EigenLayer TVL Plunges $351 Million After Airdrop Policy Controversy

By admin On Aug 16, 2024

Eigen Layer, a leading restaking protocol on Ethereum (ETH), saw at least $351 million worth of capital ooze out in the last 24 hours.

The drop follows shocking revelations about the protocol’s airdrop policy, with EigenLayer coming to its own defense.

EigenLayer Airdrop Policy Controversy

Users on X (formerly Twitter) were abuzz on Thursday following reports that Eigen Labs extorts millions of dollars in airdrop tokens from projects looking to launch protocols on their platform, EigenLayer.

Renzo, AltLayer, and ether.fi are reportedly among the projects affected by an arrangement where portions of their new tokens are set aside as a “thank you” for Eigen Labs and Eigen Foundation employees. Allegedly, in exchange for smooth operations on the restaking protocol, Eigen Labs provides employee wallet addresses whenever a project announces an airdrop, requesting reward tokens.

These tokens are supposedly intended to secure successful exchange listings, with estimated “bribes” totaling nearly $5 million. Each employee is said to receive an average of $80,000 as part of this arrangement.

Some say Eigen Labs’ actions are warranted, as they align the interests of both parties, but call for more transparency.

“Curve functions essentially on bribes. If you want to go down that semantic path. But IMO bribery is essentially implicit corruption. A payment to neglect codified duties. Protocols exchanging tokens or issuing them to actors to align their fates are different,” one user said.

However, others challenge the perspective, calling out project leaders for unethical fraud and greed.

“This is why crypto market participants are more interested in memecoins now more than ever over “utility” tokens. The unethical fraud conducted by, and greed in the leadership of some of these companies is undeniable,” another user stated.

As BeInCrypto reported, Ethereum Foundation’s Justin Drake came in as EigenLayer advisor in May amidst another bribe controversy. This inspired a new policy, including the “prohibition on team members accepting airdrop tokens or selling airdrop tokens” to “ensure trust, transparency, and avoid conflicts of interest.”

The Team Defends Extortion Claims

In its defense, EigenLayer published a blog denying “knowledge or evidence of any employee at Eigen Labs pressuring any team to unduly benefit the Eigen Labs corporate entity or its employees.” The protocol also articulated having mitigated any incentive misalignment for Eigen Labs employees in May. The protocol’s position is that Eigen Labs employees have not received airdrops since the May changes.

“We realized that airdrops to employees may create misaligned incentives and updated our internal policies in May so that if projects wanted to airdrop to Eigen Labs in the future, it could only go to the company,” EigenLayer explained.

Despite the explanation, the EigenLayer restaking protocol still suffered a loss of $351 million in total value locked (TVL). Data from DefiLlama shows a sharp decline from $12.653 billion to $12.302 billion between Thursday and Friday.

EigenLayer TVL, Source: DefiLlama

A drop in TVL typically indicates users are withdrawing funds from the platform, which can lead to reduced liquidity, popularity, and usability — key factors for a project’s success. A higher TVL reflects more capital locked in DeFi protocols, offering participants greater benefits and returns. Conversely, a lower TVL signals limited funds and reduced yields.

Despite this decline, EigenLayer remains dominant in Ethereum restaking. In Q2 2024, restaking on EigenLayer surged by 36%, with 4.3 million ETH restaked. Liquid Restaking Protocols (LRTs) accounted for most of this, holding 2.28 million ETH.

The appeal of restaking isn’t limited to Ethereum. As BeInCrypto previously reported, Jito, a liquid staking protocol on Solana, also introduced its own restaking services.

Source

0 142

Share FacebookTwitterGoogle+ReddItWhatsAppPinterestEmail