Author: Sam Kessler, Danny Nelson, Coindesk; Translated by: 0xjs@Golden Finance
Key points:
Eigen Labs, the developer of “rehypothesis” giant EigenLayer, has distributed a list of employee wallet addresses to ecosystem projects preparing to launch crypto tokens.
Some teams said they had asked Eigen Labs for the list, but one said they had not done so and felt pressured by the company to send tokens to its employees.
The size of the airdrop payments, which peaked at nearly $5 million, raises concerns about conflicts of interest, experts and industry insiders said.
Eigen Labs and the nonprofit Eigen Foundation have since banned such payments to employees.
The public transparency provided by blockchains was once promoted as a cure for Wall Street-style backroom dealings. Instead, they are paving the way for a new generation of insider trading.
EigenLayer is considered by many to be one of the most promising projects in the vast Ethereum blockchain ecosystem. The application provides a so-called "trusted neutral" platform for building blockchain applications and protecting them from theft and cyberattacks.
However, this neutrality comes with a major caveat. A CoinDesk investigation found that employees at Eigen Labs, the company behind EigenLayer, have accepted millions of dollars in compensation from other projects that rely on its technology, raising questions about potential conflicts of interest.
One team told CoinDesk that it sent each Eigen Labs employee a portion of the new cryptocurrency as a “thank you.” The final value of each employee’s allotment came to $80,000.
Another team said Eigen Labs sent them a list of wallet addresses and felt pressured to pay up or risk jeopardizing their relationship with a company that could make or break their business.
During the summer slump in the cryptocurrency market, Eigen Labs employees ultimately collected nearly $5 million worth of bonuses (just under $1 million at press time). Some of the senior employees who received the tokens now work at the Eigen Foundation, a nonprofit that provides grants to projects using EigenLayer technology.
The Eigen lab and the Eigen Foundation quietly banned employee payouts this year, acknowledging that the practice could create a conflict of interest, or at least give the appearance of one.
“Eigen Labs and its foundation are claimed to be ‘trustedly neutral,’ which implies a duty to avoid any appearance of bias or preferential treatment,” said Cessiah Lopez, a crypto researcher at nonprofit VentureESG and an associate fellow at the Minderoo Center for Technology and Democracy at the University of Cambridge. “Actions that could be interpreted as violating this principle could be cause for concern, even if they are not motivated by malicious intent.”
Airdrop “bribes”
Founded by Sreeram Kannan, an associate professor of electrical and computer engineering at the University of Washington, EigenLayer pioneered “restaking,” a new blockchain security technology and lucrative investment opportunity in 2023, helping to trigger the latest boom cycle in cryptocurrencies.
The platform raised more than $100 million in venture capital in less than a year and amassed $15 billion worth of user deposits — a huge sum even in the big-money world of blockchain.
In early 2024, more than a dozen blockchain applications were launched on EigenLayer, such as cloud computing services and data storage platforms. Also joining this wave are "liquidity re-mortgage" services, which make EigenLayer deposits more convenient for users.
These new apps, which have amassed millions of dollars in venture capital and launched cryptocurrencies valued at sometimes billions of dollars, distribute their new tokens through airdrops.
Meanwhile, Eigen Labs is helping its employees access the airdrop by sending a list of employee wallet addresses — cryptocurrency’s answer to a bank account.
Eigen Labs insists it only does this when the projects ask for it.
“For projects interested in airdropping to Eigen Labs, we provide a list of addresses of all Eigen Labs employees,” Eigen Labs said in a statement to CoinDesk.
Eigen Labs only sent the list “to those teams that had contacted Eigen Labs or its employees about airdrops,” reiterated Alan Curtis, chief business officer at Eigen Labs.
But one team told CoinDesk that Eigen Labs sent it the list of addresses, despite not asking it to do so.
One developer working on the project, who requested anonymity for fear of retaliation, said Eigen Labs asked to reward its employees with airdrops. The developer said the request was difficult to ignore given Eigen Labs’ influence.
Eigen Labs said that by amassing wallet address lists and making introductions, it helped many teams coordinate sending airdrops to others in the restaking ecosystem.
“This aligns very closely with our Coordination Engine vision, where projects help and reward each other and collaborate to build an EigenLayer ecosystem that is greater than the sum of its parts,” Eigen Labs said in a statement. This comes despite the company banning the payments to its own employees in May.
How many tokens were airdropped?
CoinDesk reverse-engineered the wallet list by compiling a list of all Eigen Labs employees and pairing them with the wallets and non-fungible token holdings they disclosed on social media.
A pattern began to emerge.
These wallets — along with other “burner” addresses that typically only interact with cryptocurrency exchanges — collected an equal number of tokens from three corresponding airdrops: Ether.Fi, Renzo, and AltLayer.
CoinDesk subsequently verified most samples of the reverse-engineered list with insiders familiar with Eigen Labs’ actual address list.
According to CoinDesk's analysis, AltLayer distributed 46,512 ALT to each Eigen Labs employee. It was followed by Ether.Fi, which distributed 10,490.9 ETHFI per person. Then there was Renzo, which distributed 66,667 REZ per person. At the peak of the price, the value of these three airdrops was approximately $30,000, $80,000 and $16,666 respectively.
