According to data from DefiLlama, the total value locked (TVL) across the decentralized finance ecosystem is nearing highs not seen since 2021. This surge has been driven by the adoption of liquid restaking tokens (LRTs) and the growth of Bitcoin-native layer 2 networks (L2s).
What’s Driving the TVL Spike?
The rising cryptocurrency prices due to 2024’s bull market have also contributed to the increase in TVL. As of December 9, aggregate DeFi TVL stands at over $134 billion, marking a nearly 150% increase year-to-date according to DefiLlama.
A Brief Look Back: 2021’s Highs
While the current TVL is approaching highs not seen since 2021, it still lags behind that year’s peak of $170 billion. Despite this, industry experts are optimistic about the future of DeFi, with Kairos Research stating:
‘We’re still in the early innings for not only restaking, but crypto at large. In the future, institutions will have a plethora of risk-adjusted strategies to get the most out of staking their [Ether].’
What is Restaking?
Restaking involves taking a token that has already been staked (posted as collateral with a validator in exchange for rewards) and using it to secure other protocols simultaneously.
Liquid Restaking Tokens (LRTs): The Rise of EigenLayer
EigenLayer, the largest restaking protocol, launched in 2023 and has subsequently bootstrapped more than $17 billion in TVL, according to DefiLlama. This has given rise to an ecosystem of LRT protocols, such as Ether.Fi, which mints tradeable tokens representing claims on restaked assets.
Other Notable LRT Protocols
- Ether.Fi: holds more than $9 billion in TVL
- Renzo: a popular LRT protocol with significant TVL
- Kelp: another notable LRT protocol
Total LRT TVL: A Growing Market
As of December 9, Ether.Fi’s total LRT TVL sits at around 3.38m ETH, worth approximately $12.5 billion.
The Growth of Bitcoin L2s and LSTs
Bitcoin-native layer 2 networks (L2s) have also seen significant growth in recent times. According to Staking Rewards, Bitcoin L2s command upward of $2.5 billion in TVL and are growing quickly.
Notable Bitcoin LST Protocols
- CoreChain: started issuing staking rewards this year
- Babylon: will start issuing staking rewards soon
- Lombard: the most popular among Bitcoin LSTs, with a TVL of approximately $1.15 billion
Conclusion: A Bright Future for DeFi
The growth of liquid restaking tokens (LRTs) and Bitcoin-native layer 2 networks (L2s) is driving the surge in total value locked (TVL) across the decentralized finance ecosystem. While it still lags behind 2021’s highs, experts are optimistic about the future of DeFi.
References:
- DefiLlama: data on TVL and LRT growth
- Kairos Research: analysis on restaking and crypto adoption
- Staking Rewards: data on Bitcoin L2s and LST growth
