EigenLayer Faces Criticism Over Token Lock-Ups and Staking Rewards
The recent release of EigenLayer’s native EIGEN token has been met with both excitement and criticism. The price surged moments after it was listed on exchanges, leading to a price discovery period culminating in a 22% slide from its momentary record high. However, beneath the surface, concerns are being raised about the lack of transparency regarding token supply.
At the heart of the issue is the fact that staking rewards received by early investors are not restricted by token lock-ups. This has led to accusations of favoritism and a perceived disregard for the interests of the broader community. The situation echoes Celestia’s token launch, which was followed by a 75% plunge as investors could sell staking rewards.
The total supply of EIGEN tokens is fixed at 1.68 billion, with a circulating supply of 186 million. These figures give the asset a fully diluted value of $5.8 billion and a market cap, excluding tokens not in circulation, of $650 million. The issue many community members raise stems from a portion of those locked tokens, which belong to early investors that bought during heavily-discounted funding rounds.
Investors who bought into EigenLayer’s $14.4 million seed round, $50 million Series A, and most recent $100 million raise in February now can stake their locked tokens to yield rewards. As it stands, there are 130 million EIGEN tokens staked. Many believed these were all a part of the claimed tokens but in fact, 70 million of these tokens belong to this small group of early investors.
Data availability protocol Celestia suffered a similar issue following its token launch, as early investors staked their dominant TIA stacks to receive tradable rewards, which many then traded away. TIA has plunged 75% since February. EigenLayer investor TardFiWhale.eth wrote on X that the project recently updated its documents to state that "Eigen Labs investors are not restricted from staking" and that rewards are not subject to lock-ups.
The X post claims this information wasn’t in an archived document from mid-September. EigenLayer’s blog post on "token disclosures" was last revised on Sept. 30. Transparency will enable us to engage in more honest and open discussions about these issues, TardFiWhale.eth wrote. However, I also believe that the rewards earned from staking should be locked until the cliff is reached at the end of the 12-month vesting period.
EigenLayer allocated 86 million tokens to early adopters, including node operators and stakers. However, this has led to criticism as whales were able to receive disproportionate rewards compared to the general population. Tron founder Justin Sun received an airdrop worth $8.75 million, almost all of which was deposited to HTX, the exchange formerly known as Huobi, according to data provider Arkham.
HTX made the following statement in regards to Sun’s wallet: "We categorically deny any connection between the mentioned wallet address and Justin Sun, Global Advisor of HTX, or any member of his team. There is absolutely no evidence to support such claims. HTX maintains a policy of not commenting on the transactions of individual wallet addresses."
The situation has raised questions about EigenLayer’s governance model and its ability to prioritize the interests of its broader community. With EIGEN recently trading at $3.57, having initially surged as high as $4.39 according to CoinMarketCap data, investors are left wondering if the project is truly committed to transparency and fairness.
The Impact on EigenLayer’s Community
The revelation has sparked concerns among EigenLayer’s community members, who are calling for greater transparency and accountability from the project’s leadership. Many feel that the lack of clear guidelines on token supply and staking rewards creates an uneven playing field, where early investors can reap disproportionate benefits at the expense of later adopters.
Investors who bought into EigenLayer’s seed round or Series A funding rounds now have the opportunity to stake their locked tokens and receive rewards. However, this has raised questions about fairness and the long-term implications for the project’s governance model. With 70 million tokens belonging to early investors, many are left wondering if these individuals will prioritize their own interests over those of the broader community.
Celestia’s Similar Issue
The situation echoes Celestia’s token launch, which was followed by a 75% plunge as investors could sell staking rewards. This has raised concerns about the ability of early investors to influence the project’s direction and create an uneven playing field for later adopters. With both projects facing similar issues regarding transparency and fairness, it remains to be seen how EigenLayer will address these concerns and ensure that its governance model is truly representative of its community.
A Call for Transparency
The situation has sparked a call for greater transparency from EigenLayer’s leadership, who are being urged to provide clear guidelines on token supply and staking rewards. Investors are seeking assurance that the project will prioritize their interests and create a fair playing field for all participants.
EigenLayer investor TardFiWhale.eth wrote on X that "transparency will enable us to engage in more honest and open discussions about these issues." The post highlights the importance of clear communication from the project’s leadership, who must address concerns about fairness and accountability. With the project’s governance model at stake, EigenLayer must ensure that its leadership is transparent and committed to representing the interests of its broader community.
Conclusion
The situation surrounding EigenLayer’s token lock-ups and staking rewards raises important questions about transparency and fairness in the cryptocurrency space. As investors and community members continue to voice their concerns, it remains to be seen how EigenLayer will address these issues and ensure that its governance model is truly representative of its community.
With 70 million tokens belonging to early investors and a fixed supply of EIGEN tokens, the project must prioritize transparency and accountability. By providing clear guidelines on token supply and staking rewards, EigenLayer can build trust with its community and create a fair playing field for all participants.
As the situation unfolds, it will be interesting to see how EigenLayer responds to these concerns and ensures that its governance model is truly representative of its community. With the project’s long-term success hanging in the balance, it remains to be seen whether EigenLayer can address these issues and emerge stronger than ever before.