EigenLayer Available volume Restaking Protocols Experience Reduction of Over $1 Billion in TVL Prior to Important Update
EigenLayer market fluidity restaking protocols have seen a decline of over $1 billion in TVL prior to the slashing news on April 17. This upgrade aims to enhance accountability and strengthen the trustworthiness of AVSs reliant on ETH validators for their safety. Will EIGEN’s price rebound after experiencing an 85% crash in just two weeks?
With EigenLayer, you can reinvest your staked Ethereum from the Ethereum mainnet and earn extra yield by securing additional services, known as Actively Validated Services (AVSs), including Ether.fi, Kelp, Renzo, Eigenpie, and more. As per DeFiLlama data, the market fluidity restaking (LRT) total value locked (TVL) on Ethereum surpasses $5 billion. This figure could rise in the upcoming months as ETH stakers diversify their strategies to gain additional income, effectively channeling investments into some of the top cryptos to purchase in 2025.
EXPLORE: Best New Cryptocurrencies to Invest in 2025
Liquidity Restaking TVL Declines by Over $1 Billion in a Fortnight
Nevertheless, the recent surge in EigenLayer TVL might face challenges.
On April 17, EigenLayer plans to execute a significant update designed to enhance the accountability within its multi-billion-dollar ecosystem, which is likely to bolster its strength.
After extensive testing, the restaking network will enable the slashing feature, contributing to ecosystem stability and enhancing the reliability of its services, particularly for AVSs that require higher uptime and smooth operations.
According to IntoTheBlock data, the available volume restaking TVL is swiftly declining, having dropped by more than $2 billion in the fortnight leading up to the April 17 update.
The unstaking queue surged for numerous LRT protocols in the past week.
The reason? Eigenlayer slashing goes into effect this week, potentially encouraging risk-averse stakers to exit.
Track Risk Alerts
https://t.co/iq3PJyT5M7 pic.twitter.com/ltuIvztPPQ
— IntoTheBlock (@intotheblock) April 14, 2025
As of now, DeFiLlama data suggests that the sector holds a TVL of $6.8 billion, a decrease from the $8 billion noted on April 1.
Over the last two weeks, notable LRT protocols have experienced a dramatic increase in unstaking requests. Following this pattern, the TVL of Kelp, Renzo, Inception, and Mello LRT, for instance, has plummeted by double digits over the past month. Ether.fi, the largest LRT, has seen its TVL drop by 8% in a month, settling around $4.2 billion.
According to analysts at IntoTheBlock, choosing to unstake before the slashing news is a tactic to safeguard against potential capital rekt.
EXPLORE: 10 Best AI Crypto Coins to Invest in 2025
The Benefits of Slashing on EigenLayer
Once slashing is activated, EigenLayer will ensure accountability throughout its Ethereum-based security network. Consequently, operators who underperform or act inappropriately will face penalties. Although this may appear rigid from the stakers’ viewpoint, the primary aim is to improve the stability and reliability of the restaking platform.
Slashing will be enforced through AVS smart contracts. For instance, all penalties for downtime, double signing, or failure to validate will be automatically applied.
The positive aspect is that penalties will differ based on the severity of the offense. Depending on the damage caused to the ecosystem, they could range from partial burns of staked amounts to redistribution of the affected stake.
1/ Introducing Slashing – Testnet Launch
Slashing Testnet is now officially launched.
This proposed protocol upgrade (ELIP-002) introduces slashing, a significant mechanism for AVSs to maintain cryptoeconomic commitments. pic.twitter.com/u9wzInoeEG
— EigenLayer (@eigenlayer) December 20, 2024
To minimize systemic slashing shocks, EigenLayer will adopt a specialized stake system. Instead of aggregating all stakes into a single risk pool, operators will assign specific amounts to individual AVSs. This strategy reduces the likelihood of contagion from any single event, enhancing the platform’s resilience through diversification.
Slashing goes live on the live platform on April 17.
Here are three essentials every Operator should know:
— EigenLayer (@eigenlayer) April 8, 2025
Moreover, there’s an avenue for engaging in an AVS that implements penalties. Each AVS must explicitly outline slashing conditions in its smart contract for clarity and risk mitigation before any funds are committed.
Can EIGEN Prices Recover After the 85% Drop?
As LRTs move to unstake, EIGEN continues to face downward pressure, lagging behind some of the top Solana meme coins to invest in 2025. Having surged above $5.5 in December 2024, the crypto token has been declining, suffering an 85% fall over four months.
Depending on the response to the slashing announcement, EIGEN might either rebound and move higher or fall to new lows in 2025 in a continuation of the pessimistic trend.
DISCOVER: 6 Best Meme Token ICOs & Presales to Invest in 2025
EigenLayer TVL Falls by $1B Ahead of Slashing Update, EIGEN Down 85%
- EigenLayer TVL declines before the slashing update
- Slashing will enhance ecosystem reliability and heighten accountability
- Penalties will apply for failures, but the extent varies based on AVS conditions
- EIGEN has dropped 85% over four months. Will EIGENUSDT recover?
The article EigenLayer Market fluidity Restaking Protocols Lose Over $1 Billion in TVL Ahead of Key Announcement first appeared on 99Bitcoins.
