How Much Yield Can You Earn with EIGEN?

If you're still holding on to your EIGEN tokens and wondering what more you can do with it, this piece is for you.

EigenLayer is a protocol built on Ethereum that allows Ethereum validators to use their staked ETH to secure other protocols through the process of ‘restaking’.

EIGEN is the native token of the EigenLayer protocol, and designed to secure Actively Validated Services (AVSs) through unique staking mechanisms. AVSs are applications such as DeFi platforms, cross-chain bridges or oracles that need high levels of security. These services basically borrow Ethereum’s security through ETH and EIGEN restaking.

Now, back to the main point of this post. Let's a breakdown how much yield you can potentially earn with EIGEN.

The Baseline Yield

The first source of yield comes from staking your $EIGEN tokens directly in EigenLayer. Right now, Eigenlayer is distributing 1% of the total EIGEN supply to stakers over a 12-month period. With a total of 1.68 billion EIGEN tokens, this means that about 16.8 million tokens will be distributed annually. Given that 95 million tokens are staked at the moment, the APR for staking is around 17.68%. That’s already a solid return just for holding your tokens in the system.

Boost Yields with Liquid Staking

But why stop at 17%? You can earn even more by using liquid staking products. EtherFi and RenzoProtocol have introduced liquid staked versions of EIGEN, called eEIGEN and ezEIGEN, respectively.

Liquid staking allows you to stake your tokens while still being able to move or trade them, keeping things flexible. So on top of the 17% APR you’d normally earn from staking, liquid staking products also give you access to bonus rewards like loyalty points from platforms such as Veda Labs, Karak, Symbiotic, Renzo, and EtherFi. These extra points further increase your earnings.

Unlock Even More with AVS Rewards

But it doesn’t stop there. When you stake your EIGEN tokens, you also become eligible for AVS rewards. Remember, AVSs are the various services running on Eigenlayer that you help secure by staking your tokens. In return, you earn extra rewards from these services, further boosting your overall returns.

The only challenge here is that managing and distributing all the different reward tokens from AVS services could become a hassle for restaking protocols. That’s where LRT² comes in.

Packaging Rewards with LRT²

Restaking protocols like Etherfi created a new token concept called LRT² which allows them to bundle the AVS rewards. Think of LRT² as a sort of claim ticket for your rewards. Instead of receiving a bunch of small, different tokens directly, you get LRT². You can either sell it for immediate profits or redeem it later for the actual AVS tokens. This setup gives you flexibility in how you manage your rewards, making it easier to track and optimize your earnings.

With the combination of staking APR and AVS rewards, you’re looking at potential yields of 20-30% APR, or even more depending on the performance of AVS services.

Bonus: Hedging Your Returns

If you’re worried about the volatility of EIGEN’s price while staking, you can hedge your risk by shorting EIGEN to offset potential losses if the token’s price drops while you’re staking.

This post was inspired by Defi Dojo's post on X.