Cashing out $5.5 million, EigenLayer employees made a fortune from "airdrop bribes"

Ismay

24-08-16 17:05

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Yesterday, crypto media CoinDesk published an article titled "Top crypto startups offer airdrops of other projects to their employees" revealing that EigenLayer has forced airdrops for ecological projects. 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 the question of potential conflicts of interest.

Wu said WuBlockchain analyst @defioasis found 51 suspected Eigen Labs employee addresses through on-chain investigations, receiving 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. 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 eventually 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 the 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 are "liquid restaking" services that make deposits on EigenLayer more user-friendly. These new applications have consumed millions of dollars in venture capital and created billions of dollars worth of cryptocurrency when the market is good.

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

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

But one team told CoinDesk that Eigen Labs sent them the list even though they hadn’t asked for it. The project’s developer said Eigen Labs asked the project to provide airdrop rewards to its employees. The request was difficult to ignore due to Eigen Labs’ influence, and the developer, who spoke anonymously, said he feared retaliation for it.

According to CoinDesk’s analysis, AltLayer distributed 46,512 ALT to each Eigen Labs employee. Ether.Fi followed closely behind, with 10,490.9 ETHFI distributed to each person. Then came Renzo, who received 66,667 REZ each. At the peak of prices, the three airdrops were worth about $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 a blockchain startup 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.

Private crypto startups have wide latitude in deciding how to disclose key information, such as percentages of tokens held, compared to government-regulated public companies.

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.”

By contrast, Renzo and Ether.fi mentioned on their token economics pages that some airdrops were reserved for ecosystem “partners,” but neither mentioned Eigen Labs employees. “There was a portion allocated to ecosystem partners, but that was not requested by anyone at EigenLayer,” said Kratik Lodha, an authorized representative of RestakeX Foundation, which is executing the Renzo airdrop.

EigenLayer responds: 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 of Eigen Labs employees by changing its policies, even its appearance.

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 ecosystem participants to reward each other, the list of contributors from the team is considered the preferred distribution mechanism, rather than the list of Github contributors that would be attacked by Sybill.

Therefore, Eigen Labs only helped multiple projects in the EigenLayer ecosystem to 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, 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 top 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, "What happened at Eigenlayer is not even abnormal. The ethics of the cryptocurrency industry are 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 comment on it, you will lose the opportunity to enter this circle."

Remember that in May, a number of researchers from the Ethereum Foundation disclosed to the public that they had accepted the "consultant" 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 sparked 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 as "tribute", just as EigenLayer once "bribed" the Ethereum Foundation.

Finally, here's a meme, EigenLayer's ideas vs. execution.