Ethereum protocol EigenLayer has fallen victim to an X (formerly Twitter) hack that shared phishing links and very likely stole $800,000 from a single victim, according to security analysts.

The first phishing link, posted at 11:20 am, claimed that the “EIGEN stakedrop Phase 2 is now open,” and that a supposed supply of EIGEN tokens would be distributed. This post has since been deleted. 

However, several similar messages have been uploaded by the account, including a seven-part thread and a disclaimer warning that any posts beyond the final one might be phishing attempts.

The hackers even uploaded a picture of a dog wearing a flower headpiece to bait users into clicking the harmful links.

Read more: Radiant Capital’s $50M crypto hack underlines DeFi’s multisig dependence

Security analyst Scam Sniffer claimed, “EigenLayer’s X account was compromised and posted phishing tweets” and that the link may install malware, steal secret recovery phrases, and feature fake metamask sites. 

Scam Sniffer also noted that someone lost $800,000 worth of mETH after signing a permit phishing signature around the same time. “The victim very likely clicked the phishing tweet from EigenLayer,” it noted.

At the time of writing, the account is still sharing phishing links.

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.

The post EigenLayer X hackers who likely stole $800K now posting dog pics appeared first on Protos.

Following a week of drama for EigenLayer’s recently launched token, Justin Sun has deposited 3.62 million EIGEN (worth $14.1 million) to Binance.

Sun had previously claimed 5.24 million airdropped EIGEN (worth $21.5 million at the time), sending it to HTX shortly after the token unlocked for trading on October 1.

A sharp decline in price following both deposits suggests a large volume of EIGEN sales accompanied the moves. After a spike to $4.10 since Sun’s most recent deposit, EIGEN is currently trading around 4.00, according to data from CoinMarketCap.

Read more: Justin Sun confirms he has seven fingers

While Justin Sun is no stranger to controversy, over the past week, EigenLayer has also found itself the focus of criticism after several gaffes that have damaged the project’s reputation.

EigenLayer purports to extend Ethereum’s ‘trust network’ to other projects by reusing, or ‘restaking,’ already-staked ETH. However, its own operations appear to be run via a system more akin to “trust me bro” rather than taking advantage of Ethereum’s trust-minimizing smart contracts.

‘Unapproved selling’ or phishing scam?

Despite the widespread use of purpose-built vesting contracts for locked tokens, EIGEN had seemingly been distributed to investors under a handshake deal to not sell before an agreed-upon date.

On Friday, EigenLayer took to X (formerly Twitter) to publish a ‘community update’ that it was investigating “unapproved selling activity” associated with a wallet that had received approximately 1.67 million EIGEN.

Read more: Curve Finance ‘gentleman’s agreement’ expires, counterparties dump CRV

Later that day, EigenLayer published another ‘update’ informing users that they had fallen for a phishing email, or, as it put it, “an email thread involving one investor’s transfer of tokens into custody was compromised by a malicious attacker.” Both updates had replies disabled.

As noted by X user DeFi_Made_Here, a test transaction was sent before following up with the full amount (worth almost $6 million at the time). Given the whole amount was indeed sent, it appears that receipt of the test was confirmed via the same, compromised email, rather than via a second line of communication. 

In September, crypto phishing scams netted approximately $46 million, according to ScamSniffer, with a single incident on September 29 accounting for $32 million of the total lost.

Previously, EigenLayer has come under fire for allowing investors to cash out via farming of staking rewards with supposedly locked tokens, and the potential conflicts of interest between EigenLayer advisors and their positions at the Ethereum Foundation.

Sun in the spotlight, as ever

In recent months, Protos examined proof of reserves (PoR) for Sun-linked exchanges HTX, which contained multiple discrepancies in underlying assets, and Poloniex, whose PoR was found to be severely lacking, only accounting for its TRON holdings.

Both exchanges were hacked within two weeks of each other in November last year.

Read more: VIDEO: Unpacking Justin Sun’s messy WBTC deal with BitGo

Given his proximity to the above issues, Sun’s potential involvement in the proposed rearrangements of wrapped Bitcoin has led to concerns over the token’s future credibility, with DeFi lending platform Sky (formerly Maker) recently voting to disable new borrows.

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.

The post Justin Sun dumps another $14M of EIGEN after week of controversy appeared first on Protos.

