Late last night, CoinDesk published a report accusing employees of Eigen Labs, the developers behind the leading re-staking platform EigenLayer, of accepting “bribes” in the form of airdropped tokens from ecosystem projects. The report even suggested that there might have been coercion involved, causing an uproar among industry insiders.
CoinDesk compiled a list of all Eigen Labs employees and tracked the corresponding wallet addresses by analyzing NFT holdings disclosed on social media. They then verified a significant portion of these wallets with insiders and found that these wallets had received identical amounts of tokens from airdrops conducted by Ether.Fi, Renzo, and AltLayer.
According to CoinDesk’s analysis, AltLayer, Ether.Fi, and Renzo each airdropped 46,512 ALT, 10,490.9 ETHFI, and 66,667 REZ tokens respectively to every Eigen Labs employee. At their peak prices, these airdrops were worth approximately $30,000, $80,000, and $16,700 respectively.
On-chain records also show that between late January and mid-June 2024, Eigen Labs employees claimed a total of 487,928 ETHFI tokens (worth up to $3.5 million), 1,733,342 REZ tokens (worth up to $433,300), and 1,539,563 ALT tokens (worth up to $1.02 million).
The report quickly went viral, with many key opinion leaders (KOLs) expressing their disgust. Eigen Labs promptly issued a statement early this morning, attempting to clarify the situation.
Eigen Labs stated, “We have no knowledge or evidence to suggest that any employee of Eigen Labs pressured any team to gain improper benefits for the company or its employees.” They explained that airdrops are simply a way of conducting business between cryptocurrency companies and that they have not received any preferential treatment from any project.
Additionally, they emphasized that they updated their internal policies in May to restrict how airdrops could be accepted, allowing only the company to receive airdrops to prevent any misaligned incentives.
Eigen Labs concluded by asserting, “Cryptocurrencies are powerful because they can create strong incentives among multiple participants,” implying that the public’s concerns were misplaced and that this was merely standard practice.
Indeed, some industry insiders echoed this sentiment, suggesting that airdropping tokens to employees of major projects like Eigen Labs is a routine practice in the crypto space, similar to the “invisible perks” employees might receive at large Web2 companies.
Ether.Fi’s CEO, Mike Silagadze, admitted that his team had airdropped tokens to employees at several companies, including Eigen Labs, as a gesture of “gratitude.” Silagadze stated that they preferred this method of airdropping because it felt more personal than sending tokens to a company. He also mentioned that he had requested a list of employees from Eigen Labs, containing 50 wallet addresses but no names. Additionally, he clarified that Eigen Labs CEO Sreeram was not involved in the process.
However, not everyone in the community was convinced.
CoinDesk reported that an anonymous cryptocurrency protocol founder called this behavior an “abuse of power.” They argued that while it might be acceptable for a company to airdrop tokens to another company for business reasons, airdropping to individual team members was “out of line,” even in the crypto world.
The founder expressed concern that Eigen Labs’ significant influence in the re-staking space could allow it to selectively promote projects that rewarded its team members or grant those projects special privileges.
Although there is no evidence of this happening, CoinDesk noted that Eigen Labs frequently highlights certain projects on its social media and hosts invitation-only events for ecosystem project founders, such as the skiing trip in Colorado following this year’s ethDenver conference.
Moreover, Helius Labs co-founder and CEO Mert Mumtaz commented, “This is not crypto-economic incentivization; it’s extortion.” FactoryDAO’s @DrNickA added, “The function of airdrops is to align various participants with the protocol. But the issue here is the lack of transparency from Eigen Labs. If this were done through a DAO, it would be fine.”
Indeed, compared to government-regulated public companies, cryptocurrency startups have far more leeway in deciding how to disclose critical information like token ownership distribution. Typically, projects will outline their token allocation during token issuance.
However, the industry still lacks a unified reporting standard. Stanford University’s Digital Economy Lab researcher Christos Makridis pointed out that the stock market has “reporting requirements” designed to protect investors, but no such regulations exist in the cryptocurrency sector.
For instance, among the three projects that airdropped tokens to Eigen Labs employees, only AltLayer proactively disclosed this in a January blog post. Renzo and Ether.Fi merely mentioned in their tokenomics that some tokens would be airdropped to ecosystem “partners,” without specifically mentioning Eigen Labs.
Kratik Lodha, a representative of the RestakeX Foundation responsible for Renzo’s airdrop, stated in an interview that “a portion of the airdrop was allocated to ecosystem partners, and the EigenLayer team did not request the airdrop.” Lodha declined to answer whether EigenLayer had sent him a list of addresses before Renzo’s airdrop in April.
As the saying goes, “fame comes with its own share of troubles,” and this certainly applies to the blockchain industry. Back in May, Eigen Labs was already mired in controversy. At that time, it was revealed that several Ethereum Foundation researchers, including Justin Drake and Dankrad Feist, were serving as paid advisors to EigenLayer, raising concerns within the community.
Although both researchers promised to redistribute their compensation to Ethereum community projects and even considered resigning if EigenLayer did not benefit Ethereum, the incident planted seeds of doubt in many users’ minds, affecting both the Ethereum Foundation and EigenLayer. As a result, the Ethereum Foundation revised its policies to prevent similar incidents from occurring in the future.
Furthermore, following the recent scandal, some users dug up a past “scandal” involving Calvin Liu, Eigen Labs’ current Chief Strategy Officer. At the time, Divergence Ventures, a DeFi venture capital fund co-founded by Calvin Liu and serial investor George Lambeth, was accused of insider trading with airdropped tokens from Ribbon Finance (now Aevo), a derivatives protocol they had invested in.
Initially, I too felt angry about this situation, but upon reflection, it seems understandable. As we have often consoled ourselves when criticizing projects for being “stingy” with airdrops, we are merely the “B-side,” while the projects themselves are the “A-side.” They have full discretion over how to distribute their tokens, and no matter how they choose to do so, it’s their decision. However, if projects like Ether.Fi were to disclose these actions openly, the industry might have fewer complaints and could appear more “transparent.”
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