EigenLayer revenue crisis
NAIROBI (Coinchapter.com) – According to an anonymous builder at 3Jane derivatives exchange, the protocol could be facing a “significant” revenue crisis as EigenLayer’s rapid growth in total value locked (TVL) outstrips the security needs of active validator services (AVSs).
The problem of reduced potential returns is looming
EigenLayer’s dominance in the re-hypothecation space is undeniable. However, the problem created by its total locked value (TVL) exceeding $15 billion is that this large amount of funds exceeds the amount required for safe operation. As a result, anyone who pledges assets on EigenLayer may suffer from potential reduction in returns.


EigenLayer. Source: DefiLlama
Since the mainnet launch on April 10, 2024, EigenLayer has quickly become a major player in the DeFi space. The decision to allow all liquid collateral tokens (LSTs) on April 16 further boosted the expansion of the protocol. However, there is now too much capital chasing limited security needs, which may lead to unsustainable user returns.
This situation highlights the challenge of balancing rapid growth with the sustainability of returns. With only ~10% of EigenLayer TVL used for security and a limited number of active addresses (667 in the last 24 hours), finding solutions to maintain attractive returns is critical to the future success of the protocol.
Solving the EigenLayer yield crisis
In an X post on April 22, Chudnov proposed two potential solutions: bottom-up and top-down. The bottom-up approach would force AVSs to issue tokens to support security budgets, which he described as “pushing the problem into the future.”


Chudnov's posts on X
The bottom-up approach involves forcing AVSs, comprised of researchers in fields such as zero-knowledge proofs and fully homomorphic encryption, to issue tokens. This temporary solution can support security budgets, but could ultimately become a convoluted delivery channel for empty airdrops with no real utility.
The top-down approach focuses on building financial primitives on top of liquid collateral. By integrating EigenLayer into the decentralized finance (DeFi) ecosystem and providing more utility to LST, protocols can extract yield from other primitives such as money markets and derivatives. This organic approach may provide a more sustainable solution to the potential yield crisis.
EigenLayer's lucrative returns depend on its ability to be more useful. Integration with DeFi is critical. Without this, returns could drop significantly, hurting users and Ethereum's liquid staking scenario.