EigenLayer's Total-Value Locked Soars by $1 Billion Within 8 Hours After Lifting Staking Cap
Summary:
After temporarily lifting its staking cap, the Ethereum-based liquid restaking protocol, EigenLayer, saw its total-value locked (TVL) soar by $1 billion within just eight hours. This move was designed to stimulate "organic demand," according to the firm's announcement on Feb 5. Since this announcement, EigenLayer's TVL rocketed from $2.5 billion to $3.58 billion, marking a staggering 21,623% increase since its testnet launch in April 2023. Despite its popularity, the protocol has received criticism for potential systemic risks associated with high restaking volumes.
In a timespan of merely eight hours, the total-value locked (TVL) for Ethereum-focused liquid restaking protocol, Eigenlayer, witnessed an impressive rise of $1 billion. This tremendous uptick followed the protocol's temporary elimination of its staking limit. EigenLayer announced on Feb 5 that it will provisionally increase its staking cap of 200,000 Ether (ETH) for each protocol until Feb 9. This move aims to boost "organic demand" for the network. By lifting the cap for a short period, EigenLayer lays the groundwork for an era where all staking limits could be permanently abolished.
Following the decision, EigenLayer's TVL quickly escalated from $2.5 billion to $3.58 billion, according to the latest data. As a result, participants raced to deposit their liquid staked ETH tokens into the protocol, DefiLlama data showed. This dramatic trajectory of growth spotlighted a record high of $1.6 billion increase within a single week. Since last December, TVL on EigenLayer has swiftly risen from $248 million to the current standing of $3.58 billion as of February 5.
EigenLayer's protocol enables investors to enhance their yields by restaking their ETH tokens to reinforce other networks. At present, EigenLayer accommodates liquid staking tokens that include Swell Stated Ether (swETH) and Lido DAO's staked ETH (stETH).
Lido Staked ETH is currently the token with the most re-stakes on EigenLayer, accounting for over $1.2 billion of EigenLayer's overall TVL. On the other hand, Swell Staked ETH is the second-highest re-staked token on the protocol, totaling a TVL of $392 million.
Restaking allows participants to earn an interest on their staked liquid tokens. These tokens are utilized for validation, lending, and liquidity across varied blockchain networks. While EigenLayer is known for its innovative use of restaked ETH tokens, concerns around the protocol's mechanics have been raised by industry insiders, indicating that high restaking volumes could amplify risks.
In 2023, Vitalik Buterin, Ethereum's co-founder, had cautioned that a significant rise in restaking could expose the Ethereum ecosystem to severe "systemic risks," along with the misuse of data or price oracles. EigenLayer's testnet was launched on April 7, 2023, followed by the mainnet launch on June 14. Since its inception, EigenLayer's TVL has observed an extraordinary 21,623% growth, a testament to the fervor for restaking within the broader cryptocurrency market.
Published At
2/6/2024 8:10:42 AM
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