Renzo’s ezETH loses a pig amid a controversial airdrop.

Renzo Protocol's liquid restaking token (LRT) ezETH experienced a depeg on Wednesday amid the controversial airdrop of its native REZ token.

The incident caused ezETH to lose 1:1 parity with its underlying asset, Ethereum (ETH).

The price of ezETH has momentarily dropped to $688 on the decentralized exchange (DEX) Uniswap. However, at the time of this writing, the value of ezETH has recovered.

The cause of the event is probably due to the large-scale sale of ezETH after the season 1 weather ended on the Renzo protocol.

“Users want to redeem their ETH to farm LRT or other protocols,” explains Tommy, an investor at Crypto.com Capital.

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Additionally, Tommy emphasized that the ezETH depeg incident is a risk that all LRTs should be aware of.

The ezETH depeg has caused mass leaks in many used protocols such as Gearbox and Morpho Labs. The leaks happened because many users frequently used LRT to borrow ETH.

“115 credit accounts were cancelled, 10,650 ezETH were sold on the Balancer pool. The liquidity loss of 25.77 ETH was automatically covered by the internal Gearbox reserve fund, no action required,” said Gearbox founder 0xmikko.

Renzo is the second largest liquidity recovery protocol with a total value locked (TVL) currently around $3.21 billion. Renzo's TVL has grown by approximately 125% in the last 30 days, according to Defillama data.

Interest in the Renzo protocol has soared since crypto exchange Binance launched its Launchpool program for its native Renzo (REZ) on Tuesday. BNB and First Digital USD (FDUSD) holders will be able to farm REZ tokens for six days until April 29.

Renzo has allocated 10% of the total 10 billion REZ tokens for airdrops. Meanwhile, 2.5% of the token supply is allocated to Binance Launchpool.

However, the Season 1 airdrop only reached 5% of the total REZ token supply. This means that the airdrop allocation for farming on the Renzo protocol is only 50% larger than that for the Binance Launchpool.

In detail, 2% of the 5% of the Season 1 airdrop (or 0.1% of the total REZ token supply) is allocated to Milady and Schizoposter Invincible Token (NFT) holders.

When the Binance Launchpool was scheduled to end on April 29 and trading of the REZ token began on April 30, the controversy intensified.

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Such an arrangement allowed participants of the Binance Launchpool to sell REZ, which they had acquired two days earlier than parties working on the Renzo protocol. This contrasts with Renzo protocol users who can only claim their airdrop on May 2nd.

However, on Thursday morning the latest development, the Renzo Protocol, updated the REZ token airdrop claim time and Tokenomics. Airdrop claim time will be 1 hour before trading on Binance. Meanwhile, Season 1's airdrop placement has grown to 7 percent.