Shortly after the "airdrop bribery" incident, the leading Restaking project EigenLayer is facing a trust crisis due to issues related to staking reward rules and a false lock-up controversy. Investors have raised questions about the portion of EIGEN tokens locked belonging to early investors, as well as the occurrence of a hacking incident that resulted in theft, sparking controversy within the community. The EigenLayer team responded to investor concerns and released information regarding the handling of staking rewards for investors. However, these events have also exposed transparency and fairness issues related to token distribution within the industry, prompting discussions on industry regulation.

EIGEN

Shortly after the "airdrop bribery" incident, the leading Restaking project EigenLayer is facing a trust crisis due to its staking reward rules and rumors of false locked assets. As a top project with over 100 million in funding and the ability to attract tens of billions in capital, the launch of EigenLayer's token has naturally drawn significant attention. After the second season of EIGEN reward claims was opened, EigenLayer's native token EIGEN officially launched on major trading platforms on October 1. However, the subsequent price increase was short-lived, which dissatisfied investors. Coindesk reported that many community members attributed the issue to the locked EIGEN tokens belonging to early investors who purchased them at significantly discounted funding rounds. They created considerable selling pressure by earning rewards through staking. On October 2, EigenLayer investor TardFiWhale.eth posted on X, stating that many discussions regarding the circulating supply of EIGEN are inaccurate. Currently, 95 million EIGEN are staked, and many mistakenly believe that this portion is entirely claimed tokens; in fact, a significant portion of it consists of early investors' locked tokens. This is similar to the approach taken by Celestia, where early investors stake their locked tokens and continue to sell the rewards they earn. Previously, @gtx360ti disclosed on X that Polychain invested about 20 million USD in Celestia's Series A and B funding rounds, and although not a single token has been unlocked yet, they have sold over 82 million USD worth of TIA through staking rewards, achieving over 4 times the return on investment. Furthermore, TardFiWhale.eth revealed that EigenLayer recently updated its documentation to allow such practices, but this information did not exist two weeks ago. EigenLayer's latest documentation indicates that staking by Eigen Labs investors is unrestricted, and staking rewards are not subject to lock-up restrictions. According to Dune data, as of October 8, the total amount of staked EIGEN exceeds 240 million, with investors staking over 180 million and users staking 5.73 million. From the statistics, the staked EIGEN from investors alone accounts for 76.6% of the total. Moreover, DeFi researcher Ignas pointed out in a recent post that the amount of EIGEN currently staked exceeds the circulating supply, with 242 million staked and 186 million in circulation (data from CMC and Coingecko on October 7). This is because EigenLayer allows tokens in a "locked" state to be staked. This is a common issue in the industry; TIA seems to have a similar problem, as it dilutes the staking rewards available to actual users and limits the token's potential for appreciation since the lower APY is insufficient to attract people to purchase these tokens from the market. "Transparency will enable us to have more honest and open discussions about these issues. Personally, I think, considering the complexity and goals of EigenLayer, it is reasonable from a governance perspective to allow locked EIGEN investors to stake, but I believe the rewards earned from staking should be locked until the cliff is reached at the end of the 12-month vesting period," TardFiWhale.eth stated. His suggestion aims to raise industry standards and end the dark "behind-the-scenes transactions." In response, Eigen Labs and the Eigen Foundation released disclosures regarding the handling of investor staking rewards, including key points such as the total reward provided to EIGEN stakers being limited to 1% of the initial total supply per year; investors can stake both EIGEN and non-EIGEN assets on EigenLayer, and investor contracts must allow them to stake EIGEN with all rewards needing to be unlocked; all EIGEN stakers can receive up to 1% of the initial total supply of EIGEN annually, with claims available weekly, requiring a full year for linear release, with this 1% encompassing all EIGEN stakers, including investors; both Eigen Labs and the Eigen Foundation prohibit their teams from participating for at least one year; investors are not eligible for Stakedrops based on EIGEN staking. However, a theft incident has further thrust EigenLayer into the spotlight. On October 4, according to Lookonchain monitoring, a wallet sold 1.67 million EIGEN for 3.3 USD each through MetaMask, reportedly these EIGEN tokens were received from the EigenLayer team's wallet. This on-chain operation also sparked controversy in the community, to which EigenLayer officially responded that an isolated incident occurred this morning, where an investor’s email about transferring vested tokens to a custody address was hijacked by