Within the decentralized finance (DeFi) space, Ethereum staking protocol EigenLayer has surged past lending protocol Aave, securing its position as the second-largest DeFi protocol by total value locked (TVL).
With a staggering $10.4 billion worth of crypto assets committed to the protocol, EigenLayer’s ascent marks a noteworthy milestone, shaking up the hierarchy of DeFi platforms.
Restaking Protocol EigenLayer Surges Ahead
EigenLayer’s rise to prominence came as it temporarily removed a cap on staking, allowing users to restake their already staking-derived tokens. This strategic move propelled EigenLayer’s TVL to an all-time high of $11 billion, overshadowing Aave’s 21-month high of $10.7 billion TVL.
The surge in TVL demonstrates the growing appeal of restaking protocols, with EigenLayer experiencing a remarkable 382.5% increase in TVL since the cap was lifted.
Despite its meteoric rise, EigenLayer’s dominance has not been without controversy. Ethereum developers have cautioned against the proliferation of restaking protocols, citing concerns over excessive leverage. However, proponents argue that restaking can yield additional rewards for users who have already staked their assets.
Solana Foundation strategy head, Austin Federa, raised questions about how restaking TVL is calculated, questioning whether staked-derived assets like stETH should be considered as TVL when their value is technically locked on another protocol.
The landscape of the DeFi protocol
EigenLayer‘s rapid ascent highlights the evolving landscape of DeFi protocols, where liquid staking platforms are emerging as key players. Liquid staking protocols, where users receive tokens in exchange for their staked funds, constitute the largest DeFi category with nearly $55 billion in locked value across approximately 160 protocols. Notably, EigenLayer’s flip of Aave underscores the growing prominence of liquid staking protocols in the DeFi ecosystem.
Dune Analytics data reveals EigenLayer boasts over 115,000 unique depositors, with Wrapped Ether (wETH) and stETH comprising 74% of staked tokens. In contrast, Aave records over 5,700 daily active users, while Lido, the largest protocol by locked value, has under 430 users, according to Token Terminal data.
Challenges faced by Aave
While EigenLayer celebrates its ascent, Aave grapples with challenges of its own. The departure of its long-time risk manager, Gauntlet, on Feb. 21 has raised concerns within the community. Gauntlet cited difficulties navigating “inconsistent guidelines and unwritten objectives of the largest stakeholders” as the reason for the split.
This departure came merely two months after Gauntlet signed a lucrative one-year contract with Aave. Additionally, Gauntlet partnered with rival DeFi lending protocol Morpho, further exacerbating Aave’s woes.
EigenLayer’s remarkable surge in TVL has solidified its position as a leading player in the DeFi landscape, overshadowing established protocols like Aave. While its ascent has sparked debate and scrutiny, EigenLayer’s success underscores the growing prominence of restaking protocols and the shifting dynamics within the DeFi ecosystem.
As the DeFi space continues to evolve, it remains to be seen how protocols like EigenLayer will shape the future of decentralized finance.
