geeogi

Some validators will need to exit the network and re-active with an EigenLayer withdrawal address if they want to participate in EigenLayer, contributing to exit/activation queues.

Ethereum validators will soon be able to earn additional rewards by performing duties for new applications (AVS) built on top of EigenLayer. Participants opt-in to the required duties of an AVS and “re-stake” their ETH – i.e. become slashable by EigenLayer contracts.

For many validators (solo stakers, staking services without an LST e.g. Binance, Kraken) “re-staking” means setting their withdrawal address to an EigenLayer contract (see EigenPod) so that any ETH withdrawn from the validator can be frozen or slashed if the validator has failed to perform their duties in some way. This slashing capability is what gives EigenLayer applications POS style security – validators are bound to perform their (opt-in) EigenLayer duties or risk losing their stake.

Currently, over 85% of validators on the network have already set their withdrawal address (0x01 credentials) and this can’t be changed for the lifetime of the validator. For many of these validators, participating in EigenLayer would require them to exit and re-activate with a new withdrawal address set to an EigenLayer contract.

Some LST services like Lido and RocketPool have special arrangements with EigenLayer (see "liquid re-staking") so that EigenLayer accepts LSTs at the router level – so they won't need to set their withdrawal addresses to EigenLayer directly. Presumably this option could not be made available to solo stakers or staking services that lack a sufficient LST.

So, a significant amount of validators (a napkin estimate suggests around 25% of ETH staked) would need to rotate out of the network and back in with a new withdrawal address to participate in EigenLayer – at worst that’d be a ~3 month queue out and back in.

That’s assuming EigenLayer becomes attractive to everyone at the same time. Seems more likely it would be a gradual/partial migration.

Say 30% of validators are solo stakers or staking services without an LST (Binance, Kraken) and, given 85% of validators have already set their withdrawal address to something other than EigenLayer, that gives around 25% of validators needing to exit and re-enter in order to participate.