Cashing out $5.5 million: EigenLayer employees' "airdrop bribery"

Author: Ismay

Note: This article was first published on August 16

Yesterday, the crypto media CoinDesk published an article titled "Top crypto startups offer their employees airdrops of other projects" exposing EigenLayer's forced request for ecological project airdrops. According to an investigation by CoinDesk, employees of Eigen Labs, the company behind EigenLayer, have accepted millions of dollars in payments from some other projects that rely on its technology, raising questions about potential conflicts of interest.

Wu said WuBlockchain analyst @defioasis found 51 suspected Eigen Labs employee addresses through on-chain investigation, which received a total of 487,933 ETHFI, 1,964,838 ALT and 1,335,090 REZ, with a peak value of more than 5.5 million US dollars. Among them, 41.3% of the addresses chose to sell ETHERFI; 41.5% sold ALT, 31.7% continued to pledge ALT; 40% sold REZ.

EigenLayer bribed?

One ​​team told CoinDesk that they sent each Eigen Labs employee a portion of the newly issued cryptocurrency as a “thank you.” Each employee ultimately received tokens worth $80,000. Another team said they received a list of wallet addresses from Eigen Labs and felt pressured to pay the tokens or risk jeopardizing their relationship with a company that could make or break their business.

In early 2024, more than a dozen blockchain applications rushed to launch on EigenLayer, including cloud computing services and data storage platforms. Joining the wave were “liquid restaking” services that made deposits on EigenLayer more user-friendly. These new applications consumed millions of dollars in venture capital and created billions of dollars worth of cryptocurrency when the market was good.

They distributed the new tokens through airdrops. In the process, Eigen Labs helped its employees access these airdrops. They distributed a list of employee wallet addresses. But the company insisted that they would only provide this list if the projects actively requested it.

"For projects interested in airdropping to Eigen Labs, we provided a list of all Eigen Labs employee addresses," the company said in a statement to CoinDesk. Alan Curtis, Eigen Labs' chief business officer, reiterated that the company would only send this list to teams that contacted and were interested in airdropping to Eigen Labs or its employees.

But one team told CoinDesk that Eigen Labs sent them the list even though they didn't ask. The project's developer said Eigen Labs asked the project to provide airdrop rewards to its employees. Due to Eigen Labs' influence, the request was difficult to ignore, and the developer said in an anonymous interview that he was worried about retaliation.

According to CoinDesk's analysis, AltLayer distributed 46,512 ALT to each Eigen Labs employee. Ether.Fi followed closely behind, distributing 10,490.9 ETHFI per person. Then it was Renzo, who received 66,667 REZ per person. At the peak of the price, the value of these three airdrops was approximately $30,000, $80,000 and $16,666 respectively.

On-chain records show that from the end of January to mid-June 2024, Eigen Labs employees received a total of 487,928 ETHFI (valued at $3.5 million at its peak), 1,733,342 REZ (valued at $433,300 at its peak), and 1,539,563 ALT (valued at $1.02 million at its peak).

Some industry sources who spoke to CoinDesk said that airdrops to Eigen Labs employees have become a norm in the crypto industry: it is one of the common benefits of working for blockchain startups with close industry ties, although it is rarely discussed publicly.

"It's a very strange crypto phenomenon that people give away free money from time to time," said Mike Silagadze, CEO of Ether.Fi.

Compared to government-regulated public companies, private crypto startups have wide latitude in deciding how to disclose key information, such as percentage of token holdings.

AltLayer was the only project to proactively disclose its allocations to the Eigen Labs team in a January blog post. AltLayer’s communications head Aparna Narayanan told CoinDesk that the allocations were “tokens of appreciation.”

In contrast, Renzo and Ether.fi mentioned on their token economics pages that some airdrops were reserved for “partners” in the ecosystem, but neither mentioned Eigen Labs employees. Kratik Lodha, the authorized representative of RestakeX Foundation, the executor of the Renzo airdrop, said, "A portion was allocated to ecosystem partners, but this was not requested by anyone at EigenLayer."

EigenLayer responded: Employees will no longer receive future airdrops

Today, EigenLayer responded to the CoinDesk article, saying that there is no evidence that Eigen Labs employees pressured any team to improperly benefit the Eigen Labs corporate entity or its employees. They pointed out that as early as May, Eigen Labs alleviated the incentive misalignment and even the appearance of Eigen Labs employees by changing its policies.

According to the new policy, Eigen Labs employees will no longer receive future airdrops. Eigen Labs has not received special treatment before, and has not put pressure on or given preferential treatment to any team.

Crypto companies have a variety of tools (such as joint marketing, investment, fund exchange, airdrops, etc.) for business development and partnerships, and companies in the EigenLayer ecosystem are no exception. In order for participants in the ecosystem to reward each other, the list of contributors from the team source is considered to be the preferred distribution mechanism, rather than the Github contributor list that will be attacked by Sybill.

Therefore, Eigen Labs only helped multiple projects in the EigenLayer ecosystem provide lists of contributors, and these projects used these lists for airdrops.

In response, EigenLayer also stated that it had updated its policy as early as May, and in the future, if any project wants to airdrop to Eigen Labs, it can only airdrop to corporate entities.

In June, EigenLayer created the EigenLayer Ecosystem Network, which was inspired by Protocol Guild and allows projects to list their company addresses so that any project that wants to airdrop can airdrop to these companies. This mechanism uses crypto-native tools to achieve incentive consistency across projects and avoid the problem of incentive misalignment.

In response to this, some people commented that "Eigenlayer institutionalized kickbacks as company policy and did so on a public ledger."

What the community thinks

But in response to this incident, the first hot comment on the Coindesk article wrote: "It may be popular, but this is basically the purpose of tokens, that is, crypto-economic incentive adjustment, and the function of airdrops is to get different participants to comply with the agreement. The problem is that it is not done transparently. If this is done through the DAO, there is no problem at all."

At the same time, some people said, "Eigenlayer Those things that happened are not even abnormal. The ethics of the cryptocurrency industry have become so bankrupt that conflicts of interest, insider trading and bribery have become the norm. A small circle benefits from the systematic exploitation of retail investors, and if you express your opinion on this, you will lose the opportunity to enter this circle. ”

Remember that in May, several researchers from the Ethereum Foundation successively disclosed to the public that they had accepted the "advisory" position of Eigen Foundation, the entity behind the re-staking agreement EigenLayer, and would receive valuable EIGEN tokens, which caused great controversy in the community and set off heated discussions, saying that this would affect the neutrality of the Ethereum Foundation.

"The Ethereum Foundation is essentially a non-profit organization. In the Crypto industry, such foundations are more opaque than traditional companies or foundations and lack basic information disclosure."

Now the LRT ecological project is pointed to EigenLayer "tribute", just as EigenLayer once "bribed" the Ethereum Foundation.

Finally, here’s a meme: EigenLayer’s idea vs. execution.