Following the recent announcement of its much-anticipated airdrop, EigenLayer, the second-largest Ethereum-based Decentralized Finance (DeFi) protocol by total value locked (TVL), received community backlash. The launch of the airdrop has polarized the crypto community.
EigenLayer (EIGEN) Airdrop Restrictions and Transfer Prohibitions
The criticisms over the rollout of EigenLayer’s token, EIGEN, have to do with its restrictive provisions and lack of clarity, leading to discontent among early adopters and other stakeholders.
One of the airdrop’s most contentious aspects is the prohibition on transferring EIGEN after claiming. Although early adopters can claim their tokens from May 10, the Eigen Foundation, responsible for overseeing the airdrop, remains silent as to when EIGEN will become transferable. This indefinite restriction from the team is frustrating to many as it limits their ability to trade or move the tokens.
However, the Eigen Foundation in a communication justifies this measure by stating that it wants to conduct extensive community discussions to gather feedback on the token’s design and implementation before allowing free trade.
Here’s why EigenLayer's airdrop is causing a stir in the crypto community.
Do you agree with the critics, or do you think it was a fair airdrop?https://t.co/sQBTFiOJ1t pic.twitter.com/JV4VxeplhK— Laura Shin (@laurashin) April 30, 2024
The Eigen Foundation’s linear distribution model is also causing discontent as a large chunk of the token allocation favors investors. With a net supply of over 1.67 billion, 29.5% is reserved for investors and 25.5% for early contributors. The remaining 45% is split to three community segments.
The linear model aims to prevent Sybil attacks, where a single person uses multiple addresses to gain an unfair advantage in airdrops. Nonetheless, critics insist that the approach favors whales over small long-term users and early adopters.
Allegations of Insider Trading and Communication Issues
Another cause for anger among community members is the vague communication on eligibility.Â
Eigen Foundation’s documentation stated that users interacting with DeFi positions, like decentralized finance protocol Pendle, would not be eligible for the first phase of the airdrop. Pendle users are outraged as they believe they were excluded from the entire first season.
The outrage seems to be responsible for bearish market sentiments as Pendle market value dipped 4.49% to $4.17 according to data from CoinMarketCap.Â
Brianna Montgomery, strategy lead at Eigen Labs, has however clarified that Pendle users were only excluded from phase one, not from season one. This implies that they would receive an allocation in a later phase.
Other causes of discontent include allegations of insider trading after pseudonymous trader GCR deposited a substantial amount of wrapped Ethereum into EigenLayer’s smart contract for Binance’s liquid staking token. The wallet identified by Arkham Intelligence made deposits between Dec. 22 and Jan. 3, leading to speculation about whether the timing was intended to exploit the snapshot system for personal gain.
