The foundation behind the EigenLayer recovery protocol has proposed a governance change to introduce new incentives for the EIGEN token, focusing on productive network activity and fee generation.
According to 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 to EIGEN holders. AVS are blockchain-based services that use EigenLayer security, relying on staked tokens and operators to keep it running honestly and correctly.
The team maintains that this change will strengthen long-term value accumulation for EIGEN token holders and better align the economics of the tokens with the actual use of the EigenLayer network.
“This approach aligns incentives across the ecosystem: participants and operators supporting active services earn more, AVS get the capital they need, and EIGEN benefits from improved tokenomics,” according to the blog post.
EIGEN, EIgenLayer’s native utility and governance token, has fallen 91% this year, losing nearly $700 million in market capitalization as the broader crypto market has retreated.
EigenLayer is an Ethereum-based protocol that allows users to “take back” their cryptocurrencies to help secure other blockchain services, effectively reusing Ethereum’s security in new applications. When it was launched, the idea attracted huge interest from developers, investors, and traders, making EigenLayer one of the most followed crypto projects. However, over time, enthusiasm waned as the system became more complex and questions arose about incentives, risk, and long-term value.
Token buyback
However, the foundation is now looking to renew the network and expand its reach through the new proposal.
Under the proposed mechanism, 20% of fees related to AVS rewards, once subsidized by EIGEN incentives, could be funneled into a fee contract designed for token buybacks. This will reduce the circulation of available token as the ecosystem grows.
Fees for cloud-based services, such as EigenAI, EigenCompute, and EigenDA, would similarly go toward buybacks after operating costs.
The governance revamp responds to the limitations of the existing “programmatic incentives” framework, a rewards system that in the past relied on the issuance of new tokens to increase supply and attract stakeholders and operators.
While previous versions distributed the EIGEN token on a weekly schedule to support AVS resumption and staking, the team believes the unique model has put some pressure on the network in recent weeks.
To oversee the new mechanism, a new “Incentives Committee” would be created, focusing allocations on participants actively securing AVS and expanding the broader 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, would have the authority to adjust emissions policies without resorting to lengthy contract updates.
The timing of any changes arising from this is still unknown, but the team said the committee will publish those criteria in the future.
If adopted, the proposal will aim to shift rewards towards tokens that are actively used on the network, rather than those that are simply re-staked and left idle.
Under the proposal, more incentives would go toward what EigenLayer calls “productive staking”: tokens that help run and secure live services. Many of those tokens are “slashable,” meaning their holders can lose funds if the service crashes or misbehaves. The idea is to better tie rewards to actual participation and risk, rather than passive ownership.
Read more: a16z bets big on EigenLayer again with the purchase of $70 million tokens to support the launch of ‘EigenCloud’
