The return of “re-staking” platforms in the crypto market is attracting both attention and concern due to its probable risk. A platform like EigenLayer has amassed $18.8 billion worth of crypto assets on its platform. This number increased from less than $400 million six months ago. However, this rapid growth is driven by the gravitation of higher yields for investors.
EigenLayer brings Re-staking to the spotlight
Re-staking is the process that expands on the traditional practice of staking. The crypto token owners lock up their assets to validate transactions on a blockchain and earn yields in return. This allows the owners to take the new tokens they receive from staking and stake them again with different blockchains. The process helps the users to create opportunities for higher returns but also introduces new layers of risk.
Data provided by DefiLlama shows that EigenLayer’s total value locked has jumped by a whopping 30% in the last one month. It had overtaken AAVE V3 in the tally to become the second biggest protocol in the category. AAVE V3 has also seen a good run over the past month with a 36% surge to stand at $10.95 billion.
EigenLayer now stands behind the Lido in the TVL rankings. Lido has recorded a jump of 32% in the same period to hold a TVL of $35.54 billion.
What’s behind the surge?
EigenLayer recorded a major jump in the month of February 2024 when its TVL stood at around $2.3 billion. It went on to hit $9.7 billion at the beginning of March. The protocol then went on to hit $15.76 billion in April.
This was the time when the crypto market rallied with Bitcoin hitting its new all time high (ATH) in March.
Experts have picked out a major concern among analysts is the possibility for these re-staked tokens to be used as collateral in the crypto lending markets. It is as complex as it sounds and could lead to complex loops of borrowing and lending. However, it is completely based on a small number of underlying assets. It could destabilize the crypto market if many users attempted to exit simultaneously.
It is important to note that the yield from the Ethereum blockchain staking is in the 3%-5% range. On the other hand, re-staking offers high returns to investors. It also allows them to earn multiple yields at the same time.
