Why has staking become less popular recently? Is it because EigenLayer is planning to launch its own token?

Researcher Haotian from On-chain shared his views on the recent market disappointment following the token issuance of EigenLayer and LRT projects, focusing on the Restaking field. He believes that apart from the market misunderstanding the ecological focus, it is more about EigenLayer team intentionally issuing tokens to lower airdrop expectations and market sentiment.

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Why has the DeFi ecosystem of staking cooled down recently?

Recently, whether it's Ether.fi or Renzo issuing tokens, the market enthusiasm hasn't been sustained for long. Both project visibility and token prices have rapidly decreased. EigenLayer also announced the issuance of tokens and airdrops recently, which seems to have further reduced market interest in this area.

EigenLayer opens up airdrop eligibility check! The first phase is mainly for staking users, and Pendle will be distributed in the second phase.

Haotian expressed his opinion on this matter.

Reason 1: The market has misjudged the focus of the staking industry

Haotian believes that the staking industry has gone through a long period of irrational prosperity. From EigenLayer's tokens to projects like Ether.fi, Puffer Finance, etc., competing for liquidity, it has created a huge new competitive and overheated market sentiment.

The market incorrectly views "whether LRT can accumulate the most liquidity" as the focus of the staking industry, while Haotian points out that the key to sustainable development of the staking industry actually lies in the development of the AVS ecosystem.

Whether the AVS network's industrial situation can be opened up and truly generate profits is the beginning of showing the value of the staking industry. For example, EigenDA, as the first AVS, can attract more projects to use its services through the security brought by staking, and return profits to the staking ecosystem is the key.

The core of the staking industry is AVS, not staking projects.

Under irrational sentiment, the market's expectations and focus are not on the practical application level of AVS, but instead on the high expectations brought by using LRT narratives to attract traffic and assets, which does not provide long-term effective support to the industry.

Reason 2: EigenLayer's token issuance is to cool down

Recently, EigenLayer hastily issued the EIGEN tokens and introduced an innovative model of Intersubjectively attributable faults among management entities, bringing a wave of surprises and discussions to the market.

Recommended reading: How will EigenLayer's token EIGEN be used to protect the security of AVS?
Reason for recommendation: This article introduces the unique token utility of EigenLayer—managing and attributing risks of errors between management entities, reducing the interests of malicious participants through the forking function of EIGEN tokens.

However, Haotian believes that EigenLayer's token issuance at this time is not only to introduce the complete functionality of the mainnet but more like a way to cool down the market— to reduce the recent frenzy about staking and LRT.

If the staking points battle is further demonized, the pressure on EigenLayer will be exponentially magnified. Any movement in the related ecosystem in the future will trigger a chain reaction of risks in the staking industry.

The market expectation landing of EigenLayer's token issuance will cool down trends like the points battle, redirecting market attention to the support point of the staking industry, the development of the AVS ecosystem, making the system healthier.

Originally, EigenLayer's staking was only meant to provide basic security capabilities for AVS, but unexpectedly opened the Pandora's box of the LRT field. If not guided and controlled, the false prosperity of staking will further amplify the potential liquidity crisis in the Ethereum network.

A Cooling-off Period Contributes to Long-term Development

By choosing to issue tokens at this time to cool down the market, the EigenLayer team also hopes to shift market focus onto the AVS ecosystem rather than just the LRT projects, all aiming to allow the industry to develop more healthily and reduce systemic risks.

Although the market seems to lack vitality at this time, there are also more opportunities to look at the development of the AVS ecosystem. Haotian believes that EigenLayer will enable the security of Ethereum to extend to more diverse services and infrastructure, and for Ethereum, which is oriented towards modular development, the potential practical applications are worth looking forward to.

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