EigenLayer TVL rockets $1B after temporarily removing staking caps

EigenLayer’s TVL spiked $1 billion in eight hours after the restaking protocol announced the removal of its staking cap for the next three days.
EigenLayer’s TVL spiked $1 billion in eight hours after the restaking protocol announced the removal of its staking cap for the next three days.

Ethereum-based liquid restaking protocol EigenLayer’s total-value locked (TVL) has surged by a staggering $1 billion in just eight hours after the protocol temporarily removed its staking cap. 

On Feb. 5, EigenLayer announced that it would temporarily lift its 200,000 Ether (ETH) per protocol staking cap until Feb. 9 in a bid to “invite organic demand” to the network. The protocol said this temporary removal is “paving the way to a future” where all staking caps are permanently removed.

In the eight hours following the announcement, the protocol’s TVL surged from roughly $2.5 billion to $3.58 billion at the time of publication as investors funneled their respective liquid-staked ETH tokens into the protocol, according to data from DefiLlama. This outsized growth marked a staggering $1.6 billion increase last week.

TVL on EigenLayer has grown from $248 million in December to $3.58 billion as of Feb. 5. Source: DefiLlama

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

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Lido Staked ETH currently stands as the most restaked token on EigenLayer, accounting for more than $1.2 billion worth of EigenLayer’s total TVL. Swell Staked ETH is the second largest on the protocol, accounting for a total TVL of $392 million.

Restaking works by providing investors with interest for locking up their existing liquid staking tokens and using the tokens to assist with validation, lending and liquidity on other blockchain networks.

While EigenLayer is widely regarded as providing a novel use case for staked ETH tokens, market commentators and developers alike have raised their concerns with the mechanics of the protocol, describing high volumes of restaking as akin to leverage.

In May 2023, Ethereum co-founder Vitalik Buterin warned that a significant increase in restaking, as well as the overuse of data or price oracles, could introduce major “systemic risks” to the Ethereum ecosystem.

EigenLayer’s testnet was launched on April 7, 2023, and the protocol’s mainnet launched two months later on June 14. Since then, the protocol’s TVL has grown a staggering 21,623%, reflecting the enthusiasm for restaking among the broader crypto market.

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