The Ethereum-based liquid restaking protocol EigenLayer has experienced a remarkable surge in its total-value locked (TVL), increasing by $1 billion in just eight hours after temporarily removing its staking cap.
On February 5, EigenLayer announced the temporary lifting of its protocol staking cap, which had previously been set at 200,000 Ether (ETH). This move was intended to “invite organic demand” to the network and pave the way for a future where all staking caps are permanently removed. The temporary removal of the staking cap was scheduled to last until February 9.
Following the announcement, the protocol experienced a surge in TVL, growing from approximately $2.5 billion to $3.58 billion at the time of publication. Within eight hours, investors funneled their liquid-staked ETH tokens into the protocol, marking an impressive increase of $1.6 billion in TVL.
EigenLayer is a protocol that enables investors to earn additional yield on their staked ETH tokens by staking them to secure other blockchain networks. The protocol supports liquid staking tokens, including Lido DAO’s staked ETH (stETH) and Swell Stated Ether (swETH). Lido Staked ETH currently constitutes the largest portion of EigenLayer’s TVL, accounting for over $1.2 billion, while Swell Staked ETH is the second largest, with a TVL of $392 million.
Despite offering a novel use case for staked ETH tokens, EigenLayer has faced concerns from market commentators and developers. Some have likened high volumes of restaking to leverage. Ethereum co-founder Vitalik Buterin warned in May 2023 that significant restaking and overuse of data or price oracles could introduce “systemic risks” to the Ethereum ecosystem.
EigenLayer’s testnet was launched on April 7, 2023, followed by the mainnet on June 14. Since then, the protocol’s TVL has seen extraordinary growth, surging by 21,623%, reflecting the broader crypto market’s enthusiasm for restaking.
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