Researcher Haotian, an expert in the field, expressed his views on the recent market downturn caused by the issuance of tokens by EigenLayer and LRT projects. He believes that in addition to the market misunderstanding the focus of the ecosystem, it is more deliberate on the part of the EigenLayer team to lower the expectations and market sentiment through token issuance.
Why has the staking ecosystem cooled down recently?
Reason 1: The market has misunderstood the focus of the staking industry.
Reason 2: EigenLayer’s token issuance is intended to cool down the market.
A period of calm is beneficial for long-term development.
Recently, both Ether.fi and Renzo, after issuing tokens, did not sustain market enthusiasm for long. The project’s volume and token price quickly decreased. EigenLayer also announced the issuance of tokens and airdrop, which seems to have further reduced market interest in this field.
Haotian provided his own perspective on this matter. He believes that the staking industry has gone through a long period of irrational prosperity, with the competition and overheated market sentiment shaped by projects like EigenLayer, Ether.fi, and Puffer Finance vying for liquidity.
The market mistakenly regards “whether LRT can accumulate the most liquidity” as the focus of the staking industry’s development. Haotian points out that the real key to the sustainable development of the staking industry lies in the development of the AVS ecosystem.
Recommended reading:
How will the staking project EigenLayer change the Web3 infrastructure ecosystem?
Reason for recommendation: The article comprehensively explains the design principles of EigenLayer, the problems it solves, and its current development status. It helps to quickly understand the differences and needs of various roles in the ecosystem, including token stakers, node operators, and active validation service providers (AVS).
Whether the AVS network can open up the industry and truly generate profits is the beginning of the value realization of the staking industry. For example, can EigenDA, as the first AVS, attract more projects to use its services through the security brought by staking and provide returns to the staking ecosystem, that is the focus.
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 of AVS but are instead driven by the high expectations generated by the narrative of LRT, which attracts traffic and assets. As a result, the industry does not receive long-term effective support.
EigenLayer hastily issued the EIGEN token and proposed an innovative model of “Intersubjectively Attributable Faults” management, which brought surprises and discussions to the market.
Recommended reading:
How will the EIGEN token issued by EigenLayer be used to protect AVS security?
Reason for recommendation: The article introduces the unique token utility of EigenLayer, which manages and reduces the risks of intersubjectively attributable faults through the forking function of the EIGEN token.
However, Haotian believes that EigenLayer’s token issuance at this time is actually an attempt to cool down the market, in addition to launching the full functionality of the mainnet. This is done to reduce the recent market frenzy surrounding staking and LRT.
If the staking point Lego war is further demonized, the pressure on EigenLayer will be exponentially amplified. Any changes or movements in the related ecosystem in the future will trigger a chain reaction in the staking industry.
The market expectation landing from EigenLayer’s token issuance will cool down the trend of the point war and shift the market’s attention to the support point of the staking industry, which is the development of the AVS ecosystem, making the system healthier.
Originally, EigenLayer was only providing basic security capabilities for AVS through staking, but it 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 of the Ethereum network.
EigenLayer chose to issue tokens at this time to cool down the market, on the one hand, to redirect the market’s focus to the AVS ecosystem rather than just the LRT project, all for the healthier development of the industry and to reduce systemic risks.
Although the market seems to lack vitality at the moment, there are opportunities to look at the development of the AVS ecosystem. Haotian believes that EigenLayer will be able to extend the security of Ethereum to a more diverse range of services and infrastructure. For Ethereum, which is moving towards modularity, the potential for practical applications is highly anticipated.
(SOL version of EigenLayer? Staking boom spreads to the Solana ecosystem)
EIGEN
EigenLayer
Ether.fi
LRT
Puffer Finance
Renzo
Further reading:
Puffer Finance mainnet launch, Phase 4 of the marketing campaign will convert user assets to ETH.
Renzo token issuance controversy indirectly leads to the detachment of ezETH.