Restaking
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Staking Circle
Staking Circle
Feb 19, 2024
4 min read

Liquid Restaking Protocols: Overview of LRTs

Liquid Restaking Protocols: Overview of LRTs

In the rapidly evolving landscape of decentralized finance (DeFi), a groundbreaking trend is taking center stage - liquid restaking. In this blog post, we will explore why liquid restaking protocols are surging at unprecedented rates and how they unlock DeFi’s full potential.

TL;DR:

  • Liquid restaking tokens (LRTs) have skyrocketed in the Ethereum ecosystem, with market capitalization increasing by 3,300% to more than $3.4 billion since mid-December
  • LRTs provide investors with increased portfolio flexibility and liquidity, as well as significantly higher yields than traditional staking, and are quickly becoming a popular strategy in the staking landscape
  • Top LRT protocols, including Ether .fi, Puffer Finance, Kelp DAO, Renxo, and EigenPie, have experienced significant growth in Total Value Locked (TVL), demonstrating their acceptance and confidence in the Defi community.
  • The future of liquid staking in Defi looks promising, with LRTs having the potential to serve as collateral for loans and mint stablecoins, subject to the industry’s ability to manage associated risks.

The Rise of Liquid Restaking Tokens

A new trend is sweeping through the Ethereum ecosystem as liquid restaking tokens experience a meteoric rise, with their market capitalization soaring by about 3,300% since mid-December, reaching over $3,4 billion on February 16th.

DefiLlama_stats_LRT_TVL.png TVL growth in the Liquid Restaking Landscape (Source)

The growing metrics suggest liquid restaking is becoming a cornerstone strategy for several crypto investors, not just DeFi degens. Through restaking, investors gain access to greater flexibility in managing their portfolios, unlocking liquidity that can be used to diversify their investments and mitigate risk.

One of the major reasons behind this surge in restaking protocols is the enticing yields offered. These new protocols are disrupting the staking paradigm, offering much higher returns than those made available by traditional staking services.

Top Liquid Restaking Tokens (LRTs)

Now that we know more about liquid restaking and why it's taking over the DeFi landscape, let’s analyze the top-performing protocols in the space. We will be looking at the Total Value Locked (TVL), a vital metric that indicates the value of all assets staked in a certain network or protocol.

A high TVL indicates widespread acceptance and confidence in an LRT protocol, demonstrating the protocol’s ability to attract and retain value. A protocol’s growth rate in TVL is a good way to measure how well it’s improving users' confidence, security, and liquidity.

LRT_Protocol_Rankings.png Liquid Restaking Protocol Rankings by TVL (Source)

In terms of TVL, the top LRT protocols are:

- Ether .fi (TVL: $1,2 billion)

EtherFi is a non-custodial decentralized ETH staking protocol that offers users control over their private keys, allowing them to stake assets and provide liquidity across Ethereum and multiple blockchains.

The protocol also introduces a Node service marketplace, enhancing the efficiency of the ecosystem, with eETH as its native restaking token.

EtherFi has registered an impressive surge of 393% over the last month and a 36% increase last week.

- Puffer Finance (TVL: $980 million)

Puffer Finance is an innovative protocol that combines Ethereum's liquid staking with native restaking features on EigenLayer, forming a native liquid restaking protocol. It was designed to lower the entry barrier for investors by allowing entry with a low bond, using pufETH as its native Liquid Restaking Token (nLRT).

The novel protocol has achieved a significant milestone by reaching almost a billion in total value locked (TVL) just two weeks after its launch on February 1. This accomplishment solidifies its position as the second-largest liquid restaking protocol operating on the Ethereum blockchain.

- Kelp DAO (TVL: $466 million)

Among the top Liquid Restaked Protocols, Kelp DAO focuses on enhancing liquidity within the EigenLayer ecosystem. Kelp DAO introduces rsETH, a synthetic token derived from ETH token LSTs, empowering users with increased yield and optimizing capital utilization efficiency.

Kelp DAO has registered a 24.79% rise over the last week and an impressive 175% surge in the last month.

- Renzo: (TVL: $321 million)

Renzo Protocol, another standout platform, streamlines operations for restaking users on EigenLayer, allowing them to earn ezETH. Renzo Protocol introduces Eigen Points as a benchmark for airdrop distribution, ensuring users receive the full value of their restaking efforts.

The Renzo Protocol has grown roughly 30% in the last week and 240% total over the last month.

- EigenPie: (TVL: $267 million)

The last protocol on our list is EigenPie, an intricate SubDAO that Magpie developed to provide Liquid Restaking Services utilizing the EigenLayer framework.

EigenPie's fundamental mechanism empowers users to transform their Liquid Staked ETH tokens into Isolated Liquid Restaked ETH tokens. These restaked tokens, crafted by Eigenpie, offer users the unique opportunity to generate passive income from both Ethereum staking and EigenLayer revenue concurrently.

EigenPie has recorded a modest 19% growth over the past 7 days

Closing thoughts

Liquid restaking tokens are expected to continue expanding, eventually becoming part of the broader DeFi ecosystem and serving as collateral for borrowing other cryptocurrencies and minting stablecoins.

As the Ethereum ecosystem evolves, the success of liquid restaking hinges on the industry's ability to address and manage the multifaceted risks associated with this emerging DeFi trend.

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