Quick take:
- EigenLayer’s mainnet launch saw it cross the $15 billion market in TVL.
- The ETH restaking protocol is now powering multiple sidechains and DeFi protocols on Ethereum, accelerating their time-to-market whilst also improving security.
- Some industry experts think this could be positive for the crypto sector.
Crypto restaking protocols are rapidly becoming popular on the Ethereum network to the point that Ethereum co-founder Vitalik Buterin is getting worried about a system overload.
One of the contributing factors to the increase in the number of restaking platforms on the network is EigenLayer, a protocol that allows other decentralised finance applications to enable liquid restaking on their platforms.
Restaked sidechains can use the platform to allow ETH restakers to participate in new consensus protocols with low latency and high throughput.
The emergence of EigenLayer has also triggered the rise of Actively Validated Services on the Ethereum network. They use restaked ETH to secure their networks ranging from anything from blockchain bridges to exchanges or oracles.
Some of the platforms using EigenLayer to power their crypto restaking protocols include the digital asset platform Galaxy Digiatl, Ether.fi, Chorus One, Block Sand, and Kiln, among others.
Venture capital firms are also bullish on crypto restaking platforms with A16z’s $100 million investment in EigenLayer earlier this year standing out. Bullish Capital and CoinFund have also shown great interest in the space, investing in Ether.fi’s $27 million Series A round, which was also joined by Collider VC and many others.
We asked Eylon Aviv, a partner at Collider VC how important EigenLayer is to the rapid growth of actively-validated services and restaking protocols on Ethereum.
“By using Eigenlayer they have simplified their development process dramatically and are coming to market over a year earlier. This is also true for new projects and protocols that are utilizing Eigenlayer to create networks that would have been too cost-efficient otherwise,” Aviv said.
MK Dunkley, the Chief Marketing Officer of Unizen added: “The most important aspect of restaking protocols is the community driving forward the adoption. There is no longer any need to rely on centralized parties to pool together staked ETH. The staking market share was typically controlled by Binance and Coinbase, but this will change going forward.”
Speaking on Bloomberg’s Big Take podcast, EigenLayer co-founder Sreeram Kannan explained why his company’s platform operates slightly differently from traditional staking protocols.
“The idea is that when you stake on Ethereum, you are promising that you’re going to run the Ethereum network nodes correctly,” said Kannan. “With restaking, you are taking the same Ether and making additional promises that you will also validate other networks correctly.”
Tom McLean – Senior Researcher, Vega Protocol emphasised the cost-cutting benefits that AVS platforms can reap from using EigenLayer. “Spinning up an entirely new decentralized chain [on Ethereum] can present significant initial challenges for developers or projects without significant funding,” he said.
“Restaking protocols like EigenLayer present an interesting potential solution to this problem, by aiming to allow new chains to bootstrap a validator set through distributed staking and consensus without such a large initial funding requirement.”
Vincent Wu, a co-contributor at Hover Market thinks “restaking protocols are laying down the infrastructure for a more interconnected and versatile blockchain network.”
More than just helping sidechains cut costs and accelerate their launch timeframes, Dunkley points out that platforms like EigenLayer are improving the overall security of the architecture.”The biggest beneficiaries of the restaking movement are bridges, DEXes, and lending protocols. In the past, many protocols suffered exploits because of a loophole when connecting to other shared community pools,” said Dunkley.
Aviv also believes the platform is helping protocols focus on the core functionalities rather than worrying about bootstrapping trust or securing their own networks. “This is done via restaking, a novel approach that leverages Ethereum network security to secure additional protocols without the need for each of them to establish their own validator set. This is one of the biggest unlocks to crypto protocols, networks, and the ecosystem as a whole.”
Wu added: “By encouraging people to stake their assets, these protocols enhance network security and participation, removing obstacles and making it easier for everyone to join.”
While there are obvious benefits to using a restaking protocol to secure a sidechain, bridging protocol or a DEX platform on Ethereum, there may be more factors at play for the current rise in crypto restaking TVL.
Ether.fi has already become one of the leading liquid restaking protocols on Ethereum with TVL of about $3.9 billion according to DeFiLlama, but EigenLayer is streets ahead.
Earlier this week, EigenLayer launched on Ethereum mainnet triggering a TVL (total value locked) surge to $15 billion.
That figure has already surpassed $15.6 billion according to a Dune Analytics dashboard prepared by 21co.
According to CoinGecko, crypto restaking tokens have also witnessed significant traction, now boasting a combined market capitalisation of about $6.6 billion.
Dunkley thinks some of the increases in TVL may be due to the rising number of airdrops from various restaking protocols, which are using rewards to entice users to their platforms.
“A lot of restaking protocols are pledging airdrops for early supporters. Users are being rewarded with points in exchange for beta testing the product, which is drawing more users,” he said.
On the other hand, Vega Protocol’s McLean thinks the general crypto boom is playing a big part as investors stand to earn higher rewards amid the rising crypto prices. “With central banks easing off on interest rate increases, or even cutting them, and increased prices on many crypto assets people are looking for somewhere to store their holdings and [limit exposure to market volatility].”
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