According to data from DefiLlama, the total value locked (TVL) across the decentralized finance (DeFi) ecosystem is approaching highs not seen since 2021. The recent surge in TVL has been driven by the adoption of liquid restaking tokens (LRTs) and the growth of Bitcoin-native layer 2 networks (L2s). Additionally, rising cryptocurrency prices due to 2024’s bull market have also contributed to the increase.
What is Driving the Increase in TVL?
The data shows that the adoption of LRTs and the growth of Bitcoin L2s are major factors behind the recent surge in TVL. LRTs allow users to stake their tokens and earn rewards, while also providing liquidity to other protocols. This has led to a significant increase in the number of users participating in DeFi activities.
Liquid Restaking Tokens (LRTs)
Liquid restaking tokens (LRTs) are a type of token that allows users to stake their existing staked tokens to secure other protocols simultaneously. This has given rise to an ecosystem of LRT protocols, such as Ether.Fi, which mints tradeable tokens representing claims on restaked assets.
EigenLayer: A Pioneer in LRTs
EigenLayer is the largest restaking protocol, launched in 2023, and has bootstrapped more than $17 billion in TVL. It has also given rise to an ecosystem of LRT protocols, such as Ether.Fi, which holds more than $9 billion in TVL.
Top 5 LRTs
As of Dec. 9, the top 5 LRTs have a total TVL of around 3.38m ETH, worth approximately $12.5bn. The largest contributor to this total is Ether.Fi, followed by other notable protocols such as Renzo and Kelp.
Total LRT TVL
The total TVL for LRTs stands at more than $16 billion, according to DefiLlama. This includes both the top 5 LRTs and other types of restaking tokens.
Lido: A Major Player in DeFi
Lido is an Ether ETH liquid staking token (LST) protocol that has been DeFi’s single biggest TVL source, with nearly $40 billion staked. Roughly 10% of Lido’s stETH LST has been restaked on EigenLayer.
Bitcoin L2s: A Growing Market
The growth of Bitcoin-native layer 2 networks (L2s) has also contributed to the increase in TVL. Bitcoin L2s are tokenized claims on Bitcoin staked to L2s, including CoreChain and Babylon.
Popular Bitcoin LSTs
Some of the most popular Bitcoin LSTs include:
- Lombard: With a TVL of around $1.15 billion
- Solv: With a TVL of approximately $1 billion
Conclusion
The total value locked (TVL) across the decentralized finance (DeFi) ecosystem is approaching highs not seen since 2021. The recent surge in TVL has been driven by the adoption of liquid restaking tokens (LRTs) and the growth of Bitcoin-native layer 2 networks (L2s). Rising cryptocurrency prices due to 2024’s bull market have also contributed to the increase.
As the DeFi ecosystem continues to grow, it is expected that institutions will have a plethora of risk-adjusted strategies to get the most out of staking their Ether. The future of DeFi looks promising, and it will be interesting to see how the ecosystem evolves in the coming years.
Sources:
- DefiLlama
- Kairos Research
- EigenLayer
- Staking Rewards
