Ethereum Reststaking Protocol EigenLayer Faces Criticism Over Its Tokenomics Structure

After releasing its native token, EIGEN this week, Ethereum restaking protocol EigenLayer is facing criticism over its tokenomics structure.

Ethereum restaking protocol EigenLayer has faced criticism over its tokenomics structure following the launch of its native token, EIGEN, this week.

Typically, the weeks and months leading up to the launch of a token are filled with hype and anticipation, and when the airdrop or launch finally occurs, investors' activities and expectations keep the token’s price high.

Over time, there is a gradual drop, like in the case of Hamster Kombat’s HMSTR tokens, which were airdropped a few days ago. Judging by the current ecosystem musing, EIGEN might face a similar sentiment. Depending on how investors feel in the short term, it has key support at $3.

The EIGEN token initially reached as high as $4.39 in early trading hours on October 1. However, it has seen more than a 17% slip in the past 24 hours. According to current market data, the token has lost 25% since hitting an ATH of $4.25.

EIGEN is now trading at $3.40, with a market cap of $636.8 million. The significant price drop is not unexpected, considering other key performance data.

Its trading volume has also plunged by 38.69%, coming in at $523.6 million. With this figure, it is now ranked the 19th most traded token. The drop in trading volume usually indicates waning interest in the token among investors.

The EIGEN airdrop saw massive success, including its listing on crypto exchanges like Binance and OKX. The Eigen Foundation pointed out to developers how they can use staked assets to build Actively Validated Services (AVSs) within the ecosystem.

Its key metrics looked right at the time. However, some investors and community members became concerned about a lack of transparency regarding the token supply.

Based on the insights provided by Etherscan.io, the maximum supply for the token is 1.68 billion, and its circulating supply is 186 million. The asset has a fully diluted value of $5.8 billion with these figures. This figure excludes tokens not in circulation worth around $650 million.

Consequently, many community members are concerned about some of those locked tokens from early investors who bought during discounted funding rounds.

Around three groups of investors had already invested in the project before it was finally launched. These include those who bought in EigenLayer’s $14.4 million seed round, $50 million Series A, and most recently, a $100 million raise in February. All these entities are free to stake their locked tokens to yield rewards.

The Call For Transparency

So far, the EigenLayer has seen 130 million EIGEN tokens staked. Initially, the stakes were considered a part of the claimed tokens. It turns out that 70 million of these tokens belong to this small group of early investors.

EigenLayer investor TardFiWhale.eth took to X to explain, “Transparency will enable us to engage in more honest and open discussions about these issues.”

Considering how data availability protocol Celestia suffered a similar incident after its token launch, crypto projects may need to start paying more attention to their airdrops and tokenomics.

Project innovators might need to create better guidelines and instructions for the airdrop allocations.

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