hackers. The hackers replaced the specific address, resulting in 1,673,645 EIGEN tokens being erroneously transferred to the hacker's address. The hackers have sold the stolen EIGEN tokens through decentralized exchanges and transferred the stablecoins to centralized exchanges. The platform is in contact with these platforms and law enforcement, and some funds have already been frozen. Following the attack, some community members also participated in "rescue" efforts. According to the analysis by the founder of the security firm SlowMist, Yu Xian, the attacker appears to have premeditated for quite some time, as the attacker's address first received 1 EIGEN and then, after nearly 26 hours, received 1,673,644 EIGEN, all coming from a 3/5 multi-signature address.Subsequently, over an hour later, various laundering activities began. The gas fees came from ChangeNow, and the illegally obtained EIGEN was mainly exchanged for USDC/USDT, primarily laundered through platforms such as HitBTC. According to official statements, the attackers succeeded because "the email was compromised." It is estimated that within the email content, the expected receiving wallet address for EIGEN was replaced with the attacker's address, resulting in the project team depositing EIGEN into the attacker's address. Despite the numerous incidents of crypto security breaches, EigenLayer has exposed the token unlocking issues for investors. In fact, according to the tokenomics disclosed in the EigenLayer documentation, the allocation ratio for investors' tokens is 29.5%, but it must remain fully locked for one year from the date of the first transfer to the community. After one year, 4% will be unlocked each month, meaning that the EIGEN held by investors will only be fully unlocked after three years. "Why can this investor obtain such a large amount of tokens at once without any lock-up? Is this compliant? Furthermore, from Eigenlayer's official address, we can see that in addition to this 'investor,' tokens have also been distributed to dozens of other addresses prior, and each address I checked has at least millions of Eigenlayer tokens. So are these addresses also investor addresses?" questioned independent researcher Chen Jian (Jason). @yuexiaoyu111 stated that the hacker's successful attack exposed the existence of insider trading within the project team, and it was indeed this insider trading that provided the hacker with the opportunity, creating a cause-and-effect relationship. It is surprising that a project with such a luxurious background and listed on top industry exchanges still has such undisclosed, opaque transactions happening behind the scenes. It seems that the Crypto industry is still far from the compliance level of the traditional financial world and lacks strong oversight. "These VC projects are essentially stocks issued by companies, and there are no regulatory bodies. Even if 100% of the tokens circulate, they can still modify the tokenomics and generate tokens out of thin air, so it's no wonder everyone criticizes them as worthless tokens. Who will become the regulator to enforce tokenomics? Until this problem is solved, the toxic issue of VC tokens will forever plague crypto," @Joensmoon expressed in the community. Additionally, regarding the transparency and reasonableness of token distribution in the industry, Chen Jian (Jason) pointed out, "Currently, there are many issues regarding token distribution in the industry. If this continues, VC tokens will really dig their own graves. I actually do not oppose the team and investors selling some at the opening, and I even think the one-year lock-up regulation for investors is inherently unreasonable, a 'hypocritical' abnormal product, which inevitably leads to more absurd situations. The reason many project teams engage in self-dealing or secretly obtain some tokens through other means is precisely because the one-year lock-up is inhumane. If they want to distribute tokens, they should be straightforward about it. As long as it is reasonable, everyone can understand. But now the problem is that they create a façade while doing something else behind the scenes, directly breaking everyone's trust. If other projects that would normally play by the rules see a 'top student' like Eigenlayer engaging in such underhanded tactics, how would they feel? They would inevitably follow suit, leading to a situation where bad money drives out good, and everyone ends up flipping the table with no food to eat. So the current issue is not about who runs first but about the unclear rules of the game, and clear rules that are not followed. Moreover, the entire industry's token distribution still has massive problems; unlocking should be linked to multiple dimensions, including project operations and token prices, with a robust and flexible system for configuration that drives projects to genuinely work hard, filtering out the low-quality projects that treat the crypto space as an ATM." Due to multiple upheavals, EIGEN's price has continued to decline within about a week of its launch. According to CoinGecko data, as of October 8, EIGEN's price has dropped 19% from its peak after launch, and its circulating market cap has fallen back to nearly $670 million.

EigenLayer Trust Controversy Review: Investors' Staking Rewards, Lock-Up Tricks, and Token Allocation Issues Brought to Light