(Bloomberg) — The EigenLayer crypto project is preparing to distribute a new token in what has become the most hyped digital asset launch of the year, but also one of the most controversial due to exceptions for users in China and the United States. in another place.
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The decentralized finance (or DeFi) protocol has raised $14 billion in assets since January, following a soft launch in 2023, according to data from DeFiLlama. EigenLayer offers a so-called repurchase facility that touts strengthened returns built on top of the process of depositing Ether coins to help operate the Ethereum blockchain.
Seattle-based Eigen Labs has raised nearly $165 million from backers including a16z Crypto as part of the development of EigenLayer, which will begin sending the EIGEN token to users on Friday through a process known as airdrop.
Part of EigenLayer’s appeal is linked to a points system designed to reward early users with these tokens. Analyst Kunal Goel of Messari said points and the expected airdrop are the “primary incentive” to deposit money into the service as it is not yet fully launched.
Read more: Crypto’s Billion-Dollar Bet Comes with Layered Risks
Excluded Countries
However, most point collectors will be barred from claiming tokens. Earlier this month, EigenLayer said it would exclude users of virtual private networks, as well as those living in countries such as the US, Canada and China.
“It is not possible to operate in this space without complying with regulatory guidelines and being responsible, and the difficult part is that there is not a lot of clarity,” Robert Drost, chief executive of the Eigen Foundation, said during a recent podcast.
Nick Cote, co-founder of secondary market platform Secondlane, said many projects are taking a more conservative approach to distribution.
“Issuers’ lack of clarity about jurisdictional restrictions leaves a sour taste in people’s mouths when it comes time to claim your prizes and then you find out you’ve been disqualified for reasons X, Y, Z,” Cote said.
Yield Increase
EigenLayer’s repurchase service allows applications in the broader Ethereum ecosystem to leverage the deep pool of transaction validators powering the most commercially successful blockchain. This increases the current 3% return from just staking or investing Ether to help operate Ethereum, while also adding layered risks.
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Eigen Labs did not immediately respond to emails and texts for comment on the token launch controversy. Following the backlash from the crypto community, EigenLayer made changes to its airdrop and announced plans to distribute an additional 28 million EIGEN tokens.
EigenLayer is now the second most popular DeFi application. This comes partly at the expense of liquid staking offered by platforms such as Lido and Rocket Pool. Liquid staking provides easier access to staking rewards and is the top-tier DeFi category, but has seen significant outflows in the last two months.
According to DefiLlama data, liquid staking protocols have seen a 27% decline in total value locked since the $63 billion peak in March. According to an April 26 note published by IntoTheBlock, approximately 4% of all Ether is currently staked using EigenLayer.
A spokesperson for Rocket Pool said the crypto industry has “always been subject to short-term changes,” adding that “while points and airdrops can provide short-term incentives, these trends can also reverse just as quickly.”
Investor interest in DeFi has picked up over the past year along with a revival in crypto prices, including Bitcoin doubling. However, the rise in the digital asset market has stalled recently and the sector remains prone to intense fluctuations.
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