TVL Grows by $100M in a Month: How Has Renzo Secured a Place in the Restaking Race?
TechFlow Selected TechFlow Selected
TVL Grows by $100M in a Month: How Has Renzo Secured a Place in the Restaking Race?
Unlimited EigenLayer deposit capacity, or the reason for the TVL surge.
Navigating Web3 tides with focused insightsAuthor: Nanzhi, Odaily Planet Daily
Restaking has undoubtedly been one of the hottest narratives over the past two years.
EigenLayer, the leading restaking protocol on Ethereum, has amassed over 770,000 ETH in total value locked (TVL), with each deposit window repeatedly reaching its cap within minutes. Renzo, a restaking protocol built on EigenLayer, achieved over $100 million in TVL just three months after launch—most of this growth occurring in January this year.
What advantages does Renzo possess that allow it to secure a strong position in the Restaking space?
Restaking and EigenLayer
What is Restaking?
The concept of restaking was introduced by EigenLayer founder Sreeram Kannan. Its core mechanism allows ETH and various liquid staking tokens (LSTs) to be restaked on other protocols or chains and participate in their validation processes. EigenLayer leverages Actively Validated Services (AVS) to directly tap into Ethereum’s security and liquidity, enabling projects to inherit Ethereum's security without needing to build their own economic and validator infrastructure.
In short, EigenLayer functions as a marketplace for cryptoeconomic security.
Cryptoeconomic security refers to the need for protocols to ensure reliable, permissionless, and decentralized operations by requiring network validators to stake tokens. If validators fail to perform their duties properly, their staked tokens are subject to slashing penalties.
As a platform, EigenLayer raises assets from holders of liquid staking derivatives (LSDs), then uses these pooled LSD assets as collateral to provide accessible and low-cost AVS services to middleware providers, appchains, rollups, and other AVS consumers. EigenLayer acts as a matchmaker between service providers and users, while specialized staking service providers handle the operational security of the staking process.
Supply and Demand in Restaking
Before restaking emerged, launching and operating securely required building an independent validator network—an endeavor involving extremely high financial and time costs. Projects had to establish their networks, issue tokens at high valuations to attract validators, and incentivize them through ongoing rewards, which created constant selling pressure from validators cashing out incentives. Validators themselves needed to invest in hardware and make initial token deposits.
With restaking, however, protocols can significantly reduce the cost of establishing trust networks. Instead of building their own systems, they can simply pay to use existing assets and validators on EigenLayer—enjoying robust security at lower costs. They can also scale their security levels according to different development stages.
For LST providers (such as stETH, rETH, cbETH, etc.), EigenLayer enables them to earn not only native staking rewards but also additional rewards from AVS demanders.
Renzo
What Problems Does EigenLayer Have?
EigenLayer uses LSTs as collateral to secure AVSs. However, this doesn't mean AVS validation services offer the same level of security as Ethereum itself. Ethereum’s formidable security stems from its vast number of nodes and massive ETH staking volume. In contrast, the validation services purchased by AVS operators from EigenLayer operate with far fewer nodes and lower staking amounts than Ethereum’s mainnet. Simply put, the security provided by EigenLayer is limited.
Additionally, according to the Renzo whitepaper, EigenLayer faces challenges related to allocation strategies:
Users must decide whether to protect one or multiple combinations among numerous AVSs. Ideally, users could fully protect all AVSs with honest operator behavior and minimal slashing risk. Yet, to build a robust restaking system, restakers must be able to quantify slashing risks and selectively allocate capital toward more attractive AVSs while reducing exposure to less favorable ones.
Renzo illustrates this with a hypothetical scenario involving only three AVSs, resulting in seven possible allocation strategies:
① Protect only AVS A; ② Protect only AVS B; ③ Protect only AVS C; ④ Protect both A and B; …… ⑦ Protect all three (A, B, and C)
As the number of AVSs increases, the number of possible strategies grows exponentially. With just 15 AVSs running on EigenLayer, there are already 32,767 potential strategies. Moreover, many other factors must be considered, including scalability needs, security audits of AVSs, and the economic models underlying each AVS.
How Does Renzo Solve This?
Renzo claims to abstract away the complex user-level processes involved in restaking, so restakers no longer need to actively manage operator selection or reward strategies.
Renzo categorizes AVS risks into two types—slashing risk and liquidity risk—and builds portfolios through quantitative analysis.
Slashing Risk: Measures the maximum potential loss (MaxLoss) from protecting one or more AVSs. The higher the MaxLoss, the greater the strategy’s risk. This helps assess the incremental risk of adding a new AVS or choosing one AVS over another with higher slashing exposure.
Liquidity Risk: Renzo introduces a Risk-Adjusted Reward ratio (RAR), calculated using staking rewards, base costs, and MaxLoss. Similar to the Sharpe ratio, RAR evaluates investment performance by weighing returns against risk. Users aim to maximize their portfolio’s RAR, allocating more funds to AVSs that improve RAR—i.e., those offering higher returns and lower slashing risks.
Renzo states it will release further details in future documentation, though specifics remain undisclosed for now.
Funding Status
One week ago, Renzo, a liquid restaking protocol in the EigenLayer ecosystem, announced a $3.2 million seed round led by Maven11, with participation from SevenX Ventures, IOSG Ventures, Figment Capital, Bodhi Ventures, OKX Ventures, Mantle Ecosystem, Robot Ventures, Paper Ventures, and others. According to OKX Ventures, this marks its first publicly announced investment in the EigenLayer ecosystem.
Points Program
On January 4, Renzo launched its points program, Renzo ezPoints. The ezPoints system rewards users who contribute to the protocol. The primary way to earn points is by minting ezETH, Renzo’s liquid restaking token, which automatically accrues rewards and ensures liquidity. ezETH allows users to participate in DeFi while retaining restaking rewards. Users providing ezETH liquidity on DEXes receive additional multiplier bonuses in ezPoints.
Furthermore, Renzo notes that EigenLayer imposes deposit limits on LSTs, while native ETH deposits are currently uncapped—but remain inaccessible to most users due to the requirement of owning 32 ETH and running an Ethereum node integrated with EigenPods. In contrast, Renzo imposes no deposit caps, making it easier for users to participate and becoming one of the key drivers behind its rapid TVL growth.
Conclusion
EigenLayer raised $50 million in a Series A round last March, and every deposit window since has quickly reached its hard cap. Renzo offers users unrestricted access to participation and enables them to earn dual incentives—from both EigenLayer and Renzo’s own points system. Meanwhile, EigenLayer won’t begin securing AVSs until mid-2024, leaving many operational details still unproven. On the fundamental issue of cryptoeconomic security distribution in restaking, Renzo provides practical logic and methodological guidance for real-world application.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
Odaily
