According to data from DefiLlama, the total value locked (TVL) across the decentralized finance (DeFi) ecosystem is approaching highs not seen since 2021. This surge has been driven by the adoption of liquid restaking tokens (LRTs) and the growth of Bitcoin-native layer 2 networks (L2s).
What’s Driving the TVL Spike?
The rise in TVL can be attributed to several factors, including:
- Liquid Restaking Tokens (LRTs): The adoption of LRTs has contributed significantly to the increase in TVL. These tokens allow users to stake their assets and receive rewards while maintaining liquidity.
- Bitcoin-native Layer 2 Networks (L2s): The growth of L2 networks, such as CoreChain and Babylon, has also driven the surge in TVL. These networks enable faster and more efficient transactions, making them attractive to users.
- Rising Cryptocurrency Prices: The 2024 bull market has led to an increase in cryptocurrency prices, which has further contributed to the rise in TVL.
TVL Reaches New Heights
As of December 9th, the aggregate DeFi TVL stands at over $134 billion, marking a nearly 150% increase year-to-date. While this is still below the 2021 highs of $170 billion, it’s clear that the DeFi ecosystem is experiencing significant growth.
The Future of Restaking and Crypto
In a recent report shared with Cointelegraph, Kairos Research noted:
"We’re still in the early innings for not only restaking, but crypto at large. In the future, institutions will have a plethora of risk-adjusted strategies to get the most out of staking their [Ether]."
Restaking involves taking a token that has already been staked and using it to secure other protocols simultaneously. This approach allows users to maximize their returns while maintaining liquidity.
Liquid Restaking Tokens (LRTs): A Growing Ecosystem
The growth of LRTs has given rise to an ecosystem of restaking protocols, including EigenLayer, Ether.Fi, Renzo, and Kelp. These protocols have bootstrapped significant amounts of TVL, with EigenLayer leading the way.
EigenLayer: The Largest Restaking Protocol
As of December 9th, EigenLayer has bootstrapped over $17 billion in TVL, making it the largest restaking protocol. This has contributed significantly to the overall growth of DeFi TVL.
Ether.Fi and Other LRT Protocols
Ether.Fi is another prominent LRT protocol, holding over $9 billion in TVL as of December 9th. Other notable protocols include Renzo and Kelp, which have also seen significant growth.
TVL Breakdown: Top 5 LRTs
According to Kairos Research, the total Ether TVL for the top 5 LRTs currently sits at around 3.38m ETH, worth approximately $12.5 billion.
Total LRT TVL: Over $16 Billion
The total LRT TVL, including other types of restaking tokens, stands at over $16 billion, according to DefiLlama.
Lido and the Rise of Liquid Staking Tokens (LSTs)
Lido is an Ether ETH liquid staking token (LST) protocol that has been DeFi’s single biggest TVL source, with nearly $40 billion staked. Roughly 10% of Lido’s stETH LST has been restaked on EigenLayer.
Bitcoin L2s and Liquid Staking Tokens (LSTs)
The growth of Bitcoin-native layer 2 networks has also led to the emergence of liquid staking tokens (LSTs), which command over $2.5 billion in TVL. These tokens are tokenized claims on Bitcoin staked to L2s, including CoreChain and Babylon.
Conclusion
The DeFi ecosystem is experiencing significant growth, with total value locked (TVL) approaching highs not seen since 2021. The adoption of liquid restaking tokens (LRTs) and the growth of Bitcoin-native layer 2 networks are key drivers of this surge. As the DeFi ecosystem continues to evolve, it’s clear that institutions will have a plethora of risk-adjusted strategies to get the most out of staking their assets.
Subscribe to Finance Redefined
Stay up-to-date with the latest DeFi developments, sharp analysis, and uncover new financial opportunities to help you make smart decisions with confidence. Delivered every Friday.
By subscribing, you agree to our Terms of Service and Privacy Policy.