DeFi
Why EigenLayer and other re-staking projects are cooling off – DL News
- EigenLayer TVL is down a fifth from its June high.
- Farmers are looking for greener pastures, an analyst told DL News.
After a roaring start to the year, EigenLayer, the protocol that pioneered Ethereum’s multi-billion dollar re-staking sector, is slowing down.
Resttaking is the process of using the same capital to secure Ethereum and various other protocols simultaneously. The total value of cryptocurrencies deposited into EigenLayer for resttaking has fallen 20% since reaching a peak of $20 billion on June 6.
Affiliated “liquid resttaking” protocols – which facilitate the deposit of cryptocurrencies into EigenLayer – have also been affected. The value of cryptocurrencies deposited into Renzo and Kelp DAO have fallen by 44% and 17% respectively over the past month. Competitors Ether.Fi and Puffer Finance experienced anemic growth during this period.
The collapse of EigenLayer impacted liquid re-staking protocols, such as Renzo.
“Retaking, whether it’s EigenLayer, Symbiotic, Karak, etc., is now entirely incentivized by points,” said Ian Unsworth, founder of Kairos Research. DL News“Right now, I think we can attribute the capital outflows to the massive reduction in incentives compared to what they were a few months ago.”
Points are crypto-based loyalty rewards. Developers say they are a way to measure users’ “contribution” to a protocol based on predefined metrics, but most users see them as a way to allocate tokens in future airdrops and increase engagement.
Rapid growth
Since its debut last year, EigenLayer has risen to the top of Ethereum’s decentralized finance ecosystem. As of Friday, it was still the second-largest DeFi protocol, managing over $15 billion in crypto.
Proponents of resttaking have called it one of the most exciting developments on Ethereum, something that could make it safer, cheaper, and easier to launch new protocols.
“Anyone who uses the word AVS or resttaking is just being fooled. [investor] money that was forced down their throats,” Ether.Fi Mike Silagadze, CEO said DL News earlier this year, using the acronym for protocols that build on EigenLayer.
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In February, venture capital firm Andreessen Horowitz invested $100 million in EigenLayer’s Seattle-based parent company, Eigen Labs.
“The implications of this are profound,” Ali Yahya, a partner at Andreessen Horowitz, wrote in a February blog post announcing the investment.
EigenLayer has the potential to unlock “100x faster innovation” of crypto-based technology, Yahya continued.
The main re-staking project has also sparked controversy, with critics warning it could destabilize Ethereum.
A “healthy step”
EigenLayer was rolled out in stages. benefits It is planned to generate and distribute among the “restakers” who will come Later this year.
To attract users, EigenLayer and liquid restaking protocols offered users “points” when they deposit their crypto. These points were used to split the distribution of tokens across multiple airdrops.
Now that the airdrops are over, investors are looking for greener pastures elsewhere.
The value of cryptocurrencies in EigenLayer is down 20% since its June high.
“Since there are still no AVS rewards, we have to attribute the outflows to the lack of current incentives,” Unsworth said.
“AVS rewards for EigenLayer are not far away, and without incentives we believe we will see a more “organic” market equilibrium develop.”
This same exodus led to the reduce by half of the value of cryptocurrencies deposited in Pendle, another related protocol.
“I want to be clear that this is a healthy step in the process,” Unsworth said, “and we believe resttaking will continue to be a massive market and an important influence across the entire Ethereum network.”
Aleks Gilbert is DL News“New York-based DeFi correspondent. Got a tip? You can reach him at aleks@dlnews.com.