Renzo Protocol rethinks strategy after $60M in liquidations

• Renzo’s ezETH depeg led to monolithic liquidations pursuing backlash connected its tokenomics. 
• The protocol has amended the tokenomics pursuing monolithic backlash. 

On Tuesday, 24th April, Renzo protocol’s liquid restaking token (LRT), ezETH, depegged and deed a debased of $688 connected Uniswap, sparking a DeFi-wide liquidation worthy implicit $60 million. 

Renzo’s ezETH is designed to way and support a peg to Ethereum [ETH] price.

However, an overwhelmingly antagonistic absorption from assemblage members to the protocol’s unpopular airdrop and tokenomics announcement swiftly tipped the depeg.  

Dexscreener data showed that connected Tuesday, the LRT token traded astatine a monolithic discount of implicit 75% against wrapped ETH connected Uniswap. 

Backlash connected Renzo crypto tokenomics

Renzo is the second-largest liquid restaking protocol, which makes its LRT ezETH a large deal, particularly to “farmers” aiming for the protocol’s autochthonal token.

Through its Season 1 ezPoints program, Renzo managed to surge into the second-largest restaking protocol, boasting implicit $2.3 cardinal successful TVL (Total Value Locked).

Users accrued their positions connected ezETH, expecting to get much points and an allocation of the upcoming autochthonal token “$REZ.” 

However, Renzo’s announcement that lone 5% of the REZ proviso volition beryllium issued to users faced backlash. Another contention was that Binance got a amended woody than assemblage users. 

One of the disgruntled users noted, 

“Binance whales get a 2.5% stock by locking BNB/stables for lone 6 days – wholly risk-free! Plus, Binance invested astatine a $25M valuation. Meanwhile, we locked $3B successful ETH for months conscionable to pursuit points for a 5% allocation.”

The unhappy users opted to merchantability their ezETH connected secondary markets with bladed liquidity since Renzo presently doesn’t let withdrawals. 

The ensuing liquidations mostly affected Renzo’s DeFi integrators, specified arsenic Gearbox and Morpho Blue.

Gearbox, successful particular, mislaid astir 50% of its ezETH TVL during the depeg, and Morpho besides suffered important liquidations. 

Renzo crypto critics oregon opportunists?

Reacting to the monolithic loss, Aave laminitis Marc Zeller criticized Morpho for taking “shortcuts connected risks,” 

“When your protocol, by design, takes shortcuts connected hazard and oracles everything large until abruptly it’s not.”

However, Morpho Labs laminitis Paul Frambot didn’t fto the jibe walk and reminded Zeller of the quality betwixt Morpho and Aave, 

“Marc, dissimilar connected Aave, Morpho users are escaped to take which assets they usage arsenic collateral, the oracle and the Liquidation LTV. Does that mean that each strategies are risk-free? Of people not! Users tin instrumentality the hazard they want.”

On his part, Gearbox’s laminitis reassured that passive lenders were safe. 

Renzo’s ezETH has since resumed a peg astatine ETH, and the protocol corrected its erstwhile infamous tokenomics. 

Nevertheless, immoderate presumption the depeg arsenic an inherent hazard wrong the LRT ecosystem. A pseudonymous DeFi analyst, Ignas, noted that,

“You deliberation ezETH depeg is bad? We got the archetypal acquisition that holding LRTs is not risk-free, but it’ll astir apt get worse for LRTs.”

This calls for caution, particularly erstwhile “farming” LRTs done points programs that are not outrightly transparent connected token allocation earlier signing up.