EXCLUSIVE: Why The EigenLayer Airdrop Both Excites And Disappoints

The revelation of the long-anticipated details about the EigenLayer airdrop was met with a mix of excitement and significant criticism. Benzinga talked to industry experts to find out why.

What Happened: The airdrop, a strategy to distribute 45% of the 1.67 billion tokens to the community, will commence with a phased rollout that initially grants 5% of the tokens across multiple seasons.

This strategy notably emphasizes rewarding individuals who have staked with the protocol.

However, the plan also introduced a contentious issue: the initial non-transferability of the tokens.

EigenLayer announced that the tokens would be non-transferable for several months post-launch, a decision intended to allow time for the development of decentralization and to solidify community consensus on the token’s utility and governance.

Crypto analyst Aman emphasizes the complexity of the situation, noting that “EigenLayer promised to allocate 15% of EIGEN supply to the community, yet only 5% of the initial allocation went to early users who participated in Season One.”

This has led to confusion and dissatisfaction among stakeholders, who expected a more substantial share. Furthermore, the restriction that tokens could not be transferred or sold until a later, undisclosed date compounded the community’s frustration.

The non-transferability issue is particularly prickly because it impacts the liquidity and immediate value realization for participants receiving the airdrop, potentially trapping their capital without immediate recourse or benefit.

Chris Hermida, the co-founder and CEO of Switchboard, an oracle network, says this has been one of the most anticipated launches of the year and trying to balance the interests of many stakeholders at their scale involves tradeoffs.

“You can't please everyone, but given the demand for AVS's, yield, and the need for economic security on certain types of applications, I don't think it will slow down interest on the builder front even if the launch potentially results in less Ethereum ETH/USD being staked on Eigenlayer in the short term,” says Hermida.

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Further Controversies And Market Reaction

Adding to the project’s challenges, the airdrop explicitly excludes participants from several countries, including the U.S. and Canada, likely due to regulatory risks.

Additionally, VPN users are blocked from participating, despite being able to use the platform for other activities.

This inconsistency has sparked further criticism among excluded users who feel unfairly treated by the airdrop’s eligibility criteria.

The complexity of the tokenomics and the underlying concepts described in EigenLayer's whitepaper have also been points of contention.

Terms like "Universal Intersubjective Work Token" and “intersubjective forking” have been critiqued as overly complicated, potentially alienating less technically-inclined users.

Confusion also arose regarding the eligibility of Pendle users, with initial communications suggesting they might be excluded from the airdrop.

Although this was later clarified to include Pendle users in receiving a portion of the airdrop, the damage had been done, with Pendle's price dropping 16% since the announcement.

Industry Leaders Weigh In

Experts point out that heightened expectations among crypto users about receiving airdrops have perhaps reached an unsustainable peak, influenced by the frequency and visibility of recent airdrops.

Markus Levin, co-founder of XYO Network, contextualizes the challenges, stating, “Carrying an airdrop is no easy task. It's technically challenging, and there are also legal and regulatory challenges.”

Rebecca Liao, CEO of Saga, echoes this sentiment, pointing out the difficulty in balancing rewarding users and managing expectations.

“There are a lot of users who simply farm any and all protocols for points, with the intention of dumping their airdrops as soon as they're live,” she explains.

This behavior stresses the need for strategic airdrop campaigns that consider long-term engagement and genuine contribution to the ecosystem, rather than transient participation.

Impact On EigenLayer's Operations And Future

The backlash has already had tangible effects on EigenLayer’s operations.

Data from Dune Analytics indicates a significant spike in withdrawals in the last 24 hours, with approximately 150,000 ETH ($457 million) removed from the platform.

Despite this, the total value locked in EigenLayer's smart contracts remains robust at $15.6 billion, indicating that the platform still holds a strong position in the market for now.

Mohak Agarwal, CEO & Founder of Claystack says upcoming airdrops will prioritize transparency over mystery.

He adds that while the mysterious approach may initially evoke excitement, it often leads to disappointment later on, as seen in recent airdrops like Etherfi and Renzo – prompting structural changes after announcing the initial airdrop.

“This pattern suggests a tendency for projects to announce a small airdrop supply initially, anticipating user disappointment, and then offering additional tokens to appease them—a short-term fix that isn’t sustainable in the long run. Additionally, I anticipate a shift towards implementing anti-Sybil protections from the outset, rather than removing users at a later stage, ” Agarwal says.

What’s Next: With Benzinga’s upcoming Future of Digital Assets event on Nov. 19, these topics are poised to take center stage, offering a platform for deeper analysis and shared learning from the recent airdrop experiences.

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