EigenLayer the Leading ETH Narrative

EigenLayer and restaking has been the hot narrative lately as they removed the caps and people look for “ETH Narratives”. Notably, 1 out of every 4 new validators is depositing to an EigenPod, highlighting the supply side interest in bootstrapping this market. If you need a refresher we wrote about Eigen in the DeFi Year Ahead report.

Arguably the 3 main ETH narratives to pay attention to right now are:

  1. EigenLayer/Restaking
  2. Eip-4844
  3. Blast Unlocks (end of Feb)

The other angle here is points and the liquid restaking tokens. Points are self-explanatory. People depositing ETH and LSTs earn Eigen points which are expected to be redeemed for either Eigen tokens or some other reward in the future. Points are trading on Whales market around $0.15 although illiquid.

EigenLayer has quickly garnered traction, evidenced by how quickly the deposit caps fill up. There are currently >$3B worth of LSTs restaked with EigenLayer as of Feb 7th, up from ~$250M when we wrote the Year Ahead report Dec 17th.

Since the year ahead report we’ve seen many “liquid restaking” protocols pop up too. Liquid Restaking is essentially just making Eigen LST deposits liquid. Restaking an LST takes away one of the main benefits (liquidity); Liquid Restaking adds it back. It’s money lego… or jenga. The leading Liquid Restaking Token (LRT) protocol is Ether.fi (325k ETH), followed closely by Puffer (228k) and Kelp (140k).

Puffer, most notably, has seen strong growth over the past few weeks and looks likely to surpass ether.fi as the #1 relatively soon.

As of now, this entire meta is mostly just farming for points as people become bullish on the long-term restaking narrative and want to get in early. Liquid restaking tokens have their own new tokens (shiny new token syndrome) to dangle as incentives and so they are racing to garner deposits quick. From a risk perspective, you’re just adding another layer of protocol & smart contract risk.

The first AVS to go live will be EigenDA and there are already teams like Polymer and Mantle who have committed to using it. For now, the restaking race is mostly about accumulating Eigen and LRT points/incentives with the expectation that these will be valuable in the future.

Again, I recommend reading the DeFi Year ahead report linked above for a refresher on restaking and some of the considerations and risks involved.

*Disclaimer: Have a stETH position in EigenLayer

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