EigenLayer TVL Surges $1 Billion in 8 Hours

EigenLayer saw surge in TVL within just eight hours after temporarily lifting its staking cap and allows investors to earn yield.

The total value locked (TVL) of the Ethereum-based liquid restaking protocol EigenLayer has skyrocketed by an astounding $1 Billion in just eight hours after the protocol temporarily eliminated its staking cap.

EigenLayer announced on February 5 that it would temporarily lift its staking cap of 200,000 Ether per protocol until February 9 to “invite organic demand” to use the network infrastructure.

The protocol states that this temporary elimination is paving the way for a future where all staking caps will be permanently abolished. As a result of investors putting their respective liquid-staked ETH tokens into the protocol, the TVL of the protocol increased from around $2.5 billion to $3.58 billion at the time of writing, according to data from DefiLlama.

This occurred in the eight hours that followed the announcement. The previous week saw a remarkable increase of $1.6 billion, which was a result of this enormous expansion.

EigenLayer is a protocol that enables investors to earn an additional yield on their staked Ethereum tokens by staking them to secure other networks. This allows investors to receive a higher return on their investment.

At this time, EigenLayer can support liquid staking tokens such as the staked Ethereum (stETH) issued by Lido DAO and the Swell Stated Ether (swETH) protocol. Lido Staked ETH is now the most restaked token on EigenLayer accounting for over $1.2 billion worth of EigenLayer’s total TVL.

This makes it the most popular reserved token on EigenLayer. Regarding total TVL, Swell Staked ETH is the second largest on the protocol accounting for $392 million. Giving investors interest in locking up their already liquid staking tokens and using the tokens to aid with validation, lending, and liquidity on other blockchain networks is how restaking works. Investors receive interest by performing restaking.

EigenLayer is largely considered to present a novel use case for staked ETH tokens. Nonetheless, market analysts and developers alike have expressed their worries over the mechanics of the protocol.

They have described massive amounts of restaking as being comparable to leverage. In May 2023, Vitalik Buterin, one of the co-founders of Ethereum issued a warning that the Ethereum ecosystem may be exposed to substantial “systemic risks” if there was considerable growth in the practice of restaking as well as if there was excessive use of data or price oracles.

April 7, 2023 was the introduction of EigenLayer’s testnet, while June 14, 2023 marked the launch of the mainnet for the protocol which was introduced two months later.

Since then, the TVL of the protocol has increased by an astounding 21,623%, which is a reflection of the passion for restaking that exists in the cryptocurrency market as a whole.