Staking Caps Temporarily Lifted Propelling EigenLayer TVL to $1B Surge

EigenLayer, an Ethereum-based liquid restaking protocol, experienced a remarkable surge in its total-value locked (TVL) of $1 billion within just eight hours after temporarily removing its staking cap. On February 5, EigenLayer announced that it would lift its 200,000 Ether (ETH) per protocol staking cap until February 9 to attract organic demand to the network and pave the way for a future without staking caps. Following the announcement, the TVL of the protocol increased from approximately $2.5 billion to $3.58 billion as investors directed their liquid-staked ETH tokens to the protocol, according to DefiLlama data. This growth represents a $1.6 billion increase from the previous week. EigenLayer’s TVL has soared from $248 million in December to $3.58 billion as of February 5. EigenLayer allows investors to earn additional yield on their staked ETH tokens by using them to secure other networks. The protocol currently supports liquid staking tokens, including Lido DAO’s staked ETH (stETH) and Swell Stated Ether (swETH). Lido Staked ETH holds the highest share, accounting for over $1.2 billion of EigenLayer’s total TVL, while Swell Staked ETH contributes $392 million. Restaking involves providing investors with interest in exchange for locking up their liquid staking tokens and utilizing them for validation, lending, and liquidity on other blockchain networks. However, concerns have been raised by market commentators and developers regarding the protocol’s mechanics, as high volumes of restaking can be seen as leverage. Ethereum co-founder Vitalik Buterin cautioned in May 2023 that excessive restaking and the overuse of data or price oracles could introduce systemic risks to the Ethereum ecosystem. EigenLayer’s testnet was launched on April 7, 2023, followed by the mainnet on June 14. Since then, the protocol’s TVL has grown by an astonishing 21,623%, indicating the enthusiasm for restaking in the broader crypto market.