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EigenLayer Liquidity Restaking Protocols Lose Over $1 Billion in TVL Ahead of Key Update

EigenLayer liquidity restaking protocols lose over $1 billion in TVL ahead of the April 17 slashing update. Will EIGEN prices recover after dumping 85% in two weeks?

By Dalmas Ngetich

Last Updated: Apr 15, 2025

Fact checked

By Akriti Seth

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EIGEN whale is accumulating days after Justin Sun dumped the token moments after EigenLayer announced the highly anticipated unlocking event
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Disclaimer
Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital. 99Bitcoins may receive advertising commissions for visits to a suggested operator through our affiliate links, at no added cost to you. All our recommendations follow a thorough review process.

EigenLayer liquidity restaking protocols lose over $1 billion in TVL ahead of the April 17 slashing update. The upgrade will enforce accountability, boosting the reliability of AVSs depending on Ethereum validators for security. Will EIGEN prices recover after dumping 85% in two weeks?

On EigenLayer, you can reuse your staked ETH on the Ethereum mainnet and earn additional yield by securing other services, called Actively Validated Services (AVSs), such as Ether.fi, Kelp, Renzo, Eigenpie, and more. According to DeFiLlama data, the liquidity restaking (LRT) total value locked (TVL) on Ethereum exceeds $5 billion. This number may increase in the coming months as ETH stakers diversify, seeking to earn even more income, effectively funneling funds into some of the best cryptos to buy in 2025.

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Liquidity Restaking TVL Loses Over $1 Billion In 2 Weeks

However, the recent explosion of EigenLayer TVL may find headwinds.

On April 17, EigenLayer will implement a key update to bring greater accountability to its multi-billion-dollar ecosystem and likely strengthen it.

After years of testing, the restaking platform will activate the slashing feature, stabilizing its ecosystem and improving the reliability of its services, especially for AVSs that demand higher uptime and seamless operations.

Data from IntoTheBlock shows that liquidity restaking TVL is rapidly shrinking, having lost over $2 billion in the two weeks leading up to the April 17 update.

At press time, DeFiLlama data indicates that the sector commands a TVL of $6.8 billion, down from the $8 billion recorded on April 1.

In the last two weeks, major LRT protocols have seen a sharp spike in unstaking requests. Reflecting this trend, the TVL of Kelp, Renzo, Inception, and Mello LRT, for example, has dropped by double digits in the past month. Ether.fi, the largest LRT, has seen its TVL decrease by 8% in one month to around $4.2 billion.

According to IntoTheBlock analysts, the decision to unstake before the slashing update is a strategy to cushion against potential capital loss.

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Why Slashing On EigenLayer Is Good

Once EigenLayer activates slashing, it will enforce accountability across its Ethereum-based security network. As a result, operators who underperform or misbehave will be penalized. While this may seem harsh from the stakers’ perspective, the goal is to enhance the restaking platform’s reliability and integrity.

Slashing will be executed via AVS smart contracts. For example, all penalties charged on downtime, double signing, or failure to validate will be imposed automatically.

The good news is that penalties will vary depending on the severity of the violation. Depending on the harm caused to the ecosystem, they may range from partial burns of staked amounts to redistribution of the affected stake.

However, to prevent systemic slashing shocks, EigenLayer will implement a unique stake system. Instead of pooling all stakes into one risk pool, operators will allocate a specific amount to individual AVSs. This way, any event will unlikely lead to contagion, making the platform more robust through diversification.

Additionally, there is an option to participate in an AVS that enforces penalties. Each AVS must clearly define slashing terms in its smart contract for transparency and risk reduction before funds are committed.

Will EIGEN Prices Recover After The 85% Plunge?

As LRTs unstake, EIGEN remains under pressure, trailing some of the best Solana meme coins to buy in 2025. After spiking to over $5.5 in December 2024, the token has been plunging, losing over 85% in four months.

(EIGENUSDT)

Depending on the reception of the slashing update, EIGEN may find relief and bounce higher or drop to new 2025 lows in a bear-trending continuation formation.

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EigenLayer TVL Drops $1B Before Slashing Update, EIGEN Down 85%

  • EigenLayer TVL shrinks ahead of slashing update 
  • Slashing will make the ecosystem more reliable and boost accountability 
  • Penalties will be charged for failures, but severity varies depending on AVS conditions 
  • EIGEN down 85% in four months. Will EIGENUSDT find relief? 

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Dalmas Ngetich
Dalmas Ngetich
Crypto Journalist

Dalmas is an experienced journalist with over a decade in crypto, technology, and blockchain. His work and that of his partners have been featured in top news outlets, including Forbes, investing.com, and Entrepreneur, among others. He is passionate about crypto... Read More

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