- Renzo’s ezETH depeg led to huge liquidations following backlash on its tokenomics.
- The protocol has amended the tokenomics following huge backlash.
On Tuesday, twenty fourth April, Renzo protocol’s liquid restaking token (LRT), ezETH, depegged and hit a low of $688 on Uniswap, sparking a DeFi-wide liquidation price over $60 million.
Renzo’s ezETH is designed to trace and preserve a peg to Ethereum [ETH] worth.
Nevertheless, an overwhelmingly unfavourable response from group members to the protocol’s unpopular airdrop and tokenomics announcement swiftly tipped the depeg.
Dexscreener data confirmed that on Tuesday, the LRT token traded at a large low cost of over 75% in opposition to wrapped ETH on Uniswap.
Backlash on Renzo crypto tokenomics
Renzo is the second-largest liquid restaking protocol, which makes its LRT ezETH an enormous deal, particularly to “farmers” aiming for the protocol’s native token.
Via its Season 1 ezPoints program, Renzo managed to surge into the second-largest restaking protocol, boasting over $2.3 billion in TVL (Complete Worth Locked).
Customers elevated their positions on ezETH, anticipating to get extra factors and an allocation of the upcoming native token “$REZ.”
Nevertheless, Renzo’s announcement that solely 5% of the REZ provide will likely be issued to customers confronted backlash. One other competition was that Binance acquired a greater deal than group customers.
One of many disgruntled customers noted,
“Binance whales get a 2.5% share by locking BNB/stables for less than 6 days – completely risk-free! Plus, Binance invested at a $25M valuation. In the meantime, we locked $3B in ETH for months simply to chase factors for a 5% allocation.”
The sad customers opted to promote their ezETH on secondary markets with skinny liquidity since Renzo at the moment doesn’t permit withdrawals.
The following liquidations largely affected Renzo’s DeFi integrators, corresponding to Gearbox and Morpho Blue.
Gearbox, specifically, misplaced about 50% of its ezETH TVL in the course of the depeg, and Morpho additionally suffered substantial liquidations.
Renzo crypto critics or opportunists?
Reacting to the huge loss, Aave founder Marc Zeller criticized Morpho for taking “shortcuts on dangers,”
“When your protocol, by design, takes shortcuts on threat and oracles every little thing nice till all of a sudden it’s not.”
Nevertheless, Morpho Labs founder Paul Frambot didn’t let the jibe move and reminded Zeller of the distinction between Morpho and Aave,
“Marc, in contrast to on Aave, Morpho customers are free to decide on which property they use as collateral, the oracle and the Liquidation LTV. Does that imply that each one methods are risk-free? After all not! Customers can take the chance they need.”
On his half, Gearbox’s founder reassured that passive lenders have been protected.
Renzo’s ezETH has since resumed a peg at ETH, and the protocol corrected its earlier notorious tokenomics.
Nonetheless, some view the depeg as an inherent threat inside the LRT ecosystem. A pseudonymous DeFi analyst, Ignas, noted that,
“You suppose ezETH depeg is dangerous? We acquired the primary lesson that holding LRTs will not be risk-free, however it’ll most likely worsen for LRTs.”
This requires warning, particularly when “farming” LRTs by way of factors packages that aren’t outrightly clear on token allocation earlier than signing up.