Can EigenLayer Make Restaking Math Work?

Restaking was all of the rage in early 2024 as airdrop hunters sought profit for the simple task of depositing into EigenLayer, yet the meta stalled out shortly after EigenLayer’s first drop in April, and TVL has failed to grow since – falling 8% in ETH-denominated terms.

With no restaking services actually live yet, deposits continue to be incentivized by promised future airdrops. But this paradigm is set to change the moment that the Actively Validated Services (AVSs) that leverage restaked security go live, with their activation bringing real yields to depositors and showcasing where the demand for restaking lies.

Today, we’re exploring EigenLayer’s top 5 AVSs by restaked capital to get a sense of just how much revenue they could be expected to produce. 👇

🌐 EigenDA

Website | Twitter
ETH Restaked: 3.64M ($9.8B)
EIGEN Restaked: 71.4M ($247M est.)

Over $10B in crypto collateral has been restaked to secure EigenDA (assuming an EIGEN pre-launch price of $3.46 at the time of writing), making it the largest AVS by TVL.

EigenDA is the flagship EigenLayer application and is being developed as a proof-of-concept for restaking; it is a data availability network that will let L2s store historical transaction data with restaking operators instead of Ethereum, translating to rollup cost savings.

Data availability competitor Celestia stunned crypto investors on its run to a $20B fully-diluted valuation this February, however, the protocol has only earned ~3.5k TIA ($20k at analysis) in payments for data availability since its October 2023 mainnet, making it difficult to envision how EigenDA can yield returns of significance for its $10B+ in restaked capital.

🗣️ eOracle

Website | Twitter
ETH Restaked: 2.91M ($7.8B)
EIGEN Restaked: N/A

Oracles are a critical component of blockchain infrastructure that enhance onchain programmability by allowing developers to integrate real-world information into smart contracts. One of the most common oracle applications is for lending markets, in which centralized exchange price feeds are ingested and used to inform automated onchain liquidations.

eOracle leverages restaking to enhance the capital efficiency of oracle operation and creates a competitive oracle marketplace where anyone can independently provide or consume data.

Competitive oracle network Chainlink makes 98% of its revenues off price feed, and while this line item has tapered significantly since June, the protocol earned $36.7M from price feeds during the first six months of 2024, equating to annualized returns of just under 1% for eOracle restakers in the unlikely event it can steal the entirety of Chainlink’s market share.

👀 Witness Chain

Website | Twitter
ETH Restaked: 2.60M ($7.0B)
EIGEN Restaked: N/A

Witness Chain positions itself as the “EigenLayer AVS for DePIN coordination.” It is a system that enables off-chain DePIN networks to convert their physical attributes (i.e., location and compute capacity) into verifiable onchain proofs.

By maintaining a repository of physical information, Witness Chain hopes to empower DePIN projects to connect with each other, thereby creating an “end-to-end supply chain of decentralized infrastructure.”

Although potential revenues for the network promising to revolutionize decentralized infrastructure sharing could certainly be enormous, the broader decentralized infrastructure sector has achieved limited adoption in comparison to centralized alternatives. As DePIN largely remains a proof-of-concept, the potential yield Witness Chain can generate remains a mystery.

⏩ Hyperlane AVS

Website | Twitter
ETH Restaked: 2.32M ($6.3B)
EIGEN Restaked: N/A

Hyperlane is a permissionless interoperability layer, or bridge, enabling smart contracts to transmit arbitrary information across different blockchains. The protocol is currently deployed on over 35 chains, including EVM, Cosmos, and Sealevel.

Developers can tailor Hyperlane’s security to meet their specific needs by selecting their validator set, setting rate limits, and adjusting the stake securing their application using programmable Interchain Security Modules (ISMs).

On a year-to-date basis, the Across Network has grossed $5.43M in fees from its bridging services; this would correspond to an annualized yield of 0.1% for Hyperlane AVS restakers, given the current amount of ETH restaked.

🧾 Lagrange ZK Prover Network

Website | Twitter
ETH Restaked: 2.27M ($6.1B)
EIGEN Restaked: N/A

The Lagrange ZK Prover Network generates ZK proofs from arbitrary blockchain data sets and stores packages with a decentralized network of “Gateway” nodes, which transmit requested information to provers for translation into readable data. The network can process smart contract information on any EVM-based chain and answer queries about the contracts on another chain without the need for a third-party bridging solution.

When utilized in combination with the Lagrange State Committee, a separate EigenLayer AVS secured by 2.02M restaked ETH ($5.5B), Lagrange can provide fast confirmations for optimistic rollups, enabling them to work around standard 7-day fraud challenge periods during normal operations to eliminate cross-chain bridging latency.

Should Lagrange become the de facto interchain communication standard in a multichain future, its immense utilization could churn out astronomical profits for restakers. The protocol must first gain adoption, however, and will be forced to compete against established bridging solutions and upcoming alternatives like the Polygon AggLayer to achieve it.

Restaking Sustainability

Restaking is about more than the yield potential of any one platform, but in order for EigenLayer to succeed, its underlying AVSs will need to win big, too.

While expected revenues from AVSs in isolation may appear inadequate to satisfy existing deposits, optional pooled restaking enables operators to simultaneously secure multiple AVSs with the same capital, a cornerstone feature of EigenLayer that would create unprecedented capital efficiency in crypto-economic security.

Beyond this real yield, yes, restaked depositors will be compensated with native tokens, though the values of these inflationary incentives and the broader EigenLayer ecosystem will again be wholly reliant on the adoption of the underlying AVSs over the long run.

We're still in the early innings of restaking, and while competing services like Symbiotic are attracting deposits in a battle for restaking supremacy, there are still plenty of questions about the long-term sustainability of the sector and its current kingpin.