[EIP #3] - Reduction of vlEGP Rewards Buyback Threshold from 50% to 30% APR

Eigenpie 3. Eigenpie Improvement Proposals
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Abstract

This follow-up proposal builds on the existing monthly reward adjustment and buyback mechanism by lowering the APR threshold that triggers excess reward reallocation from 50% to 30%. Rewards in EIGEN and USDT will continue to be capped monthly, with any surplus above the new 30% APR target automatically redirected to the automated EGP buyback program. This change aims to maintain sustainable yields for vlEGP holders while substantially increasing buyback volumes to drive greater EGP value accrual and long-term price support.

Motivation

The Eigenpie community is focused on optimizing the vlEGP reward system to create a more efficient and resilient environment, especially by enhancing the impact of the buyback mechanism in varying market conditions.

This proposal advances that objective by:

  1. Lowering the Threshold: Reducing the APR cap from 50% to 30%, allowing excess rewards to be captured and reallocated earlier.

  2. Boosting Buyback Volume: Significantly increasing the amount of rewards funneled into EGP purchases, thereby accelerating the reduction in circulating supply.

  3. Preserving Transparency: Continuing the established process of routing bought-back tokens to the Treasury multisig for community-verifiable tracking.

These adjustments will create a more efficient vlEGP ecosystem by:

  • Driving higher buyback amounts to strengthen EGP scarcity and mitigate sell pressure more effectively.

  • Balancing attractive holder rewards with stronger token value capture, making locking EGP more rewarding over time.

  • Building a bolstered economic model that aligns incentives and enhances overall ecosystem resilience.

Specification

EIP #3 introduces a single targeted change to the existing mechanism:

Adjusted APR Buyback Threshold:

The threshold for capping vlEGP rewards and triggering excess reallocation will be reduced from 50% APR to 30% APR. All other aspects of the monthly evaluation, reward capping, surplus redirection to the buyback fund, and execution of periodic EGP purchases remain unchanged as established in prior governance decisions.

Implementation:

Upon approval, the protocol will update the APR target parameter to 30%, effective from the next monthly reward cycle onward. No additional modifications to reward distribution, buyback execution, or treasury handling are required.

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Look, the vote marked with the hash bc-2a5-ad… (visible in the Eigenpie governance space on Snapshot) boils down to this: it authorizes the protocol to take a fixed portion of the revenue it already generates—specifically, restaking fees and interest from EigenLayer—and automatically use it to buy back EGP on the market, lock it in the vlEGP contract, and simultaneously allocate another small percentage to a security fund to cover potential slashing or bugs. This isn’t a change in philosophy; it’s an operational adjustment to get the flywheel spinning without human intervention.

Now, what specific advantages does this offer? First, it creates structural demand for the token itself. Every time the protocol collects fees, it becomes a recurring buyer of EGP, which cushions eventual sales and ensures that some of the selling pressure is met with an automatic counterparty. Second, by sending these newly repurchased EGP to the vlEGP module, the liquid supply in circulation decreases, and at the same time, the voting power of long-term stakers increases; this aligns incentives because those who lock tokens receive more power to decide on future proposals and also a larger share of the fee stream.

Third, the security fund, which is fueled by this same mechanism, is key when considering the risks of a restaking protocol. The day a validator makes a mistake and suffers slashing on EigenLayer, Eigenpie can cover that loss without having to issue new tokens or deplete the main treasury. Fourth, the proposal mandates that all these movements be executed via smart contracts without the need for manual multisigs. This reduces the attack surface and eliminates the political temptation to “pause” buybacks if the price rises too quickly.

Fifth—and almost no one mentions this—by having the protocol buy EGP with the same rETH, stETH, or swETH it already manages, a constant conversion of LSTs into EGP-WETH liquidity is generated within Arbitrum. This improves the depth of the liquidity pool and, by extension, reduces slippage when a market maker or retail user wants to enter or exit a position. Greater depth means more volume and, therefore, more fees, which in turn fuel the cycle.

In short, the proposal is advantageous because it transforms Eigenpie into its own market maker, rewards patient capital with a higher percentage of revenue, builds a credible risk buffer, and strengthens on-chain liquidity without relying on additional inflationary incentives. If you are an EGP holder or plan to restake more LSTs, you have a vested interest in this happening: it’s the missing piece that will allow the token to programmatically capture the value that the protocol is already generating.

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Token Prize has dropped from 9$ to 0.15$ and now offering another buyback plan.

You have already rugged the investors, what more are you looking for ?