The foundation behind restaking protocol EigenLayer has proposed a governance change to introduce new incentives for 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, relying on staked tokens and operators to keep it running honestly and correctly.
The team argues this change will strengthen long-term value accrual for EIGEN token holders and better align token economics with real usage of EigenLayer’s network.
“This approach aligns incentives across the ecosystem: Stakers and Operators backing active services earn more, AVSs get the capital they need, and EIGEN benefits from improved tokenomics,” according to the blog post.
EIGEN, the native utility and governance token of EIgenLayer, has fallen 91% this year, losing nearly $700 million in market cap as the broader crypto market has pulled back.
EigenLayer is an Ethereum-based protocol that lets users “restake” their crypto to help secure other blockchain services, effectively reusing Ethereum’s security across new applications. When it launched, the idea drew intense interest from developers, investors, and traders, making EigenLayer one of the most closely watched projects in crypto. Over time, however, enthusiasm waned as the system grew more complex and questions arose regarding incentives, risk, and long-term value.
Token buyback
However, the foundation is now looking to revamp 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 funneled into 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, would similarly be directed toward buybacks after operational costs.
The governance revamp responds to limitations in the existing “Programmatic Incentives” framework — a rewards system that in the past relied on issuing new tokens to increase supply and attract stakers and operators.
While earlier versions distributed 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” would be created, focusing allocations on participants who actively secure AVS and expand 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 upgrades.
The timing of the changes coming out of this is still unknown, but the team said that the committee will publish those criteria in the future.
If adopted, the proposal will aim to shift rewards toward tokens that are actively used on the network, rather than those that are simply restaked and left idle.
Under the proposal, more incentives would go to what EigenLayer calls “productive stake” — tokens that help run and secure live services. Many of those tokens are “slashable,” meaning holders can lose funds if the service fails or behaves improperly. The idea is to better 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
