The foundation behind the EigenLayer restaking protocol has proposed governance changes to introduce new incentives for the EIGEN token. At the core of the proposal is a fee model that directs revenues from Actively Validated Services (AVS) rewards and EigenCloud services back to EIGEN holders. The team emphasizes that the goal is to align the token’s economics with real network usage and support long-term value accumulation for holders.
What Are EigenLayer and EIGEN?
EigenLayer is an Ethereum-based protocol that allows users to "restake" assets, reusing Ethereum’s security to protect other blockchain services. This approach enables services to rely on an existing stake and operators for proper functioning and honest behavior. EIGEN serves as a utility and governance token within the ecosystem, linked to protocol operations and reward distributions.
New Incentives for EIGEN Holders
A key element of the proposed model is redistributing revenues from AVS and EigenCloud services to EIGEN holders through a fee mechanism. The project aims to shift focus from mass token issuance toward supporting so-called "productive stake"—stake that actively participates in service operations. This is intended to better align rewards with active network participation and real operator risks.
The idea to revamp the economic model arose in response to limitations of the previous "Programmatic Incentives" scheme, where rewards were often issued via new token minting. The new model aims to provide more flexible tools to reward those who genuinely maintain AVS operations and expand the ecosystem.
Related topics on staking and rewards are also discussed in other industry materials, such as the recent addition of staking rewards in ETFs; these help illustrate how different projects are testing income return mechanisms for network participants. VanEck staking rewards
Decline in EIGEN Market Capitalization
The EIGEN token has significantly lost value: it dropped 91% over the year, losing nearly $700 million in market capitalization. The team directly associates this with a general decline in interest. The article notes that the drop occurred as enthusiasm waned and the system became more complex for participants. Despite this, the proposal aims to restore some economic rationale to the token through the new reward model.
Token Buyback Mechanism
The proposed buyback mechanism is based on redistributing a portion of fees: it envisions that 20% of fees related to AVS rewards, after subsidizing EIGEN incentives, could be allocated to a contract for token buybacks. Similarly, revenues from cloud services—such as EigenAI, EigenCompute, and EigenDA—after operational expenses, may also be directed toward buybacks.
The authors intend for buybacks to reduce token circulation as the ecosystem grows and to create a more direct link between service usage and EIGEN’s value. The text emphasizes shifting focus from new token issuance to income generated by real services.
Creation of an Incentives Committee
To manage the new model, an "Incentives Committee" is proposed, focusing distributions on participants actively securing AVS and expanding EigenCloud. The committee will include representatives from Eigen Foundation and Eigen Labs, with its decisions subject to ratification by the Protocol Council. The committee will have authority to adjust emission policies without lengthy contract upgrades and will publish distribution criteria in the future.
This approach targets rewarding "productive stake"—tokens involved in operating live services and subject to slashing risk (meaning they can be partially lost due to faults or violations). This model aims to better tie payouts to actual participation and risks rather than passive holding.
Governance and protocol amendment issues are already discussed in DAO communities and relate to similar topics reflected in the Aave DAO proposal, which also emphasizes control and distribution mechanisms.
a16z Investment in EigenLayer
The publication also mentions significant external support: a16z purchased $70 million worth of tokens to support the EigenCloud launch. This investment is seen as connected to efforts to expand cloud services and develop the EigenLayer ecosystem. The team aims to use the new mechanisms for more sustainable project operation.
Why This Matters
For miners with 1–1000 devices, the main takeaway is the shift toward "productive" stake: rewards will be more focused on tokens that actively support service operations. This means simply holding or restaking tokens passively may yield fewer incentives compared to participating in AVS maintenance.
Buyback mechanics and fee redistribution may reduce the available token supply in circulation, but this does not guarantee price growth. The 91% drop in EIGEN and nearly $700 million loss highlight why the team seeks ways to strengthen the link between network usage and token economics. The new model and committee represent an attempt to achieve more targeted reward distribution.
What to Do?
- Follow the official proposal and committee publications—they will define criteria for "productive stake" and reward distribution.
- Assess whether your stake genuinely supports AVS: participants in live services and operators may receive higher incentive flows.
- Consider slashing risk: the proposal notes many tokens receiving increased rewards are "slashable," meaning partial loss is possible upon faults.
- Monitor how buybacks (20% of AVS fees and cloud service revenues after expenses) are implemented to understand potential token liquidity changes.
- Avoid impulsive decisions based on expectations—wait for committee clarifications and evaluate changes in your strategy without risk of hasty moves.
