How Liquid Restaking Tokens are revolutionizing DeFi

Liquid Restaking Tokens (LRTs) are becoming a crucial part of the restaking industry and could reshape the entire decentralized finance (DeFi) space.

LRTs are simplifying the complexities of traditional Ether (ETH) staking and increasing DeFi capital efficiency, by offering stakers the equivalent of their staked tokens that can be deployed in other protocols.

Showcasing their growing importance, the total value locked (TVL) in LRTs rose over 8,300% year-to-date (YTD) to $13.8 billion, up from just $164 million at the beginning of 2024.

The simplicity introduced by these protocols is part of their significant growth, according to a Node Capital report shared with Cointelegraph.

“The shift towards Liquid Restaking Tokens is driven by the demand for more efficient and user-friendly financial instruments… LRTs have the potential to not only dominate the restaking landscape but also to reshape the entire DeFi ecosystem.”

Liquid restaking protocols make staking more accessible for retail users, who would require a minimum of 32 Ether, worth over $106,000, to run their validator node via traditional staking.

EigenLayer was crucial part of rise of Liquid Restaking Protocols

Liquid staking protocols grew to become the largest protocol category with a combined TVL of $52.9 billion, while liquid restaking protocols are in sixth place, with over $14.2 billion in cumulative TVL, according to DeFiLlama data.

EigenLayer, the largest restaking protocol by TVL, was a significant reason behind the success of the liquid restaking industry, according to Harel, token engineering analyst at Node Capital:

“Following 'points rush' for potential airdrops led to demand far outstripping supply in EigenLayer's deposit caps. Leading Liquid Restaking Protocols capitalized on this technical arbitrage opportunity. One of the many complexities they abstracted away was EigenPods management, abstracting this and related processes into a token.”

The continued infrastructure development of LRPs helped the protocol category attract billions in capital, explained Harel:

“In a short period, these LRPs accumulated billions in stakers' capital and built sophisticated operator infrastructure, positioning themselves as key facilitators of the supply side and gaining a strategic advantage in influencing the demand side of Actively Validated Services (AVSs).”

EigenLayer’s over $16 billion TVL accounts for more than 85% of the entire restaking industry’s TVL, worth $18.9 billion.

Ether.fi controls over 50% of LRT market

Ether.fi is controlling over 50% of the total LRT market, according to Node Capital.

The protocol’s success can largely be attributed to its user-friendly restaking model, which simplifies traditional staking, according to the report.

“The distribution of market share further highlights ether.fi’s dominance, securing over 50% of the total market. This dominance is indicative of the platform’s successful simplification of complex restaking operations into a user-friendly token model that facilitates value accrual autonomously.”

Ether.fi saw a large capital exodus in April. On April 2, the protocol saw nearly 400,000 Ether in absolute flow, while Lido saw an outflow of over 250,000 Ether, according to Node Capital.