Ethereum Foundation blasted for EigenLayer conflicts of interest

Two Ethereum Foundation researchers have disclosed advisory roles at restaking protocol EigenLayer’s EigenFoundation, raising concerns over potential conflicts of interest within Ethereum’s core development team.

On Sunday, Justin Drake announced his advisorship via X (formerly Twitter), stating the “community deserves transparency.” Two days later, Dankrad Feist also disclosed his role at EigenLayer, “on the same conditions” as Drake.

Both state that their involvement comes with significant token allocations, but that their work will be specifically focused on the protocol’s risks.

Drake states that he will reinvest or donate the proceeds to ‘worthy projects’ and that he had previously posted about the role in response to an Orbholder’s question, over one month prior. Feist plans to focus on risks and decentralization. “I am therefore fully expected to take contrarian views on Eigenlayer,” he says.

Drake’s disclosure came the day after a post from influential crypto trader Jordan Fish, aka Cobie. Replying to Ethereum founder Vitalik Buterin’s celebration of the community’s ‘ideal of ‘open discourse,’ Fish’s tweet, visible only to followers, reads:

Conflicts of interest?

EigenLayer ($18 billion) is the second largest decentralized finance (DeFi) protocol by total value locked (TVL), after liquid staking platform Lido ($35 billion), according to data from DeFiLlama.

Restaking has long been seen as potentially dangerous for Ethereum’s consensus model, with Buterin authoring a blog post titled Don’t overload Ethereum’s consensus precisely one year ago.

As EigenLayer’s documentation explains, restaking ‘enables the reuse of ETH on the consensus layer.’ By depositing ETH or liquid staking tokens, such as Lido’s stETH, other projects can piggyback on Ethereum’s underlying proof of stake (PoS) consensus mechanism to benefit from what EigenLayer calls ‘pooled security.’

However, using Ethereum’s consensus layer for anything other than block validation could prove dangerous.

The major concern is known as the ‘principal agent problem,’ which Feist explains results from mismatched incentives in which a protocol’s ‘operator is not necessarily the same as the person providing the capital.’

A similar set of risks is posed by liquid staking protocols, which free up staked ETH to be used as collateral on DeFi lending platforms via a wrapper token. The aforementioned Lido has often come under criticism for capturing up to almost a third of staked ETH (currently 24%), and rejecting a governance vote to self-limit.

Drake addresses this in his post: “As a researcher, I feel I did too little too late with regard to liquid staking. This is an opportunity to not repeat the mistake with restaking.”

Backlash

Aside from the potential dangers of EigenLayer itself, many have voiced their concerns over the nature of the disclosures. Firefox’s Taylor Monahan pointed out that the timing wasn’t ideal.

Danger, the pseudonymous creator of TodayInDeFi claimed it’s naive to expect the Ethereum community to believe that financial incentives won’t result in a conflict of interest.

And Rotki developer and open-source advocate Lefteris Karapetsas underlined the importance of “credible neutrality” within the Ethereum Foundation.

Got a tip? Send us an email or ProtonMail. For more informed news, follow us on X, Instagram, Bluesky, and Google News, or subscribe to our YouTube channel.