Is Liquid Restaking 2024's Biggest Crypto Narrative?
A Comprehensive Deep Dive into Eigenlayer
Blockcrunch VIP is a premium research newsletter on the most important crypto projects and trends, prepared by top crypto analysts twice a month. Subscribe to Blockcrunch VIP to receive in-depth project analysis from our research team - all for the price of a coffee ☕ a day. Disclaimer: author and Blockcrunch have no official personal exposure to Eigenlayer; editor is an angel investor in Eigenlayer
Since the dawn of finance, there has been an endless pursuit for more yield.
In traditional finance, banks may use customer securities, deposits or even US treasury bills as collateral to get more loans and use it to get additional yield. This is known as rehypothecation - the reusing of assets to generate additional yield.
In crypto, this is similar to liquid staking where tokens are staked in exchange for a liquid staked token (LSTs) that can be reused to generate additional yield. This concept is so popular that Lido, a liquid staking protocol (LSP) that launched in 2020, is now the largest DeFi protocol in TVL. This shows that the desire for more yield is one of the top demands.
Fast forward to today; Ethereum now has close to a million validators around the world. Validators are computers that can do all kinds of tasks, from networking to storage to computations, etc. This large network of validators have a lot of excess computing power that is not being used.
As crypto continues to advance quickly with ETFs, protocol upgrades, more projects becoming open-source, there will be even more applications being created that needs to be economically secured for the user’s safety.
So we have LSTs that are looking for more yield, and computational power that is looking for more work, and applications that are looking for more security. This is where EigenLayer comes in, creating a job marketplace that matches all of them together.
EigenLayer raised $50 million in their Series A round at a $500 million FDV, backed by prominent VCs such as Blockchain Capital, Coinbase Ventures, Polychain Capital and more.
EigenLayer is adding a new layer of utility and efficiency to the Ethereum ecosystem enabling liquid restaking and the creation of a new category of tokens called liquid restaked tokens (LRT). They have captured over $1.5 billion in TVL since it launched roughly half a year ago.
This week we will delve deeper into EigenLayer and will aim to cover the following:
What is EigenLayer and why it is important to Ethereum
The AVS Landscape
EigenLayer Token and Valuation Framework
What is Liquid Restaking and Liquid Restaking Protocols
Risks of EigenLayer