Eigenlayer rewards and airdrop will be less than you think

less than 0.5% APR for restakers and no juicy airdrop

14 Dec 2023

Blog Eigenlayer rewards and airdrop will be less than you think

As an Eigenlayer restaker I am hoping for the best but we should have realistic expectations. 

DeFinauts are risking their ETH on Eigenlayer expecting a huge APR boost from restaking rewards and a big airdrop from Eigenlayer. We will get neither.

There are a lot more people who want to restake ETH for additional yield than there are apps and protocols that can provide meaningful yield for restaked ETH. That is to say, way more ETH is being put up for restaking than can be paid for by Active Validator Services (AVSs). 

This means restaking rewards will be spread thin and there is no need to incentivise more restaking with airdrops.

Low restaking rewards

Here is a “DeFi Researcher” with 70k followers on X saying Eigenlayer restakers will get 10% additional APR!

He is either clickbaity or delusional, and he is feeding other people’s delusions because he is off by about 20X.  When everything is live, Eigenlayer will return less than 0.5% additional APR, mostly in ERC20 tokens, not ETH. And for that you put your entire balance at risk.

It’s simple supply and demand. These factors contribute to the huge amount of ETH being made available for restaking:

  • It is very easy to restake ETH.
  • Eigenlayer’s hype and people thinking they will get high yields and airdrops (see 854 likes on the delusional hype tweet above).
  • Most of the liquid staking token (LST) market will convert and become the liquid restaking token (LRT) market.

This all means so much ETH will be available for restaking that demand for it will not keep up.

Eigenlayer’s success or failure will be determined by whether or not large, popular, long term sustainable services will be built with Eigenlayer’s restaked security. Eigenlayer will get some early use from crypto specific applications like:

  • Oracles.
  • Data availability.
  • Rollup and bridge services.

These are limited in scope to crypto infrastructure, they are not mass market applications. 

The 59 items on Eigenlayer’s ecosystem page make for an insular, self-referential, incestuous, circle-jerk. They are all just ETH services, in fact most of them are in Eigenlayer’s own sub-niche of ETH staking. None of them have mainstream mass market goals that transcend crypto. 

The Eigenlayer ecosystem

In a bull market these can add up and snowball to some extent, but unless Eigenlayer lucks into providing security for the next Lido, Maker, Aave and Uniswap then rewards will be low.

Programmable slashing is a powerful concept but there are other restaking platforms. The biggest services built on restaked security that generate lots of rewards for restakers could well use a restaking platform other than Eigenlayer, for example:

Lastly, be aware that most staking rewards will not be given in the form you actually want; ETH. Rather they will be ERC20s of doubtful long term value.

No big airdrop from Eigenlayer

Eigenlayer have never said they would do an airdrop so not doing one would not be breaking any promises and the only people that would be disappointed would be a few restakers which Eigenlayer already has too many off.

Yes there will be a token and yes there will be rewards for restaked points. There will even be something that some people will call an airdrop, kind of. That does not mean Eigenlayer will indiscriminately give away a large amount of value to incentivize something they don’t need.

Eigenlayer will do what’s best for Eigenlayer and their goals. That means they will implement a reward system and token distribution that incentivizes the behaviors they want from users. What they need is big apps and protocols to use a lot of restaked ETH, so that is where their resources and incentives will go.

What restake points will get us

The rewards for restake points holders will be protocol specific utilities. Things like:

  • AVSs will be incentivized to use the restake from restakers with more points. Meaning amount of points will be one criteria used to order which of all the available restake should be used and paid for first.
  • Points holders get fee discounts or points can be used to pay fees.
  • Points holders get early access to new features and opportunities.
  • Points holders will get non-Eigenlayer airdrops. 

Just listen to Eigenlyaer themselves, this is their standard copy and past whenever anyone asks about current rewards

Currently you get restaked points. Restaked points are a measure of your contribution to the shared security of the EigenLayer ecosystem. Later, services may use it to recruit staker’s and determine fees.

Eigenlayer representatives in Discord

They will also tell you directly and repeatedly that there are no plans for an airdrop or a token…there will be a token though.

Points holders will get some Eigenlayer tokens or be able to convert points to tokens or something along those lines. So it will be called an airdrop. However it won’t be the juicy kind of airdrop many early restakers have in mind. It will be worth less than $0.01c per point.

Other airdrops

AVSs and other participants will airdrop shitcoins to Eigenlayer restakers as incentives. That’s good if you are into airdrop farming. If you are new to the idea, keep in mind that:

  • You will be airdropped ERC20s, not ETH.
  • Most of the tokens you get airdropped will not be useful to you.
  • Most of the airdrops will go down in value after you get them.
  • The airdrop is for the benefit of the protocol that is doing it, not for your benefit.
  • USA and dozens of other countries will be excluded from most airdrops.

As an Eigenlayer restaker I am hoping for the best but I want to encourage realistic expectations.

Gentleman James

Gentleman James: New money trash connoisseur

Gentleman James
New money trash connoisseur

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