Eigen Layer Projects Lock In More Ethereum LSTs, Can They Support That Value?

Eigen Layer is growing its influence, now in the early stages of distributing the new Eigen token.

• Eigen Layer takes locked, staked Ethereum and produces new assets through “restaking”
• Eigen Token is in the middle of its airdrop event to eligible wallets
• More than 43% of the ETH supply is now locked or staked
• Eigen Layer is opening up a new tool for earnings and returns, making Web3 decentralized finance more complex

Eigen Layer is the leading protocol to deposit Ethereum’s Liquidity Staking Tokens (LST). The protocol allowed the tokens to flow in with no limits since February, and ended up locking in $13.65B in liquidity as of April 2024, soon after expanding to more than $16M.

The Eigen protocol is set to change the Ethereum ecosystem, locking up even more free coins, while also creating new asset classes. The Eigen token is also at the claiming stage, distributed to eligible wallets. 

The value comes from the activity of Actively Validated Services, which are new startup projects built on top of Eigen Layer. There are currently 14 such projects, with more to come and possibly issue their own tokens. But according to user @chudnovglavniy, there is a liquidity crisis in the making, as the projects are inflating their nominal value. 

This reported liquidity is much higher compared to the reported LST locked in the protocol. According to Eigen Layer’s own statistics, the protocol is carrying around 1.082M LST. The locked LST are worth $3.49B based on an ETH market price of $3,216.67. 

Eigen Layer Removes Limits to Deposits

Since April 16, Eigen Layer has launched a new deposit campaign, removing all limits for new LST inflows. The renewed inflows come from several types of LST: ankrETH, osETH, xETH, wBETH, swETH, oETH, stETH, cbETH, ETHx. Eigen Layer will also constantly add new types of LST to mop up as much liquidity as possible. 

The removal of limits sets out expectations for an “Eigen Layer summer”, where liquid staking will lead to the creation of new value. But such a growing ecosystem could also become risky, as it creates a new selection of tokens with potentially inflated value. 

Staking is also often done for the potential rewards and airdrops, which include NFT. It is hard to estimate the real value of those projects, and not all may survive after the initial months of enthusiasm.

How Much ETH is Available for Restaking 

Hypothetically, there are more than 43M ETH that could be turned into liquidity tokens. At least this is how much deposits are already sitting in the official staking contract. 

Actual-created liquidity tokens have a much lower supply and a market cap of around $31B. Lido Staked ETH has a supply of 9.33M tokens and is among the top contributors to Eigen Layer. 
But even after the lifting of deposit limits, there are only around 9,899 LsETH deposited to the Eigen Layer smart contract. Over time, the long list of liquidity tokens is slowly expanding and building the basis for Eigen Layer collaterals and liquidity. Still, the potential for depositing ETH-based tokens is smaller compared to the fast value generation based on derived tokens, airdrops and rewards.