The Ethereum liquid restaking protocols have witnessed a staggering increase in their total value locked (TVL) in 2024. According to data from decentralized finance (DeFi) aggregator DefiLlama, the TVL of liquid restaking on the Ethereum network was approximately $284 million on January 1. By December 15, this figure had climbed nearly 60-fold, reaching a staggering $17.26 billion.
The Rise of Liquid Restaking
The growth in liquid restaking can be attributed to the utility of liquid restaking tokens (LRTs). These assets simplify the complexities of traditional Ether staking and increase capital efficiency in DeFi. LRTs offer a more user-friendly experience for users who want to participate in network security while maintaining liquidity.
What is Liquid Restaking?
Liquid restaking tokens (LRTs) build on the foundation of liquid staking tokens (LSTs). 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 Difference Between Liquid Staking Tokens and Liquid Restaking Tokens
Liquid staking tokens (LSTs) provide a way for users to stake their Ether while maintaining liquidity. However, they come with certain limitations. LRTs introduce a new layer of functionality, allowing users who have already staked ETH to secure Ethereum to also stake the derivative tokens they received in securing an application-specific blockchain or a layer-2 network.
Risks Associated With Liquid Restaking Tokens
While liquid restaking tokens offer flexibility and increased utility, they come with their own set of risks. These include:
- Depegging or price volatility: The value of derivative tokens can fluctuate, potentially affecting the value of LRTs.
- Exposure to multiple networks: LRTs are exposed to multiple networks, which can lead to compounded losses if one network fails.
Ether.fi Retains Over 50% Market Share for LRTs
The 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.
"The 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 Ethereum liquid restaking protocols have seen a significant increase in their total value locked (TVL) in 2024. The growth can be attributed to the utility of liquid restaking tokens (LRTs), which simplify traditional Ether staking and increase capital efficiency in DeFi. However, LRTs come with their own set of risks, including depegging or price volatility and exposure to multiple networks.
References
- DefiLlama: Liquid Restaking TVL on Ethereum
- Node Capital Report: The Rise of Liquid Restaking
Learn More About DeFi Developments
Stay up-to-date with the latest DeFi news, trends, and analysis by subscribing to our Finance Redefined newsletter. Every Friday, you’ll receive a toolkit that breaks down the latest DeFi developments, offers sharp analysis, and uncovers new financial opportunities to help you make smart decisions with confidence.
Subscribe now and start making informed investment decisions today!
