EigenLayer, the biggest restaking protocol on Ethereum by whole worth locked (TVL), could possibly be dealing with a “main” yield disaster, based on business watchers.
As a consequence of EigenLayer’s speedy progress in TVL, the protocol could also be outgrowing its Actively Validated Companies (AVS), which might result in a serious yield discount, based on Chudnov, a pseudonymous builder at 3Jane derivatives alternate. He wrote in an April 22 X submit:
“EigenLayer has >$15B in TVL however AVSs will really want lower than *10%* of that for safety, which suggests yields could fall off a cliff.”
EigenLayer eliminated the boundaries on all liquid staking tokens (LSTs) on April 16, based on an X announcement. EigenLayer launched on mainnet on April 10.
When a person stakes an LST by way of EigenLayer, it’s routinely delegated to a node operator, which makes use of the deposits to safe an AVS on EigenLayer, whereas receiving staking rewards. A part of the staking rewards are handed on to the person.
But, Actively Validated Companies on the protocol require a lot much less staked Ether for safety, which might result in points sooner or later, based on Chudnov:
“The issue is that not one of the AVSs will come near needing $1.5B in safety not to mention $15B. The entire level of Proof-of-Stake is that the worth of the stake is larger than the potential revenue earned from a validator behaving dishonestly.”
Cointelegraph has approached EigenLayer for remark.
EigenLayer is the second-largest protocol on Ethereum, after liquid staking protocol Lido. EigenLayer TVL rose over 16% throughout the previous month to the present $14.15 billion, based on DefiLlama.
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The problem might worsen as altcoin costs decline since AVSs gained’t be incentivized to carry the surplus on-chain capital. The primary resolution could possibly be a collection of token launches to extend the safety finances necessities, which might briefly be “kicking the can down the street.”
Nevertheless, intertwining EigenLayer into the decentralized finance (DeFi) ecosystem and creating extra utility for LSTs, might supply a everlasting repair. In accordance with Chudnov:
“If [EigenLayer] ecosystem can extra deeply entrench itself within the DeFi ecosystem by way of [Liquid restaking tokens] and monetary primitives on high then this can be a rather more guardable moat and offers AVS’s extra time to determine issues out at a fraction of the price.”
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