EigenLayer Withdrawals Accelerate After Airdrop Backlash

DeFi traders are leaving EigenLayer in droves since the much-hyped Ethereum restaking protocol released its airdrop allocations two days ago.

Since April 29, almost 14,000 wallets have initiated withdrawals from the protocol, accounting for roughly 13% of its user base.

EigenLayer is DeFi’s third-largest protocol, with $14.5 billion in total value locked (TVL), according to DeFiLlama. It enables users to re-stake their Ether or liquid staking tokens (LSTs) to earn additional yield by securing third-party applications called Actively Validated Services (AVS).

Despite the large number of wallets, the pending withdrawals amount to less than 12,000 ETH ($35 million), according to a Dune dashboard. That’s barely 0.25% of EigenLayer’s TVL and indicates that smaller depositors are leaving the protocol.

The project is facing severe backlash from the DeFi community after it geo-blocked many countries, including the United States, and aggressively blocked VPN users from its EIGEN airdrop despite accepting deposits from these ‘prohibited jurisdictions’ during its growth phase.

Airdrop recipients are also unhappy that the EIGEN token will not be transferable at launch, meaning that holders will be unable to trade their tokens. Many community members also criticized the linear distribution of EIGEN, which favours larger depositors.