Renzo Protocol’s ezETH Depeg Incident: What Happened and Why
If you’ve been following the Renzo Protocol’s liquid restaking token (LRT) ezETH, you may have noticed a significant event on Wednesday. The controversial REZ native token airdrop caused ezETH to depeg from its underlying asset, Ethereum (ETH). Here’s a breakdown of what happened and why:
ezETH Price Impact and Recovery
During the incident, ezETH’s price dropped momentarily to as low as $688 on the decentralized exchange (DEX) Uniswap. However, the price of ezETH has since recovered, mitigating some of the initial losses.
- The depeg incident happened due to a large-scale sell-off of ezETH following the end of the season 1 airdrop on Renzo Protocol.
Causes of the Incident
- Investors, like Tommy from Crypto.com Capital, wanted to retrieve their ETH after farming LRT or other protocols, triggering the depeg.
- The ezETH depeg led to mass liquidations in leveraged protocols, with losses automatically covered by Gearbox’s reserve fund.
Renzo Protocol Overview
Renzo is among the top liquid restaking protocols, with a total value locked (TVL) of around $3.21 billion. In the last 30 days, Renzo’s TVL has surged by approximately 125%, reflecting growing interest in the platform.
- Renzo’s popularity soared after Binance introduced the Launchpool program for its native token REZ, sparking a rush to stake assets and farm REZ tokens.
Airdrop Controversy
- Renzo allocated 10% of the total REZ token supply for the airdrop, attracting users eager to participate.
- The season 1 airdrop only covered 5% of the total token supply, leading to discrepancies in airdrop availability for Renzo and Binance Launchpool participants.
Recent Developments and Updates
Following the airdrop controversy, Renzo Protocol made adjustments to the REZ token claim time and tokenomics to address user concerns and improve transparency:
- Airdrop claim time now occurs one hour before REZ token trading on Binance to align with user expectations.
- The season 1 airdrop allocation was increased to 7%, providing more opportunities for participants.
As a crypto investor, staying informed about market developments, controversies, and platform updates is essential for making sound investment decisions. Keep an eye on Renzo Protocol and other projects to adapt to changing dynamics and seize opportunities in the crypto landscape.
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