What’s the deal with EigenLayer’s $EIGEN token?

Lack of clear communication and restrictive distribution strategies have led to a backlash against EigenLayer’s $EIGEN token airdrop.

AutostratusThe highly anticipated airdrop of the $EIGEN token has sparked considerable controversy since its announcement. The protocol has been criticized due to several restrictive provisions and allocation strategies that deviate from community expectations.

Let’s learn more about what’s going on behind the scenes…

Initial enthusiasm and subsequent disappointment

EigenLayer has announced the airdrop of its native token, expected in May, sparking initial excitement in the cryptocurrency community. However, the distribution details quickly led to widespread disappointment, highlighting recurring problems with allocation strategies in blockchain initiatives.

Since its inception in June last year, EigenLayer has allowed users to deposit and buy back Ethereum from various liquid staking tokens, becoming the second largest DeFi protocol with $15.64 billion in total value locked, according to DefiLlama data.

Allocation and transferability problems

The native token, totaling 1.67 billion, was introduced to enhance the EigenLayer ecosystem. However, the independent and non-profit Eigen Foundation allocated 45% of these tokens community-related activities, including stakedrops, community initiatives and ecosystem development.

Despite this seemingly generous allocation, the community’s enthusiasm faded when they learned that only 15% of the tokens would be distributed through what EigenLayer called a “stakedrop.” Specifically, in the first distribution season, only 5% of the total token supply will be allocated to users based on a snapshot of their staking activity as of March 15, 2024.

Furthermore, of this endowment, 90% cannot be claimed until May 10 and will not be immediately transferable, which adds to the frustration. In contrast, 55% of tokens are reserved for investors and early contributors, prompting criticism within the crypto community over the fairness of token distribution.

Trade restrictions and strategic objectives

The Eigen Foundation has set specific “goals” to be achieved before allowing $EIGEN to trade freely. This includes holding extensive community discussions to solicit feedback on the token’s design, as well as defining and understanding key payout and redemption features before $EIGEN becomes transferable.

“We believe this approach will best support the long-term growth and maturity of the EigenLayer ecosystem,” the foundation said.

The lack of transferability has made $EIGEN unmarketable for the foreseeable future, dissatisfiing many community members.

Snapshot timing and linear distribution problems

Furthermore, the community criticized the March 15 choice of instant voting to determine the assignment addresses. Some community members were angry at the timing of the vote because they wanted points earned after March 15 to be included in the airdrop count for Season 1, even though these will be taken into account for subsequent seasons.

Additionally, the EigenLayer airdrop follows a linear distribution model, meaning that the percentage of a user’s total points corresponds directly to their share in the community’s initial distribution. This method typically favors whales over smaller investors, exacerbating concerns about fairness and fairness in the distribution process.

Confusion arising from Airdrop documentation

The release of documents detailing the specifics of the launch coincided with the announcement but fueled confusion rather than clarity. Several users have misunderstood the phases and seasons of the airdrop program, especially regarding their eligibility to participate in positions related to the Pendle decentralized finance protocol.

While phases and seasons describe different periods within EigenLayer’s launch strategy, this distinction was not immediately clear to everyone, leading to further frustration within the community.

Early Pendle adopters expressed outrage after being left out of EigenLayer’s first airdrop.

Wider implications and community reaction

This confusion and dissatisfaction with the execution of the airdrop reflects broader debates about fairness and transparency in cryptocurrency token distributions.

Voices within the community, such as those on EigenLayer’s Discord and X (formerly Twitter), have expressed considerable discontent, pointing out the perceived disadvantages of the linear allocation model and the restrictive conditions imposed on newly minted tokens.

Sentiment has been particularly negative among early adopters and small investors, who feel sidelined in favor of new, large-scale entrants.

According to cryptocurrency investor CoinMamba, the allocation is not uniform.

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