We need to talk.
Now that I have increased your anxiety, I want you to define neutrality.
On Thursday, CoinDesk published a report on its investigation into EigenLayer for distributing a list of employee wallet addresses ahead of coin giveaways.
“We want to make it clear that we have no knowledge or evidence that any Eigen Labs employee has pressured any team to gain improper benefit for the Eigen Labs corporate entity or its employees,” Eigen Labs said in a message to the community last night. It is also looking for any evidence of “inappropriate behavior.”
In short, Eigen Labs employees were reportedly receiving cryptocurrency from projects operating in the ecosystem, and as I mentioned earlier, wallet addresses were allegedly shared.
This is not the first time Eigen Labs has faced this type of scrutiny. The firm noted that it initially changed its incentive policy back in May after Justin Drake and Dankrad Feist of the Ethereum Foundation signed on as consultants.
“As an Eigenlayer project, we communicate with the team regularly and we have never had any requests like this about our upcoming airdrop. On the contrary, they are very helpful to us and I believe that projects can reward anyone they deem important, it just needs to be verified by the community first,” Peter Chris, co-founder of Gasp.xyz, told me.
But I’m not here to focus on “whether they did it or not.” Instead, this report and the response from Eigen Labs (which changed its policy on such employee payments because they claim to want to be neutral) have started an important discussion in this area: what does it mean to be neutral, and how can projects avoid conflicts of interest?
“It’s clear that when participants accept airdrops as tips, such incentives influence the business decisions of protocol developers,” said Tim Shekihachev, co-founder of Resolv Labs. “Compared to public companies, where business gifts rarely involve more than a few managers involved in the transaction, the conflict of interest in such situations is more pronounced because a large part of the team can benefit, and everyone is colluding to bypass actual management.”
“Ironically, for strategic VCs, their lack of protection is currently offset by outsized returns over shorter investment periods, so there doesn’t seem to be any pushback against transparency. People are simply optimizing for other, more important factors that influence investment decisions.”
Nika Coreli, co-founder and CTO of Hinkal, said that “privacy is critical in trading strategies,” but “everyone needs to play fair” or it will put the industry at risk.
When it comes to these types of conversations, there is no easy answer or solution.
Mason Borda, CEO of Tokensoft, questions whether such payments are really “worth it in the long run.”
“EigenLayer has a smart, focused team, which means they will be looking at all product decisions from multiple angles and weighing the tradeoffs. Payouts to individuals will have little impact on those conversations,” Borda said.
I specifically asked Borda whether we need an industry standard to move forward, because the current situation is murky.
“It really should be up to the founders,” he said. “Founders should apply whatever standards they have for employees acting as consultants to third parties. The best way to stay fair is to adhere to existing industry norms.”
For its part, Eigen Labs says “community trust in our neutrality is critical,” adding that they took steps to mitigate potential incentives “many months ago.” To be fair, May was only about four months ago, but the point remains: the team says it was trying to get ahead of that time.
One thing is for sure: this report is a spark for a longer, more robust dialogue in the crypto space. One that can lead to positive, transparent changes in the industry.
– Katherine Ross
Data center
- BTC and ETH in essence apartment that daypriced at $58,400 and $2,600 each.
- RUNE, FTM And AAVE to top the top 100 with growth of 6% to 3.5%. APT, TIA, VIF And PEPE Otherwise, everyone lost more than 6%.
- EigenLayer competitor Symbiotic’s TVL has risen 50% in the past day to $1.56 billion.
- ABOUT 47,000 addresses interact with EigenLayer per month, down from 72,000 in July and nearly 200,000 in June. The number of people controlling these addresses is unknown.
- The number of daily Runes transactions has doubled in the last few days, from around 20,000 – 30,000The number of BRC-20 transfers more than doubled to over 72,000.
Hey-gon-Layer
EigenLayer has had some unpleasant experiences again.
Re-staking should be one of Ethereum’s biggest selling points. Currently, over 28% of the total ETH supply is directly staked on the blockchain, with new validator counts being added every other day.
The popularity of ETH staking has driven the native yield down to 3.21% from over 4.2% last year. Stakers can earn additional MEV on top of these stakes, but by design, ETH yields decline as more supply is locked up.
Liquid staking platforms like Lido and Rocket Pool allow users to tokenize, trade, stake, and otherwise leverage their ETH stakes for potential gains, opening the door to higher yields beyond the native annual interest rate.
Meanwhile, EigenLayer aims to reward re-stakers with additional yield of its own that is reliable. Stakers who would normally go with Lido to get stETH could instead simply earn additional rewards for providing economic security to other projects built on EigenLayer (which it calls actively verified services).
That was enough for EigenLayer and the apps in its orbit, like ether.fi and renzo, to take a bite out of Lido’s lunch.
But EigenLayer’s yield functionality hasn’t launched yet. That may happen later this year, but in the meantime, the protocol is rewarding early re-stakers with points and an airdrop — incentives for choosing yield-generating DeFi applications this cycle.
The aforementioned report by Sam Kessler and Danny Nelson describes instances of mutual manipulation of interests between EigenLayer and the platforms that use it to benefit their users, specifically AltLayer, Ether.fi, and Renzo.
Currently, over 30% of EigenLayer’s TVL is on Ether.fi and almost 9% on Renzo.
This is obviously not a good look. Putting aside the fact that pushing blockchain startups to swear loyalty to your employees smacks of cartel collusion, speculation on drops via Sybil attacks is one of the most long-standing and painful problems in cryptocurrency.
And given that EigenLayer itself strictly restricted recipients of its own EIGEN tokens (not yet for sale) in May in an attempt to weed out fake users, this whole situation raises a lot of awkward questions, as Catherine noted above.
It’s too early to tell whether this will have any significant impact on EigenLayer, the Ethereum staking landscape, or the broader crypto space. And based on Kessler and Nelson’s findings, something similar is almost certainly happening elsewhere.
We know that inflows turned negative for the first time in months after EigenLayer published the EIGEN whitepaper and details of its immediate release date.
And its weekly net flows remained negative after the report, while its rival Symbiotic saw a surge.
More specifically, the pre-market price of EIGEN tokens has increased by 70% over the past few days on the Whales Market points trading platform.
The mood may not be very good, but something tells me that the market will soon forget about everything – until another mess occurs.
— David Kanellis
Works
- Steve Cohen’s Hedge Fund Point72 Announces Investment in Bitcoin Miner TeraWolf.
- Coinbase returned to Hawaii, said Ben Strack of Blockworks.
- JPMorgan Believes Stablecoin Regulation Could Be Problematic for Leash.
- MakerDAO removed WBTC in a vote on Friday morning, leading to another update in the BitGo-Justin Sun saga.
- The number of hacks has increased slightly this year despite the upbeat market situation, a new report reports. Chain analysis the report shows.
