Eigen Layer: Capital Outflows and Airdrop Controversy
Eigen Layer, the leading heavily collateralized protocol for Ethereum (ETH), has experienced a significant outflow of capital, totaling at least $351 million, within the past 24 hours. This drastic drop in capital comes in the wake of revelations surrounding the protocol’s airdrop policy, which has sparked controversy and forced Eigen Layer to address the issue.
Eigen Layer Airdrop Policy Controversy
Reports indicate that projects such as Renzo, Altair, and ether.fi have been impacted by Eigen Layer’s airdrop policy. The protocol reserves a portion of new tokens to reward Eigen Labs and Eigen Foundation employees as a gesture of appreciation. Allegations suggest that when a project announces an airdrop, Eigen Labs provides employee wallet addresses and requests reward tokens in exchange for assistance in the smooth operation of the protocol.
These tokens, amounting to approximately $5 million, are believed to have been utilized to facilitate listings on exchanges, with each employee receiving an average of $80,000. While some argue that Eigen Labs’ actions are justified due to aligned interests, calls for increased transparency have also been voiced.
“Curve essentially operates on the basis of bribery. If you want to go that route. But IMO bribery is essentially implicit corruption. You are paying the price for neglecting your legal obligations. Exchange tokens or pay to participate The protocol for issuing tokens to match Destiny is different,” one user commented.
On the other hand, skeptics point to unethical conduct and greed on the part of project leaders, questioning the morality of such practices.
“This is why cryptocurrency market participants are showing greater interest in Memcoin than in the past for ‘utility’ tokens. The unethical fraud and greedy behavior of some corporate executives is undeniable,” another perspective highlighted.
Following the appointment of the Ethereum Foundation’s Justin Drake as an advisor in May, Eigen Layer introduced new policies to address the bribery controversy. These measures included prohibiting team members from receiving or selling airdrop tokens to uphold trust, transparency, and avoid conflicts of interest.
Team Defends Racketeering Claims
Responding to allegations, Eigen Layer clarified on its blog that there is no evidence suggesting undue pressure from employees on other teams to exploit the organization. The protocol also stated that incentive imbalances among employees were addressed in May, with employees no longer receiving airdrops following the policy update.
Eigen Layer explained, “We recognize that paying airdrops to employees can lead to an incentive imbalance, so we updated our internal policies in May to ensure that future projects wishing to airdrop to Eigen Labs can only do so for the benefit of the company.”
Despite these reassurances, Eigen Layer’s Restock protocol witnessed a significant decrease in total deposit volume, dropping from $12.653 billion to $12.32 billion between Thursday and Friday.
Learn more: Ethereum ReStake: What is it and how does it work?
A decrease in total value locked (TVL) often signifies users withdrawing funds from the platform, which in turn can impact liquidity, popularity, and usability, crucial factors for a project’s success. Higher TVL indicates greater capital invested in the decentralized finance protocol, offering increased benefits and returns. Conversely, lower TVL restricts capital and leads to reduced returns.
Despite the decline in TVL, Eigen Layer continues to dominate Ethereum heavy staking, with a notable surge in re-staking activities during the second quarter of 2024. Liquidity ReStake Protocol (LRT) leads the pack by holding 2.28 million ETH out of the total 4.3 million re-staked.
Furthermore, the appeal of ReStake protocols extends beyond Ethereum, as Solana’s ZITO liquidity staking protocol has recently launched its own re-staking service.