EigenLayer leaders have today admitted to withholding the full truth about its massive insider allocations, specifically that they claimed a majority of its supply was not for sale (in ‘full lock’) despite wealthy insiders being allowed to cash out rewards.

Back in April, EigenLayer became one of Ethereum’s largest yield-boosting protocols with $15.7 billion in assets. Fast-forward to today, and its fully diluted value has crashed 60%.

EigenLayer admitted its sneaky practices in a belated transparency disclosure.

Buoyed by $100 million from Andreessen Horowitz (a16z) and tens of millions from other Silicon Valley luminaries, EigenLayer claimed it could compete with Lido, by far the largest liquid restaking protocol on Ethereum.

Restaking protocols are essentially leveraged debt schemes that use staked ether’s paltry 3.5% as collateral for derivatives that loop up to double-digit percent yields.

EigenLayer’s leaders claimed that they would lock a majority of the EIGEN token supply for at least a year. Specifically, in April, EigenLayer published a whitepaper allocating a stunning 29.5% of the token supply to early investors plus 25.5% to early contributors. Combined, these two groups would hold greater than 50% of all EIGEN.

It further promised that both of these groups agreed to three years of trading restrictions, including “a full lock in year one, followed by a linear unlock of 4% of their total allocation each month over the next two years.”

Read more: Ethereum Foundation blasted for EigenLayer conflicts of interest

EigenLayer’s shady ‘full lock’ promise

Fast-forward to September 30 — mere days into the listing of EIGEN on exchanges — and users started to notice that these so-called ‘full lock’ allocations were actually allowing investors and early insiders to cash out.

As recently as two weeks ago, Eigen did not disclose that investors holding ‘full lock’ EIGEN could sell the staking rewards received from those locked, staked tokens. Eigen then updated its docs at the very last minute.

“Basically they’re earning dividends,” noted one user. “Locked tokens should not be staked. That there is a grift,” said another, while one commented, “The public was unaware of this practice… leading to misleading conclusions about the token’s float and, consequently, investment decisions.”

In June, EigenLayer had attracted $20 billion in assets and become the second-largest liquid restaking protocol after Lido’s then-$35 billion. Today, it is is down 44% to $11.2 billion.

Although the price of ether has declined over this time and accounts for some of these dollar losses, Lido’s assets have roughly tracked the 25% price decline of ether whereas EigenLayer’s 44% losses have far outpaced ether’s decline.

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.

The post VCs secretly cashed out rewards on ‘locked’ EIGEN tokens appeared first on Protos.

This summer, crypto restaking protocols were rallying to new heights. Almost without exception, these leveraged plays on the native yield of proof-of-stake blockchains like Ethereum and Solana were attracting all-time high capital inflows.

As of June 5, their total value locked (TVL) — a convenient albeit incomplete metric for judging the size of crypto protocols — had crested $21 billion.

Protos has created a chart illustrating the breakdown of this TVL — click here to view.

However, as of publication time, the assets in those protocols had declined by one-third to $14 billion.

As investors return from summer vacation, university classes restart, and capital allocators reassess their portfolios with sober professionalism, the world has decided to take some risk off the table at the start of the third quarter.

Declines in these USD values are influenced by general declines in ETH, SOL, and other restaking assets. Since June 5, the crypto market has shed 26% of its total market capitalization.

Read more: Ethereum Foundation blasted for EigenLayer conflicts of interest

Restaking: More leverage, liquidation, complexity, and risk

Restaking protocols enable crypto asset holders to leverage staked assets like ETH or SOL to generate additional yield. Anil Lulla of Delphi called it “the rehypothecation of ETH to riskier networks,” and it certainly has both of those qualities.

Restaking rehypothecates, or ‘double-allocates,’ an asset across two or more protocols. A common restaking strategy involves Ethereum + Lido + EigenLayer, among many other examples. The introduction of these additional protocols beyond the base layer — in this case, Lido and EigenLayer — introduces the additional risk of two networks into one’s investment.

As compensation for these additional risks, restaking schemes advertise yields with annualized percentages in the double and even triple digits.

“Looping,” or taking out additional loans after restaking in order to restake yet again can transform these numbers into quadruple digits and beyond.

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.

The post CHART: Restaking assets down 33% in two months appeared first on Protos.

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:

Read more: Ethereum centralization is becoming a serious problem

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.

Read more: Here’s why Ethereum 2 staking is risky and increases centralization

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.

The post Ethereum Foundation blasted for EigenLayer conflicts of interest appeared first on Protos.