The Eigen Foundation has revealed plans to introduce higher incentives for active restakers on the Eigen protocol’s network. A newly established Incentive Committee, as outlined in the proposed plan, will manage token emissions and prioritize participants who secure Active Validated Services (AVSs).
According to the Eigen Foundation, a proposed fee model will channel revenue from EigenCloud services and AVS rewards back to EIGEN holders.
AVS blockchain services utilize EigenLayer’s security and rely on staked tokens and operators to ensure its correct and honest operation. The Foundation believes that shifting the protocol’s reward strategy to prioritize productive fee generation and network activity could potentially create deflationary pressure as the ecosystem expands.
The Foundation’s team further argues that these changes will strengthen the long-term value for Eigen token holders and align token economics with the real-world usage of the EigenLayer network. The approach also aligns incentives across the Eigen ecosystem, with restakers earning more, AVSs getting the capital they need, and EIGEN benefiting from improved tokenomics.
Incentives Committee to bring three improvements if implemented
ELIP-12 proposes an Incentives Committee that will bring three improvements if implemented. First, the new mechanisms will collect and use EigenLayer and EigenCloud fees to benefit EIGEN holders. The Committee proposes a 20% fee on AVS rewards for stakes subsidized by EIGEN incentives.
Meanwhile, only fee-paying AVSs will be eligible for staker and ecosystem incentives. These fees will be directed to a fee contract that can be used for repurchases. Similarly, 100% of cloud fees, after deducting operator expenses, will be directed to the same fee contract for buybacks as revenue grows on EigenAI, EigenDA, and EigenCompute.
Secondly, the Eigen Foundation Incentives Committee will be responsible for reducing rewards for idle stakes, directing EIGEN token emissions to fee-paying AVSs, and designing incentives for AVSs to pay rewards against those stakes. The Committee will also explore changes to EIGEN staking rewards to encourage the paid consumption of EigenCloud services.
What this means is that rewards will shift toward productive stake, such as redistributable and slashable stake. Meanwhile, baseline rewards to idle stake could decline over time as the Incentives Committee redirects token emissions.
Third, there will be new flexibility to direct emissions toward fee-generating activities and growth. The Incentives Committee will be able to quickly modify the allocation of EIGEN emissions without the need for lengthy contract upgrades.
However, any changes to the maximum total amount of emissions remain subject to the governance of the Protocol Committee. Any modifications to how EIGEN emissions are allocated to different parties currently require an ELIP.
Protocol Council to approve weekly EIGEN mints
Under the new Eigen Foundation proposal, the amount of EIGEN minted weekly will be determined by governance, but cannot be altered without the Protocol Council’s approval. Meanwhile, to streamline the future implementation of rewards, these contracts will be deployed behind upgradable proxies owned by the Protocol Council. The proxies will also be subject to the same time locks enforced on the rest of the protocol.
According to the Eigen Foundation, the minting and distribution of rewards will be controlled by the same Hopper and ActionGenerator mechanism used for Programmatic Incentives, ensuring a smooth transition to this incentive distribution mechanism. However, no immediate changes will impact operators and stakers. Incentives will continue to be emitted weekly until the Incentives Committee proposes otherwise.
Meanwhile, the complete action plan will include publishing the ELIP for community review. An open call will also be held if needed, and all comments will be submitted to the Protocol Council for approval. The Incentives Committee structure and proposal will be authorized for implementation upon approval.
Lastly, the Eigen Foundation will author the Charter, which defines powers, membership rules, transparency requirements, and interfaces with the Protocol Council. The community and the Protocol Council will monitor performance against success criteria and introduce follow-up ELIPs as needed.
The smartest crypto minds already read our newsletter. Want in? Join them.
Source: https://www.cryptopolitan.com/eigen-foundation-plans-to-boost-incentives/
