Karak’s Potential to Succeed as EigenLayer Grows Amidst Airdrop Setback

The total value locked (TVL) of the emerging Ethereum restaking protocol Karak has increased by over 25% in the past week, surpassing $440 million. Experts in the industry believe that Karak has a strong chance of becoming the next major player in the restaking protocol market, potentially eating into EigenLayer’s market share. Anndy Lian, an intergovernmental blockchain expert and author, stated that Karak has a broader range of assets for restaking compared to EigenLayer, including ETH, LST, LRT, stablecoins, LP tokens, and wrapped Bitcoin. This diversity could attract a wider user base seeking more options beyond ETH.

Karak recently completed a Series A funding round, raising $48 million and achieving a valuation of over $1 billion. This funding round has provided Karak with significant upside potential. In comparison, EigenLayer is currently valued at $15.7 billion, making it the largest restaking protocol on Ethereum. The recent disappointment surrounding the EigenLayer airdrop may lead to a decrease in its TVL.

EigenLayer released a white paper for its upcoming EIGEN token on April 29, but it banned participants from several jurisdictions, such as the United States, Canada, and certain African and Asian countries, from its airdrop. This decision received widespread criticism within the crypto community. As a result, stakers who were looking forward to the EIGEN airdrop may now seek alternative platforms or protocols that offer more inclusive airdrop opportunities, potentially leading to a decline in EigenLayer’s TVL.

Some analysts believe that EigenLayer is a venture capitalist (VC) scam that aims to attract liquidity from unsophisticated retail investors. Ran Neuner, a crypto analyst and host of the Crypto Banter podcast, argues that early-stage VC investors benefit from the airdrop ban in key unbanked jurisdictions and the decision to lock the airdropped EIGEN tokens until the team decides. Neuner suggests that retail investors who buy into EigenLayer within the first three years may be at a disadvantage.

While Karak has the potential to become a leading restaking protocol, it also introduces more protocol risks due to its multi-asset restaking feature compared to EigenLayer. Alon Muroch, CEO of SSV.Labs, points out that with more complexity comes more risk. EigenLayer has focused on Ethereum as its foundation because it is the most secure and battle-tested Proof-of-Stake network, providing a safer environment for shared security.