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EigenLayer’s TVL Skyrockets to Over $6 Billion After Lifting Deposit Caps

EigenLayer, a protocol that allows users to re-stake their liquid staking tokens (LSTs) from various Ethereum-based staking projects, has seen a massive influx of deposits over the past week. The protocol’s total value locked (TVL) has surged to over $6 billion, making it one of the top DeFi protocols by TVL.

Source: DefilLama

What is EigenLayer?

EigenLayer is a protocol that enables users to re-stake their LSTs from different staking projects on Ethereum. LSTs are tokens that represent a user’s stake in a staking project, such as Lido’s stETH, Rocket Pool’s rETH, or Coinbase’s cETH. By re-staking their LSTs on EigenLayer, users can earn additional rewards and diversify their risk exposure.

EigenLayer also aims to provide a shared security model for the Ethereum staking ecosystem, allowing protocols to join the network by leveraging a collective pool of re-staked ether. This way, EigenLayer hopes to create a “permissionless, neutral environment while promoting decentralization.”

Why did EigenLayer’s TVL surge?

EigenLayer’s TVL has increased by around 170% since Feb. 5, when the protocol temporarily lifted its deposit caps for each LST. The deposit caps were initially imposed to ensure the security and stability of the protocol, as well as to prevent centralization of re-staked ether.

However, due to high demand from users and the growth of the staking market, EigenLayer decided to remove the caps for a limited time, allowing users to deposit as much LSTs as they want. The window for unlimited deposits will close at 3 p.m. ET today, Feb. 11.

EigenLayer said that it plans to lift the caps permanently in the future, after conducting thorough audits and testing. The protocol also said that it will introduce new features and improvements, such as governance, liquidity mining, and cross-chain compatibility.

What are the benefits of re-staking on EigenLayer?

Re-staking on EigenLayer offers several benefits for users, such as:

  • Higher returns: Users can earn double rewards by re-staking their LSTs on EigenLayer. They can receive both the staking rewards from the original staking project and the re-staking rewards from EigenLayer.
  • Risk diversification: Users can reduce their exposure to the risks of a single staking project by re-staking their LSTs on EigenLayer. They can also choose from different LSTs with varying risk-reward profiles and liquidity options.
  • Enhanced security: Users can contribute to the security and decentralization of the Ethereum staking ecosystem by re-staking their LSTs on EigenLayer. They can also benefit from the shared security model that EigenLayer provides, which can mitigate the risks of slashing, downtime, or malicious attacks.

How to re-stake on EigenLayer?

To re-stake on EigenLayer, users need to have some LSTs from any of the supported staking projects. Currently, EigenLayer supports eight LSTs: Lido’s stETH, Rocket Pool’s rETH, Coinbase’s cETH, Stakewise’s sETH, Mantle’s mETH, Frax’s sfrxETH, Ankr’s ankrETH, and Binance’s wBETH.

Users can then visit EigenLayer’s website and connect their wallet. They can select the LST they want to re-stake and enter the amount they want to deposit. They can also see the estimated re-staking rewards and the current TVL of each LST.

After confirming the transaction, users will receive EigenLayer’s re-staking tokens (rLSTs), which represent their share of the re-staked LSTs and the rewards. Users can also withdraw their rLSTs at any time and redeem them for the underlying LSTs and the accrued rewards.

Conclusion

EigenLayer is a protocol that allows users to re-stake their LSTs from various Ethereum-based staking projects and earn additional rewards. The protocol’s TVL has skyrocketed to nearly $6 billion after temporarily lifting its deposit caps for each LST. EigenLayer also aims to provide a shared security model and a permissionless environment for the Ethereum staking ecosystem. Users can re-stake their LSTs on EigenLayer by visiting its website and connecting their wallet.

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