Ever because the Ethereum blockchain transitioned right into a Proof-of-Stake (PoS) community after The Merge occasion in September 2022, there’s been a steep rise of the liquid staking protocols on the platform. However, restaking is getting much more consideration in latest occasions with the rise of liquid restaking tokens (LRTs).
Eigen Layer Becomes Ethereum’s Second-Largest DeFi Protocol
EigenLayer has emerged as Ethereum’s second-largest DeFi protocol by complete worth locked (TVL), presently standing at $12.4 billion, due to Ethereum’s well-established staking infrastructure and surplus safety price range. EigenLayer facilitates validators to earn additional rewards by securing actively validated companies (AVS) via restaking their staked ETH.
The exceptional progress of EigenLayer’s TVL positions it because the runner-up solely to Lido, Ethereum’s main liquid staking protocol.
EigenLayer’s restaking protocol was launched on Ethereum’s mainnet in June 2023, with AVSs set to be launched within the subsequent part of its multi-phase rollout within the second quarter of 2024. This modern idea of “restaking” by EigenLayer permits validators to safe new Ethereum options, equivalent to knowledge availability layers, rollups, bridges, oracles, and cross-chain messages, doubtlessly incomes further rewards. This introduces a novel revenue stream for validators within the type of “security-as-a-service”.
In its report, Coinbase additionally highlighted the emergence of a burgeoning ecosystem surrounding Liquid Restaking Tokens (LRTs), mirroring the success of Liquid Staking Tokens (LSTs). This ecosystem now boasts over half a dozen protocols, every providing its personal iteration of liquid restaking tokens, that includes numerous incentives and airdrop schemes. Moreover, of the three million ETH locked in EigenLayer, roughly 2.1 million ETH, accounting for 62%, are wrapped in secondary protocols.
The Future of Restaking Tokens
Coinbase additionally famous the potential significance of restaking as a pathway for ETH returns, significantly if there’s a decline in native staking issuance attributable to elevated participation in staking actions. However, Coinbase additionally highlighted the anticipated challenges for Liquid Restaking Tokens (LRTs) within the close to time period, as Actively Validated Services (AVS) yields are comparatively low post-launch.
Notably, no AVS has been launched on the mainnet as of now, with EigenDA, the primary AVS anticipated to roll out in early Q2 2024. EigenDA is prone to operate as an information availability layer much like Celestia or Ethereum’s blob storage.
Considering the success of the Dencun upgrade in considerably lowering layer-2 (L2) charges, Coinbase anticipates that EigenDA will provide yet one more avenue for cost-effective L2 transactions, contributing to Ethereum’s numerous toolkit.
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