EigenLayer’s EIGEN Airdrop Might Signal Demise of Once-Popular ‘Points’

In its inaugural year on Ethereum, EigenLayer amassed an impressive $16 billion in crypto deposits before officially debuting to users – this despite only offering rudimentary blockchain wallet functionality at the time. The project primarily served as a potential reward repository, lacking operational features beyond the promise of future benefits. However, it did introduce its pooled security service in April, yet several essential elements are still absent.

Critics have raised concerns primarily about the specifics of how tokens are distributed in X and similar social media platforms. The discourse has grown increasingly pessimistic, with some industry insiders questioning whether this could ultimately threaten the success of the widely-used “points” reward system in crypto.

The EIGEN airdrop

As a crypto investor, I have engaged with EigenLayer, a project that offers rewards in the form of points for depositing funds. These points are kept track of by EigenLayer and external parties, and their accumulation is determined by both the amount and duration of my investment. However, it’s essential to note that these points don’t represent crypto tokens themselves but are anticipated to be exchangeable for them in the future. This anticipation stems from similar incentive models adopted by other emerging crypto projects over several months.

Some individuals not only accrued points by funding EigenLayer, but also engaged in direct trading of these points on exchanges such as Pendle. On these trading floors, users could benefit from a maximum leverage of up to 40 times when dealing with points transactions.

As an analyst, I’ve observed that EigenLayer’s point system played a significant role in drawing users to the platform and amassing billions of dollars in value. However, when the long-awaited announcement of the EIGEN token airdrop came last week, the project’s community reacted with fierce anger.

Initially, it came to light that the tokens could not be transferred before a specified later time; thus, investors had to endure further delays before they could realize the returns on their investments.

As a researcher at IntoTheBlock, I’ve observed that despite the absence of an explicit statement on day 1 that the EigenLayer points could be transferred, the longevity of the program – nearly a year old – had created an expectation among depositors that they would be able to claim their tokens then. It’s reasonable for the team behind EigenLayer to aim for decentralization, but failing to manage these expectations effectively was a misstep.

EigenLayer’s choice to limit the airdrop to specific regions drew criticism, despite the fact that the project did not impose any geographic restrictions for users making deposits or accumulating points. Users in over a dozen countries, such as the United States, Canada, and China, will be excluded from this distribution event.

As a researcher investigating the recent controversy surrounding EigenLayer’s point distribution and airdrop policy, I came across some ambiguous statements suggesting an infinite sum game where everyone would supposedly win. However, I was taken aback when I learned that two-thirds of potential users and airdrop recipients were excluded from the project. In my opinion, it is acceptable to exclude U.S. participants from the airdrop; nonetheless, it seems inconsistent not to allow them to use the platform altogether.

As an analyst, I’ve noticed that there have been criticisms concerning the distribution plan of EIGEN tokens in “Season 1.” This strategy involves allocating tokens to certain earners, but leaves others waiting for a vaguely defined “Season 2” airdrop. This creates uncertainty for users who deposited into EigenLayer through various liquid staking services and third-party platforms. Although these intermediaries account for a significant portion of EigenLayer’s total deposits, the number of tokens they will receive remains undetermined.

As a researcher examining the decision made by EigenLayer, I would rephrase it this way: “EigenLayer opted for a more permissive approach, enabling others to engage in complex financial maneuvers akin to rehypothecation. They could have simply stated that such activities were off-limits and that they held no obligation to honor those transactions.”

In light of the strong reaction from the community, EigenLayer adjusted its token strategy. However, it remains uncertain if these modifications will be sufficient to win back the trust and acceptance of the crypto community.

The problem with points

“There are other modern initiatives, including EigenLayer, that have faced challenges in delivering as intended based on their reward systems.”

Last month, Renzo on EigenLayer, which is a liquid staking protocol, encountered criticisms similar to those faced by Blur, one of the pioneers in crypto points, over their respective reward systems. Investors expressed disappointment as neither platform met their expectations. As for Blur, they have been subjected to criticism due to their repeated extensions of the points window and alterations in the rules governing when and how tokens would be distributed.

As a crypto investor, I’ve noticed that some token distribution programs have evolved into airdrops without much fuss. However, I’ve been left feeling disappointed by an increasing number of these events, especially those associated with larger projects such as EigenLayer.

Several investors have started to ponder if the common practice among crypto businesses is approaching its demise.

Silgadze points out that points served as a means to stimulate protocol engagement prior to the token launch. This enhancement was more transparent than the previous method, which required users to engage with a blockchain protocol in order to qualify for an airdrop, but left uncertainty regarding the specific actions that would result in rewards. By implementing point systems, users are provided with clearer guidance on the desired protocol interactions.

As a researcher studying the cryptocurrency market, I’ve discovered that point systems serve as effective incentives for potential users. However, these points systems are not merely voluntary initiatives; they also emerge from regulatory requirements. Cryptocurrency companies are cautious about directly selling tokens through Initial Coin Offerings (ICOs) due to the regulatory scrutiny such actions may attract.

From a investor protection standpoint and ensuring transparency, Robert Leshner, founder of Compound and Robot Ventures, who invested in EigenLayer developer Eigen Labs, believes that points present the most significant problem. “The core of investor protection lies in preventing information disparity between investors and sponsors. Points introduce the largest information gap found in crypto,” he stated. “All decisions are at the team’s discretion, leaving users and investors to hope for favorable treatment.”

As a researcher studying trends in various practices, I believe that the accumulation of failures in the past year, as pointed out by Leshner, may ultimately result in the waning or even demise of the practice.

As an analyst, I’ve come across numerous cryptocurrency projects during my research. Among them, EigenLayer stands out as one of the most significant, ambitious, and genuine initiatives I’ve seen. However, if such a distinguished project like EigenLayer were to stumble over something as seemingly simple as creating an effective points program, I would be concerned. If even EigenLayer can’t get it right, who then is capable of doing so? The answer, in my opinion, is that no one else may be up to the task.