The foundation behind the restaking protocol EigenLayer has proposed a governance change to introduce new incentives to the EIGEN token, focusing on productive network activity and fee generation.
Under the plan outlined in a recent blog post, a cornerstone of the proposal is the introduction of a fee model that channels revenue from Actively Validated Services (AVS) rewards and EigenCloud services back to EIGEN holders. AVSs are blockchain-based services that use EigenLayer’s security and rely on staked tokens and operators to keep it running honestly and correctly.
The team claims that this change will strengthen the long-term value addition for EIGEN token holders and better align token economics with real use of EigenLayer’s network.
“This approach aligns incentives across the ecosystem: stakers and operators supporting active services earn more, ACPs get the capital they need, and EIGEN benefits from improved tokenomics,” according to the blog post.
EIGEN, EIgenLayer’s native utility and governance token, is down 91% this year and has lost nearly $700 million in market capitalization as the broader crypto market has retreated.
EigenLayer is an Ethereum-based protocol that lets users “replicate” their crypto to help secure other blockchain services, effectively reusing Ethereum’s security across new applications. When it was launched, the idea attracted intense interest from developers, investors and traders, making EigenLayer one of the most watched projects in crypto. Over time, however, enthusiasm waned as the system became more complex and questions arose regarding incentives, risk, and long-term value.
Token redemption
But the foundation is now looking to renew the network and expand its reach via the new proposal.
Under the proposed mechanism, 20% of AVS reward-related fees, once subsidized by EIGEN incentives, could be transferred to a fee contract designed for token buybacks. This will reduce the circulation of the available token while the ecosystem grows.
Fees from cloud-based services, such as EigenAI, EigenCompute and EigenDA, will also be targeted for buybacks after operating costs.
The management revamp responds to limitations in the existing “Programmatic Incentives” framework – a reward system that previously relied on issuing new tokens to increase supply and attract stakeholders and operators.
While previous versions distributed the EIGEN token on a weekly schedule to support restaking and AVS participation, the team believes that the one-size-fits-all model has been somewhat of a strain on the network in recent weeks.
To oversee the new mechanism, a new “Incentives Committee” will be created, focusing allocations on participants who actively secure AVS and expand the wider EigenCloud ecosystem.
The committee, which will be composed of representatives from the Eigen Foundation and Eigen Labs, and subject to ratification by the Protocol Council, will have the authority to adjust emissions policies without resorting to lengthy contract upgrades.
The timing of the changes that will come out of this is still unknown, but the team said that the committee will publish these criteria in the future.
If passed, the proposal would aim to shift rewards towards tokens that are actively used on the network, rather than those that are simply re-staked and left idle.
According to the proposal, more incentives will go to what EigenLayer calls “productive effort” — tokens that help run and secure live services. Many of these tokens are “slashable,” meaning holders can lose money if the service fails or misbehaves. The idea is better to link rewards to real participation and risk rather than passive ownership.
Read more: a16z bets big on EigenLayer again with $70M Token Buy to Back ‘EigenCloud’ launch
