EigenLayer’s native token EIGEN officially circulated this week and is facing turmoil. After EIGEN was listed on the exchange, the price briefly surged, but then fell 22% from its high. Since its release, the price of EIGEN has dropped from 4.53 to $3.47. However, price volatility is not the only concern for investors, with transparency once again raising questions. This is also the second time that major blockchain media CoinDesk has made negative comments about EigenLayer.
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ToggleEIGEN token supply warning, early investors have a lot of chips
CoinDesk commented that the main issue is the transparency of the EIGEN token supply. The total supply is capped at 1.68 billion tokens, while the circulating supply is 186 million. This brings EIGEN's fully diluted valuation (FDV) to $5.8 billion, with a market capitalization of approximately $650 million including only circulating tokens. The controversy centered on the portion of locked tokens that early investors received in heavily discounted funding rounds.
These early investors have participated in EigenLayer's multiple rounds of funding, including a $14.4 million seed round, a $50 million Series A round, and most recently, a $100 million round in February. These investors can stake their locked tokens to earn rewards. As of now, a total of 130 million EIGEN tokens have been pledged, 70 million of which belong to these early investors, raising concerns about the impact they may have on token supply and market dynamics.
Comparison case Celestia’s TIA
CoinDesk believes that the EIGEN token economy is reminiscent of similar events: data availability (DA) protocol Celestia's TIA token issuance also faced similar challenges. Early investors in TIA also staked their tokens to earn token rewards and then sold off, causing the price to drop 75% since February. The EigenLayer community is concerned that similar selling behavior by early investors may have a negative impact on EIGEN's market performance.
Call for more transparency in staking rules
EigenLayer investor TardFiWhale.eth pointed out new details in EigenLayer's recent document update. The new document states that "Eigen Labs investors can stake and their rewards do not need to be locked." However, this information did not appear in the mid-September filing.
TardFiWhale.eth calls for information transparency and suggests that while it is governance-sound for investors to stake locked EIGEN tokens, the rewards earned from staking should also be locked before the 12-month vesting period expires. EigenLayer's "Token Disclosure" page was only updated on September 30.
Reward distribution has been criticized for being biased towards “whale”
EigenLayer distributed 86 million tokens to early users, including node operators and stakers. However, this has sparked criticism as “whale” (large numbers of token holders) receive generous rewards that far exceed those of ordinary investors. The most notable example is Tron founder Justin Sun, who received an airdrop worth $8.75 million. According to blockchain data provider Arkham, almost all of these tokens were deposited into HTX.
EigenLayer quickly clarifies: Eigen Labs investors cannot receive rewards
According to CoinMarketCap, EIGEN’s price began to fall below opening levels just one day after listing. As the token continues to trade, the market remains cautious about possible selling behavior by early investors and its impact on token price and supply dynamics.
EigenLayer announced after the news broke:
- Eigen Labs and Eigen Foundation each banned their teams from participating in staking for at least one year. Again, this differs from several protocols, where others allow team staking starting on Day 1.
- Eigen Labs investors are not eligible to receive Stakedrops based on EIGEN staking. Only through future programmatic incentives can they begin to accumulate rewards for EIGEN staking.
These points can be regarded as solving the above concerns, but TardFiWhale.eth also expressed why EigenLayer is willing to take the initiative to make people aware of these things when someone complains.
