Eigenlayer’s Total Value Locked Nearly Doubles After Cap Removal
Eigenlayer, an Ethereum layer 2 protocol, has seen its total value locked (TVL) increase significantly after removing caps that were initially put in place to prevent centralization. According to DeFiLlama, Eigenlayer’s TVL jumped from $2.16 billion to $3.84 billion in just 24 hours after the cap removal. The surge was mainly driven by stETH, a liquid staking token issued by Lido, which accounted for $560 million of the new deposits.
Introduction of Caps to Prevent Dominance
Last year, Eigenlayer introduced caps to prevent any single token from dominating the network and undermining decentralization. Instead of issuing its own tokens, Eigenlayer relies on an open marketplace where validators can choose which services to help secure.
Token Restaking Resumes with New Limits
The protocol has now resumed token restaking and suspended the cap for a week-long run. However, the team hopes to remove the caps permanently in the future while introducing new limits to prevent any token or participant from controlling more than 33% of governance.
Shared Security Trend
Eigenlayer is part of a growing trend of “shared security” protocols that utilize Ethereum’s staked ETH to secure other chains. By depositing staked ETH or liquid staking tokens into Eigenlayer’s smart contracts, users can earn extra rewards and provide economic security for newer projects without the need for their own validators and hardware.
Ethereum Founder’s Perspective
Ethereum founder Vitalik Buterin has praised the idea behind shared security protocols but has also expressed caution about potential overloading of the base chain. He emphasized the importance of preserving Ethereum’s minimalism and supporting re-staking strategies that do not extend the role of Ethereum consensus.
Concerns and Funding
Eigenlayer strikes a balance by remaining blockchain-agnostic, which has attracted $50 million in Series A funding. However, concerns about unintended consequences have been raised as investors use platforms like Eigenlayer to compound their rewards through restaking. The protocol will reimpose a temporary cap as they seek to achieve a reasonable balance between neutrality and decentralization.
Hot Take: Eigenlayer’s TVL Surges as Caps are Lifted
Eigenlayer, an Ethereum layer 2 protocol, experienced a significant increase in total value locked (TVL) after removing caps designed to prevent centralization. In just 24 hours, TVL jumped from $2.16 billion to $3.84 billion, with stETH accounting for a substantial portion of the new deposits. Eigenlayer initially introduced caps to avoid dominance by a single token and maintain decentralization. While the protocol has temporarily lifted the caps and resumed token restaking, the team aims to permanently remove them in the future while implementing new limits to safeguard governance control. Eigenlayer is part of the growing trend of shared security protocols that utilize Ethereum’s staked ETH to secure other chains. However, caution has been advised by Ethereum founder Vitalik Buterin regarding potential overloading of the base chain.
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