{"id":12798,"date":"2024-04-22T15:06:11","date_gmt":"2024-04-22T12:06:11","guid":{"rendered":"https:\/\/forklog.com\/en\/expert-warns-of-potential-yield-crisis-at-eigenlayer\/"},"modified":"2024-04-22T15:06:11","modified_gmt":"2024-04-22T12:06:11","slug":"expert-warns-of-potential-yield-crisis-at-eigenlayer","status":"publish","type":"post","link":"https:\/\/forklog.com\/en\/expert-warns-of-potential-yield-crisis-at-eigenlayer\/","title":{"rendered":"Expert Warns of Potential Yield Crisis at EigenLayer"},"content":{"rendered":"<p>Tokens used in EigenLayer&#8217;s liquid staking will need greater utility within the DeFi sector to avert a potential future yield crisis for the protocol, according to 3Jane DEX developer known as Chudnov.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">1\/ EigenLayer is facing a *major* yield crisis, and nobody is talking about it. <a href=\"https:\/\/twitter.com\/eigenlayer?ref_src=twsrc%5Etfw\">@eigenlayer<\/a> has >$15B in TVL but AVS&#8217;s will actually need less than *10%* of that for security, which means yields may fall off a cliff<\/p>\n<p>\u2014 chudnov (@chudnovglavniy) <a href=\"https:\/\/twitter.com\/chudnovglavniy\/status\/1782253746615177568?ref_src=twsrc%5Etfw\">April 22, 2024<\/a><\/p><\/blockquote>\n<p> <script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>The expert highlighted that EigenLayer is experiencing higher growth rates in terms of <span data-descr=\"total value locked\" class=\"old_tooltip\">TVL<\/span> than the active validation services (AVS) it supports. As a result, the protocol&#8217;s offered yield could sharply decline.<\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><em>&#8220;EigenLayer&#8217;s TVL has exceeded $15 billion. [&#8230;] The problem is that none of the AVS will need $1.5 billion for security, let alone $15 billion. The whole point of<\/em><em> <\/em><em>Proof-of-Stake<\/em><em> is that the value locked in<\/em><em> <\/em><em>staking<\/em><em> assets is higher than the potential profit from dishonest validator behavior. [&#8230;] This means that [EigenLayer&#8217;s] yield could fall off a cliff,&#8221;<\/em> the specialist warned.<\/p>\n<\/blockquote>\n<p>According to the expert, the issue could be exacerbated by declining altcoin prices, as AVS would lack the incentive to maintain excess on-chain capital. An initial solution might involve a series of token launches to increase security budget requirements, which would only delay the problem.<\/p>\n<p>Chudnov sees a permanent solution in increasing utility for LST and greater protocol interaction with the decentralized finance sector.<\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><em>&#8220;If the [EigenLayer] ecosystem can become more deeply rooted in the DeFi ecosystem through [<span data-descr=\"liquid restaking tokens\" class=\"old_tooltip\">LRT<\/span>] and financial primitives built on top of them, it will be a much more reliable positioning and give AVS more time to sort everything out at lower costs,&#8221;<\/em> the expert concluded.<\/p>\n<\/blockquote>\n<p>On April 10, developers launched EigenLayer and its data availability layer EigenDA (in beta) on the Ethereum mainnet.<\/p>\n<p>On April 16, the team removed limits on all supported LST.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">Unpausing starts now! <\/p>\n<p>All Liquid Staking Token (LST) caps have been removed. LST restaking is now open.<\/p>\n<p>Explore the uncapped LSTs or restake ETH natively through an EigenPod on the EigenLayer app at <a href=\"https:\/\/t.co\/k9qHVJdRhl\">https:\/\/t.co\/k9qHVJdRhl<\/a><a href=\"https:\/\/t.co\/nonr4oi0Fz\">https:\/\/t.co\/nonr4oi0Fz<\/a><\/p>\n<p>\u2014 EigenLayer (@eigenlayer) <a href=\"https:\/\/twitter.com\/eigenlayer\/status\/1780265243215536223?ref_src=twsrc%5Etfw\">April 16, 2024<\/a><\/p><\/blockquote>\n<p> <script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>EigenLayer ranks as the second-largest protocol by TVL on Ethereum after Lido, with a figure of $14.1 billion, according to <a href=\"https:\/\/defillama.com\/\">DeFi Llama<\/a>.<\/p>\n<p>Previously, experts examined the impact of restaking on Ethereum&#8217;s on-chain metrics.<\/p>\n<p>Back in February, the EigenLayer team <a href=\"https:\/\/forklog.com\/en\/news\/eigenlayer-chief-dismisses-plans-for-token-launch\">secured $100 million in funding<\/a> from Andreessen Horowitz, while project co-founder Sriram Kannan stated there were no plans to issue a native token.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Tokens used in EigenLayer&#8217;s liquid staking will need greater utility within the DeFi sector to avert a potential future yield crisis for the protocol, according to 3Jane DEX developer known as Chudnov. 1\/ EigenLayer is facing a *major* yield crisis, and nobody is talking about it. @eigenlayer has >$15B in TVL but AVS&#8217;s will actually [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":12797,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"select":"","news_style_id":"","cryptorium_level":"","_short_excerpt_text":"","creation_source":"","_metatest_mainpost_news_update":false,"footnotes":""},"categories":[3],"tags":[1289,1262,1145,1138,1263],"class_list":["post-12798","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news-and-analysis","tag-cryptocurrency-staking","tag-eigenlayer","tag-market-analysis","tag-opinions","tag-restaking"],"aioseo_notices":[],"amp_enabled":true,"views":"28","promo_type":"","layout_type":"","short_excerpt":"","is_update":"","_links":{"self":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts\/12798","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/comments?post=12798"}],"version-history":[{"count":0,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts\/12798\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/media\/12797"}],"wp:attachment":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/media?parent=12798"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/categories?post=12798"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/tags?post=12798"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}