Ethereum Restaking Protocol EigenLayer Tops $10.5 Billion in TVL Ahead of Dencun Upgrade

EigenLayer, a restaking protocol built on top of the Ethereum network, has seen its total value locked (TVL) hit $10.5 billion, up around 23.5% in the last seven days and over 360% in a month, according to data from DefiLlama. Data also shows that the protocol’s TVL was about $2 billion at the beginning of February.

The protocol’s TVL is up over 360% over the past month.

With this major surge, EigenLayer has become the second-largest DeFi protocol, only behind Lido Finance, a leading Ethereum liquid staking protocol. Lido’s TVL currently sits at over $34 billion, up around 15% over the past week and 56% in a month.

Big Ups To EigenLayer

Additional data shows that WETH accounts for over 41% of the total assets sent to EigenLayer, and stETH accounts for over 32%. Other tokens share a small portion. The tokens that EigenLayer currently supports include Lido’s stETH, RocketPool’s rETH, Coinbase’s cbETH, Stakewise’s sETH, Mantle’s mETH, Frax’s sfrxETH, Ankr’s ankrETH and Binance’s wBETH, to name a few.

EigenLayer is the pioneer in restaking, a trend that has emerged since earlier this year. Simply put, restaking is repurposed staked ETH and Ethereum’s liquid staking tokens across Ethereum and other platforms to enhance security.

In February, EigenLayer announced that it had successfully raised $100 million in a series B round from a16z fund. Previously, in March 2023, the protocol reportedly secured $50 million from Blockchain Capital, Coinbase Ventures, Polychain Capital and many other funds.

EigenLayer hasn’t issued tokens yet, but the team’s leaders told Bloomberg they are open to token issuance.

As EigenLayer gains traction, projects associated with it, such as Ether.Fi, Kelp DAO and Puffer Finance, also experience growth. Kelp DAO recently airdropped EigenLayer users based on reward points measured by protocol activities. Ether.Fi announced today that it partners with Omni Network in a $600 million deal to boost the security of EigenLayer’s restaking model.

Ethereum-powered Protocols Set to Benefit from Dencun Upgrade

Ethereum’s Dencun upgrade is set to go live on March 13. This will be one of the largest upgrade following the Shanghai upgrade last year. The Dencun upgrade is expected to bring several key improvements that will not onlyl benefit Ethereum but also the projects built on top of it, particularly liquid staking, restaking, and cross-chain protocols.

Two major highlights of the Dencun upgrade is the EIP-4788 and EIP-4844, aimed at reducing risks while enhancing security for dApps. Apart from the security aspect, these proposals also target fee reduction on layer 2 protocols like Arbitrum and Optimism, potentially driving more users to engage with the blockchains.

Liquid staking protocols, like Lido Finance and Rocket Pool, are among the names that could take advantage of the Dencun upgrade. Over the last year, the liquid staking segment has increasingly attracted large-scale adoption, with the potential to reach billions of dollars in value.

The total value locked (TVL) of projects in this segment, as seen in DefiLlama’s report, increased by 300% last year.

Liquid staking protocols such as Lido, Rocket Pool, SSV and Stader have become familiar names to investors in the industry since Ethereum successfully deployed The Merge, switching from Proof-of-Work to Proof- of-Stake and then proceeded to unlock staked ETH after the Shanghai upgrade in April 2023. This movement potentially continues after Dencun.

Another group that can benefit from the Dencun upgrade are staking projects, with common names being EigenLayer, Swell, Ether.Fi and Kelp DAO.

As a result, a wave of new DeFi derivatives products have come, allowing users to reuse their staked assets. For example, Lybra Finance and Prisma Finance are currently offering yields to ETH depositors, while veterans like Abracadabra are showing signs of entering liquid staking.

According to CoinMarketCap’s data, Ethereum (ETH) is nearing $3,600 amid Bitcoin’s price rally earlier today. At press time, ETH is trading at around $3,560, up around 2% in the last 24 hours.

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