In a remarkable display of growth, Ethereum liquid restaking protocols have seen their total value locked (TVL) increase by almost 6,000% in 2024. This surge can be attributed to the rising demand for staked asset utility.
What is Driving the Growth?
According to data from decentralized finance (DeFi) aggregator DefiLlama, liquid restaking TVL on the Ethereum network was approximately $284 million on January 1st. By December 15th, that figure had climbed nearly 60-fold, reaching a staggering $17.26 billion.
The Rise of Liquid Restaking Tokens
Liquid restaking tokens (LRTs) are at the forefront of this growth. These assets simplify the complexities of traditional EtherETH staking and increase capital efficiency in DeFi.
What is Liquid Staking?
Liquid staking tokens (LSTs) build on the foundation of traditional staking. In liquid staking, stakers who want to maintain liquidity while participating in network security receive derivative tokens — such as stETH from Lido — representing their staked holdings. These tokens can be used in other DeFi activities like trading, lending or yield farming, allowing holders to retain the liquidity of their staked assets.
The Evolution of Liquid Staking Tokens
Liquid restaking tokens (LRTs) introduce a different layer, further pushing the assets’ utility. In liquid restaking, users who already staked ETH to secure Ethereum could also stake the derivative tokens that they received to participate in securing an application-specific blockchain or a layer-2 network.
The Risks Associated with Liquid Restaking Tokens
While these asset types offer flexibility, they come with their own risks. This includes the depegging or price volatility of derivative tokens, potentially affecting their value. This is further amplified in LRTs due to their exposure to multiple networks.
Furthermore, a failure in one network could negatively impact restaked assets and lead to compounded losses.
Ether.fi Retains Over 50% Market Share for LRTs
Liquid restaking protocol Ether.fi controls has over 50% of the LRT market TVL. According to DefiLlama, the protocol has $9.17 billion in restaked assets.
A Node Capital report attributed the protocol’s success to its user-friendly restaking model. "This dominance is indicative of the platform’s successful simplification of complex restaking operations into a user-friendly token model that facilitates value accrual autonomously," the report said.
Conclusion
The growth of Ethereum liquid restaking protocols has been nothing short of remarkable. With a 6,000% increase in TVL, it’s clear that demand for staked asset utility is on the rise. As the DeFi space continues to evolve, it will be interesting to see how these protocols adapt and innovate.
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