EigenLayer ProtocolEigenLayer Redistribution
Redistribution allows protocols to redirect penalized funds from misbehaving validators to compensate affected parties, rather than destroying the funds, enabling new use cases like lending and insurance services that need to make victims whole when things go wrong.
What Happens:
- Success: Operator serves AVS correctly, rewards distributed
- Failure: AVS slashes operator, funds permanently burned
- No compensation for affected parties
- Value completely lost from ecosystem
What Happens:
- Success: Operator serves AVS correctly, rewards distributed
- Failure: AVS slashes operator, funds sent to redistribution recipient
- AVS can compensate harmed parties
- Value stays within the ecosystem
Harmed Party Compensation
Affected parties can be directly compensated from slashed funds instead of taking a total loss
Incentive Alignment
Reliable operators can be rewarded with redistributed funds, creating stronger incentives
Capital Efficiency
Value remains in the ecosystem and can be used productively rather than being destroyed
Insurance Protocols
When operators fail to provide coverage, slashed funds can directly compensate affected policyholders, creating the first truly decentralized insurance with guaranteed payouts.
Lending Platforms
Failed loan commitments trigger automatic redistribution to protect lenders and maintain protocol stability, enabling higher leverage with built-in safety nets.
Cross-chain Bridges
SLA violations automatically redistribute funds to users affected by delayed or failed transactions, creating bridges with credible uptime guarantees and user protection.
Stablecoin Protocols
Operator failures in yield generation trigger redistribution to protect stablecoin holders, enabling sustainable yields with downside protection and peg stability.
The Redistribution Advantage
Unlike traditional slashing that permanently destroys value, redistribution creates a closed-loop system where economic security translates directly into user protection and ecosystem sustainability.
How Cap Uses Redistribution
Cap creates a decentralized marketplace for yield generation, protecting stablecoin holders through redistribution
When Things Go Wrong: Redistribution Protection
The Problem:
- Institutional operator makes bad investment decisions
- Stablecoin holders face potential losses
- Traditional systems offer no recourse
Cap's Solution:
- Malicious operator gets slashed automatically
- Slashed funds redistribute to affected stablecoin holders
- Autonomous & verifiable protection
Key Innovation: Marketplace Model
No Central Team
Unlike traditional stablecoins, Cap doesn't rely on slow DAOs or fund managers
Decentralized Marketplace
Connects capital, strategy, and security like Uber connects riders and drivers
Credible Guarantees
First stablecoin with verifiable financial protection through redistribution
⚠️ Increased Slashing Incentives
With redistributable slashing, AVSs can now benefit from slashed funds. This creates stronger incentives to slash operators, potentially leading to more frequent slashing events. Stakers must carefully evaluate this risk-reward tradeoff.
Staker Risks
- Fund Theft Risk: Compromised AVS keys can drain allocated stake instead of just burning it
- Malicious Operators: Compromised operators may create malicious AVSs to slash and steal funds
- Governance Attacks: Corrupted AVS governance can authorize illegitimate slashing
- Collusion Risk: Operators and AVSs may collude to redistribute funds inappropriately
Operator Risks
- Key Compromise: Lost keys can enable attackers to register malicious AVSs and steal staker funds
- Reputational Damage: Being slashed in redistributable sets causes severe trust loss
- Increased Liability: Higher security requirements and operational complexity
- Visibility Changes: Marked as "Redistributable" affecting stake attraction
AVS Risks
- Enhanced Key Management: Redistribution recipient keys require highest security standards
- Governance Risks: Must implement robust fraud proofs and veto mechanisms
- Precision Attacks: Risk of precision loss in small magnitude slashing
- Design Complexity: Must carefully balance incentives to prevent abuse
Built-in Protections
- Immutable Recipients: Redistribution addresses cannot be changed after creation
- Clear Metadata: All redistributable operator sets are clearly marked
- Opt-in Only: Participation requires explicit consent from all parties
- Allocation Delays: Time windows for stakers to react to compromised operators
Risk Assessment Guidelines
Before participating in redistributable slashing, conduct thorough due diligence on all parties involved.
For Stakers
Carefully evaluate operator reputation, AVS governance, and risk-reward ratios before delegating
For Operators
Implement exceptional security practices and only participate in AVSs with robust governance
For AVSs
Design with security-first principles, implement delays, and provide clear transparency