2.amazonaws.com/1bdeaa23-71f3-4c40-8924-979844b3795e/6a8c27d1-c9ab-4770-9ec7-6e3e9e23945f/image.png)

* **Restaking** enables stakers to restake their Native ETH or Liquid Staking Tokens (LST) to provide greater security for services in the EigenLayer ecosystem, known as Actively Validated Services (AVSs).
* **Operators** are entities that help run AVS software built on EigenLayer. They register in EigenLayer and allow stakers to delegate to them, then opt in to provide various services (AVSs) built on top of EigenLayer.
* **Delegation** is the process where stakers delegate their staked ETH to operators or run validation services themselves, effectively becoming an operator. This process involves a double opt-in between both parties, ensuring mutual agreement. Restakers retain agency over their stake and choose which AVSs they opt-in to validate for.
* **Actively Validated Services (AVSs)** are services built on the EigenLayer protocol that leverage Ethereum's shared security.
  * Operators perform validation tasks for AVSs, contributing to the security and integrity of the network.
  * AVSs deliver services to users (**AVS Consumers**) and the broader Web3 ecosystem.

**LRTs**

Like LSD, LRT providers let users join EigenLayer restaking without becoming full operators or making a full Ethereum validator deposit. These protocols handle organizational matters and give investors a share of the reward from AVS operators.

So, LRT is built on EigenLayer, which is built on Ethereum’s native staking and liquid staking platforms. This means that the assets of a retail user, who doesn’t plan to run their own node, will be leveraged on four layers simultaneously:

* Ethereum basic staking;
* liquid staking platform (optional);
* EigenLayer restaking pools;
* liquid restaking service.

#### What is the EIGEN token?

The EIGEN token is a universal intersubjective work token. We will break down the terms here. First, by work token, we mean that a token that can be staked to perform some work within a blockchain platform. This work could be an execution task or validation task. Existing work tokens often have the following limitations:

* **Special-purpose:** Existing work tokens are designed to provide cryptoeconomic security to only one enshrined specific digital task. For example, before ETH restaking in EigenLayer, ETH was specialized for securing only Ethereum’s consensus.
* **Objective:** ETH restaking expanded the scope of ETH. With ETH restaking, the ETH staked can now be used to secure those services that have objectively attributable faults and can be proven onchain by means of an optimistic dispute resolution mechanism. Resolution of faults is done by means of mathematics and cryptography. However, there is a much wider class of digital tasks where the faults in their execution are not provable onchain in a smart contract but are observable by any observer outside the chain and a wide agreement can be achieved among the honest observers. We call this category of faults **intersubjectively attributable faults**. By having staking with EIGEN, the goal is to secure AVSs that have **any** intersubjectively attributable faults and penalize the EIGEN stake of the operators who participate in these faults. This lends a universal nature to the EIGEN token.

#### Intersubjectivity

Intersubjectivity refers to a category of faults in digital tasks where there is broad agreement among external observers about the occurrence of a fault, even though it may not be provable on-chain through mathematics or cryptography. Unlike subjective faults, where opinions may differ among observers, intersubjectively attributable faults are those where all honest observers would agree on the outcome. An example of such a fault is whether data was available in a Data Availability layer at a given time, which can be observed externally but not necessarily proven on-chain or **if a bank in tradfi is insolvent or not (there tends to be consensus at certain point in time)**.

**Slashing**

Slashing is a critical mechanism in Ethereum and EigenLayer that ensures the integrity and security of the network by penalizing validators who engage in malicious or faulty behavior. It acts as a deterrent, discouraging actions that could harm the network.

In the context of Ethereum, slashing occurs when a validator violates the protocol rules, such as attempting to create conflicting blocks or failing to validate correctly. The Ethereum network continuously monitors validator behavior, and if a validator is found to be malicious, a portion of their staked ETH is "slashed" or confiscated as a penalty. This ensures that validators have a strong incentive to act honestly and maintain the network's security.

EigenLayer introduces an additional layer of responsibility for validators. Validators who choose to restake their ETH on EigenLayer not only need to adhere to Ethereum’s protocol but also to the rules of the Actively Validated Services (AVSs) they opt into. EigenLayer deploys on-chain slashing contracts within these AVSs to enforce penalties for misbehavior. If a validator fails to meet the standards required by these additional services—whether due to smart contract vulnerabilities, operational failures, or other issues—they risk being slashed not only at the Ethereum level but also within EigenLayer’s framework. This dual-layer of accountability makes slashing in EigenLayer more complex, requiring validators to maintain good behavior across multiple protocols to avoid penalties.

**US Treasury Bills: Risk-Free Rate of Return**

[The risk-free rate of return](https://www.investopedia.com/terms/r/risk-freerate.asp) is the theoretical [rate of return](https://www.investopedia.com/terms/r/rateofreturn.asp) of an investment with zero risk. The [risk-free](https://www.investopedia.com/articles/financial-theory/08/risk-free-rate-return.asp) rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.

The three-month U.S. Treasury bill (asset held by BUIDL tokenized fund and collateral of egUSD)is a useful proxy because the market considers there to be virtually no chance of the U.S. government defaulting on its obligations. The large size and deep liquidity of the market contribute to the perception of safety. This is a useful proxy because the market considers there to be virtually no chance of the U.S. government defaulting on its obligations. The large size and deep liquidity of the market contribute to the perception of safety.

Meaning that would be fair that the bigger risk of holding tBills would actually the counterparty who retain custody and their underlying legal structure; in our case we partnered with BlackRock, one of the biggest asset management companies in the world.

***About BlackRock:** BlackRock is a global investment management firm renowned for its expertise in crafting robust investment strategies and its comprehensive approach to risk management. The company has earned a reputation for resilience, particularly during market turbulence, by focusing on diversification, strategic asset allocation, and regular portfolio rebalancing. BlackRock is also highly regarded for its commitment to transparency, accountability, and responsible investing, which has solidified its position as a trusted partner for institutional investors, financial advisors, and individual investors worldwide. With over $8.5 trillion in assets under management, BlackRock’s reputation is built on decades of consistent performance and ethical practices.*