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EigenLayer’s EIGEN airdrop may signal the end of once-popular “stitches.”
What is perhaps the most publicized cryptocurrency launch ever will begin on Friday, but not necessarily with the kind of enthusiasm its creators might have hoped for.
EigenLayer, a renewal platform on Ethereum, it accumulated cryptocurrency deposits worth $16 billion in the first year of opening to users, even before its official commercialization. launched last month. When most of that money arrived, the project was little more than a glorified blockchain wallet on the Ethereum blockchain: a non-functional safe that held the prospect of future rewards but still had no actual features. (Although the project “launched” its joint security service in April, many mission-critical features they remain missing).
But it is the details of token distribution that have generated the most criticism about X and other social media platforms. The tone has become so negative that some industry officials are wondering whether it will lead to the end of the wildly popular crypto incentive system known as “points” rewards.
As the main incentive model, EigenLayer depositors were rewarded points – counts tracked by EigenLayer and other third parties accumulated based on how much a person has deposited into the project and for how long. The dots were not themselves crypto tokens, but most depositors expected that they would eventually be converted into them, an expectation that followed months of similar programs from other emerging crypto projects.
In addition to earning points by depositing on EigenLayer, some people started trading them directly on platforms like Pendle, which offered up to “40x leverage” on trading points.
EigenLayer’s points program helped it attract users and attract billions of dollars, but when the EIGEN token airdrop was finally announced last week, the project’s community erupted in anger.
First, it was revealed that the tokens would not be transferable until a yet-to-be-determined future date, meaning users would have to wait even longer to cash out their investments.
“Although there was purposely no communication saying that the token would be transferable on day one, the fact that the EigenLayer points program has been going on for almost a year has certainly led to the expectation that depositors would be able to able to claim their tokens on day 1,” said Luxas Outumuro, who leads research at IntoTheBlock, a blockchain market intelligence firm. “It is understandable that they want to further decentralize their token, but this was a mismanagement of expectations that was not adequately addressed.”
Further backlash revolved around EigenLayer’s decision to limit its air launch to users from select regions, even though the project had not imposed geographic restrictions on users making deposits and earning points. Users from more than a dozen countries, including the United States, Canada and China, will be barred from the airdrop.
“There was so much ‘wink, wink’ going around about points and how they were making an infinite-sum game where everyone would win and all that shit. And then they basically cut off two-thirds of the potential users and recipients of the airdrop,” said an EigenLayer venture investor who agreed to speak on condition of anonymity. “I think it’s absolutely right to isolate the United States from an airdrop, but then not let them use it in the first place.”
More criticism has come over the “Season 1” token distribution plan, which will put EIGEN tokens in the hands of some point earners but force others to wait for a “Season 2” airdrop that has not been detailed. This means that users who have deposited to EigenLayer via some liquid retaking services and other third-party platforms do not yet know how many EIGEN tokens they will receive, despite these services being responsible for a large portion of EigenLayer’s overall deposits.
“EigenLayer chose to allow others to, in a sense, remortgage and play all these crazy games. They could have just said, ‘No, don’t do that. We’re not committed to honoring these points.’ ,’” said Mike Silgadze, founder of the liquid restaging platform Ether.Fi.
EigenLayer he revised his symbolic plans in response to backlash from the community, but the changes are unlikely to be enough to bring EigenLayer back into the crypto community’s good graces.
EigenLayer isn’t the only recent project that has struggled to meet the expectations set by a points-based program.
Renzo, addressed a liquid restaking protocol on EigenLayer similar backlash last month when its points system failed to meet investor expectations. Blur, one of the creators of crypto points, received criticism for repeatedly extending its points window and changing the rules on when and how tokens would be distributed on planes.
Some point programs have turned into airdrops with little controversy, but more and more of them – particularly larger projects, like EigenLayer – have led to disappointment.
Many investors are starting to think that the practice, which has become ubiquitous among crypto startups, may finally be nearing an end.
Silgadze explains that the points were a way to “encourage protocol activity before the token launch.” This improved on the old system, where users “farmed” for an airdrop by interacting with a blockchain protocol, but didn’t know exactly what kind of activities would ultimately lead to the airdrops. Points-based systems “give a lot more clarity to people about what the protocol wants you to do,” Silgadze said.
While point systems are a great way to attract potential users, they also exist as a result of regulatory protection. Crypto companies are reluctant to sell tokens directly in ICO (Initial Coin Offer) style.as this could put them in the crosshairs of regulators.
But when it comes to protecting investors and offering transparency, Robert Leshner, founder of Compound and Robot Ventures, an investor in EigenLayer developer Eigen Labs, thinks the dots are the worst of all worlds. “The main goal of investor protection is to make sure that there is no information asymmetry between investors and sponsors. And the dots create the largest information asymmetry that exists in the cryptocurrency industry,” he said. “Everything is at the discretion of the team and users and investors just pray to be treated right by the team.”
Leshner believes last year’s streak of failed points will eventually lead to the practice of extinction.
“When you see one of the biggest, most ambitious, most authentic projects in all of crypto, EigenLayer, f*ck a points program: If EigenLayer can’t do it properly, who can do it? Nobody can do it.”