On-chain records show that from late January to mid-June 2024, Eigen Labs employees received a total of 487,928 ETHFI (peak value of US$3.5 million), 1,733,342 REZ (peak value of US$433,300), and 1,539,563 ALT (peak value of US$1.02 million).
“Really weird crypto stuff”
Some industry insiders who spoke to CoinDesk said the airdropping of funds to Eigen Labs employees was just normal business in the cryptocurrency world: a common perk for a well-connected blockchain startup, though one rarely discussed publicly.
“It’s one of those really weird crypto things where people occasionally give out free money,” said Mike Silagadze, CEO of Ether.Fi.
He said Ether.Fi airdropped tokens to employees of several companies, including Eigen Labs, as a “thank you”.
Silagadze said Ether.Fi preferred to airdrop tokens to individuals at these companies “because it’s more personal,” rather than sending them directly to the companies. He said he asked Eigen Labs for a list of employees so they could get the airdrop. The company sent him a list of 50 wallet addresses, but no names.
“They did make it clear that Sreeram was not involved,” Silagadze said of Kannan, the Eigen Labs CEO. “Given the size of the team, it’s possible that others were involved.”
(CoinDesk parent company Bullish is an investor in Ether.fi)
Others said the payments to Eigen Labs employees by various teams were improper. One crypto protocol founder who was aware of the Eigen Labs airdrop payments but wished to remain anonymous said it amounted to an “abuse of power.”
“If a company gives tokens to another company for business reasons, that’s one thing, but giving tokens to individual team members is completely abnormal — even in cryptocurrency,” the founder said.
The person believes that Eigen Labs’s huge influence in the restaking space means it can selectively promote or prioritize projects that pay tokens to team members.
Eigen Labs frequently highlights projects on its social media channels and hosts invitation-only networking events for ecosystem founders — such as the Colorado ski weekend following this year’s ethDenver conference.
The Eigen Foundation controls 15% of all EIGEN tokens and provides rewards to projects in the EigenLayer ecosystem.
CoinDesk found no evidence that Eigen Labs or the Eigen Foundation used its power to privilege projects that paid their employees with tokens.
Lack of regulations
Compared to government-regulated public companies, private cryptocurrency startups have wide latitude in deciding how to disclose key information such as token ownership percentages.
When a crypto project issues a token, it typically publishes a rough breakdown of the beneficiaries. No one asked for a pie chart; the crypto industry’s lack of consistent reporting standards leaves investors with incomplete or even misleading information about digital assets.
“The token holders are really the public [equity] market here,” said Christos Makridis, a digital researcher at Stanford University’s Digital Economy Lab. In stock markets, “there are reporting requirements” designed to protect investors, he noted. In crypto, none of that is codified.
AltLayer was the only project to proactively disclose its allocations to the Eigen Labs team in a January blog post. AltLayer communications director Aparna Narayanan told CoinDesk the allocations were a “symbol of gratitude.”
In contrast, Renzo and Ether.fi disclosed on their token economics pages that part of their airdrops were reserved for ecosystem “partners.” Neither mentioned Eigen Labs employees.
Kratik Lodha, an authorized representative of the RestakeX Foundation, which is conducting the Renzo airdrop, said that “ecosystem partners received an allocation, but EigenLayer did not consult anyone.”
CoinDesk subsequently asked Lodha whether EigenLayer proactively sent Renzo an unsolicited list of blockchain addresses (some might not consider this an explicit request) ahead of its April airdrop. He declined to answer.
Cleanup Operation
In May, the Ethereum Foundation, a Swiss nonprofit that supports the Ethereum blockchain, sparked another controversy that made crypto headlines, and Eigen Labs subsequently canceled its airdrop policy.
The Ethereum Foundation has revealed that two of its lead researchers, Justin Drake and Dankrad Feist, have accepted paid advisory positions with another Ethereum-based project, EigenLayer.
Community members expressed concerns on X (formerly Twitter) about the idea that EigenLayer was attempting to manipulate the Ethereum roadmap to its advantage. Feist and Drake ultimately pledged to redistribute their revenue to Ethereum community projects, and the Ethereum Foundation amended its conflict of interest policy to prevent similar incidents in the future.
Eigen Labs told CoinDesk it stopped allowing projects in its ecosystem to airdrop tokens to its employees in May.
The company also said it has a policy that "explicitly prohibits any employee from influencing any company-related transaction for personal gain."
Eigen Labs has also instituted “a prohibition on team members selling any airdrops received while in possession of material non-public information, including a standardized blackout period following an airdrop.”
The company said the measures were taken "to ensure trust and transparency."
According to the commit log, a policy shift published on GitHub on June 3 by the Eigen Foundation prohibits employees from "collecting airdrops individually." The foundation cited "concerns about conflicts of interest or the appearance of such conflicts of interest." Wallets in the Eigen Labs address list continued to receive airdrops until mid-June.
Eigen Labs and the Eigen Foundation said that employees who have already received the airdrop do not need to return their tokens.
