EigenLayer TVL Surges After Removing Staking Limits!

EigenLayer ‘s TVL (Total Value Locked) skyrocketed by 43%, increasing its value by a staggering $1 billion in just eight hours after the protocol announced it was removing its staking limits for the next three days.

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The total value locked (TVL) of Ethereum-based liquid restaking protocol EigenLayer saw an incredible increase of $1 billion just eight hours after the protocol temporarily lifted its staking limit.

On February 5th, EigenLayer announced plans to temporarily lift its 200,000 Ether (ETH) protocol staking limit until February 9th to “attract organic demand” to its network. The protocol stated that this temporary change could pave the way for the permanent removal of all staking limits in the future.

🟦 EigenLayer Restaking Reloaded! 🟦

From NOW until Feb 9th, 12 PM PT, dive back into the world of LST restaking! All pools are fully uncapped, featuring both the existing pools and welcoming new partners @fraxfinance, @liquid_col, & @0xMantle. pic.twitter.com/yDGHiJjX3m

— EigenLayer (@eigenlayer) February 5, 2024

EigenLayer TVL

Just eight hours after the announcement, EigenLayer’s TVL jumped from $2.5 billion to approximately $3.58 billion, as investors rushed to stake their liquid-staked ETH tokens on the protocol. According to DefiLlama data, this represents a massive $1.6 billion increase over the past week.

EigenLayer is a protocol that allows investors to earn additional yield by staking their staked ETH tokens to secure other networks. It currently supports liquid staking tokens such as Lido DAO’s staked ETH (stETH) and Swell Stated Ether (swETH).

Lido Staked ETH is the largest restaked token on EigenLayer, accounting for $1.2 billion of the protocol’s total TVL. Swell Staked ETH is the second largest token on the protocol, with a TVL of $392 million.

The process of restaking allows investors to lock their existing liquid staking tokens and earn interest, while also using those tokens to participate in validation, lending, and liquidity provision on other blockchain networks.

While EigenLayer has seen widespread adoption for providing a new use case for staked ETH tokens, market commentators and developers have raised concerns about the protocol’s mechanics, particularly the high leverage nature of its restaking capabilities.

In May 2023, Ethereum co-founder Vitalik Buterin warned that a significant increase in restaking, coupled with the overutilization of data or price oracles, could pose significant “systemic risks” to the Ethereum ecosystem.

EigenLayer’s Testnet was launched on April 7, 2023, and the protocol’s Mainnet was launched two months later on June 14. Since then, the protocol’s TVL has grown by a staggering 21,623%, reflecting the overall excitement in the crypto market for restaking.