The basis of the takeover protocol, EigenLayer, proposed a governance change to introduce new incentives for the EIGEN token, focusing on productive network activity and fee generation.
As part of the plan outlined in a recent blog post, the cornerstone of the proposal is the introduction of a fee model that channels revenue from Actively Validated Services (AVS) and EigenCloud Services rewards to EIGEN holders. AVS are blockchain-based services that use EigenLayer security, relying on staked tokens and operators to ensure honest and correct operation.
The team says this change will strengthen long-term value accumulation for EIGEN token holders and better align the token economics with real-world usage of EigenLayer’s network.
“This approach aligns incentives across the ecosystem: stakeholders and operators supporting active services earn more, AVSs 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 crypto to help secure other blockchain services, effectively reusing Ethereum’s security in new applications. Upon launch, the idea garnered strong interest from developers, investors, and traders, making EigenLayer one of the most closely watched crypto projects. Over time, however, enthusiasm waned as the system became more complex and questions arose regarding incentives, risks, and long-term value.
Token redemption
However, the foundation is now looking to revamp the network and expand its reach with the new proposal.
Under the proposed mechanism, 20% of AVS rewards fees, once subsidized by EIGEN incentives, could be channeled into a fee contract designed for token redemptions. This will reduce the circulation of the available token as the ecosystem grows.
Fees for cloud-based services, such as EigenAI, EigenCompute and EigenDA, would also be skewed toward buybacks after operational costs.
The governance overhaul addresses the limitations of the existing framework of “programmatic incentives” – a reward 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 recovery and participation, the team believes that the single model has put a strain on the network in recent weeks.
To oversee the new mechanism, a new “Incentive Committee” would be created, focusing allocations on participants who are 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 power to adjust emissions policies without resorting to lengthy contractual upgrades.
The timeline for the resulting changes is still unknown, but the team said the committee will publish these criteria in the future.
If passed, the proposal will aim to shift rewards toward tokens actively used on the network, rather than those that are simply reinvested and left idle.
Under the proposal, more incentives would be given to what EigenLayer calls “productive participation” – tokens that help run and secure live services. Many of these tokens are “slashable,” meaning holders can lose funds if the service goes down or misbehaves. The idea is to better tie rewards to real participation and risk, rather than passive ownership.
Read more: a16z bets big on EigenLayer again with $70M token purchase to support EigenCloud launch
