Renzo protocol recently underwent a strategic overhaul after facing substantial setbacks following the significant ezETH depegging incident. The platform made swift adjustments to its tokenomics structure amidst intense criticism in a bid to restore confidence and dispel Fear, Uncertainty, and Doubt (FUD) prevailing within its community.

The turbulence began on a fateful Tuesday, 24th of April, when Renzo protocol's liquid restaking token (LRT), ezETH, experienced a drastic depegging, plunging to a notable low of $688 on the Uniswap platform. This event triggered a DeFi-wide ripple effect, resulting in a staggering liquidation exceeding $60 million in losses. Renzo's ezETH was primarily designed to mirror and retain parity with the price movements of Ethereum (ETH).

However, the adverse reaction from community members towards the platform's controversial airdrop and tokenomics announcement swiftly prompted the depeg incident. According to data sourced from Dexscreener, during this period, the LRT token traded at a compelling discount of over 75% against wrapped ETH on Uniswap, marking a significant divergence from its intended peg.

Renzo, as the second-largest liquid restaking protocol in the space, holds considerable influence with its LRT, ezETH, serving as a focal point of interest, particularly for participants seeking to harvest the platform's native token rewards. Leveraging its Season 1 ezPoints program, Renzo achieved substantial growth, ascending to become the second-largest restaking protocol, boasting a Total Value Locked (TVL) surpassing $2.3 billion.

User engagement heightened as individuals expanded their holdings of ezETH with the expectation of accruing more points and a share in the anticipated native token, "$REZ." However, dissatisfaction erupted within the community upon learning that only a minimal 5% of the REZ supply would be distributed to users, with additional grievances arising over the preferential treatment accorded to Binance compared to ordinary users.

One disillusioned user voiced their discontent, highlighting the disparity in treatment, which favored Binance whales receiving a 2.5% share by locking BNB/stables for a mere 6-day duration, seemingly devoid of risk. In contrast, users had committed significant assets totaling $3 billion in ETH over an extended period, primarily to amass points for a nominal 5% allocation. Consequently, aggrieved users opted to offload their holdings of ezETH on secondary markets with limited liquidity due to Renzo's temporary restriction on withdrawals.

The consequential liquidations predominantly impacted Renzo's affiliated DeFi integrators, with entities such as Gearbox and Morpho Blue experiencing notable losses. Gearbox, in particular, witnessed a substantial reduction of approximately 50% in its ezETH TVL during the depeg episode, while Morpho also bore the brunt of significant liquidation ramifications.

In light of these developments, criticisms and suspicions were cast upon Renzo and its affiliated platforms, prompting prominent figures within the DeFi space to weigh in on the unfolding scenario. Aave's founder, Marc Zeller, raised concerns over Morpho's perceived acceptance of elevated risks, citing instances where protocols may take shortcuts on risk factors, only for vulnerabilities to emerge unexpectedly.

In response to Zeller's remarks, Paul Frambot, the founder of Morpho Labs, emphasized the contrasting features between Morpho and Aave, asserting that users within their ecosystem retained the autonomy to select various assets as collateral, determine oracle tools, and adjust Liquidation Loan-To-Value (LTV) ratios. Frambot emphasized that the inherent risk associated with specific strategies rested upon individual user choices and risk appetites.

Amidst the discord, Gearbox's founder reassured the community that passive lenders remained safeguarded within their protocol. Subsequently, Renzo's ezETH managed to reestablish a peg with ETH, while the platform enacted revisions to amend its previously contentious tokenomics decisions. Despite these adjustments, certain observers regard the depeg event as an inherent component of the risks embedded within the LRT ecosystem.

A notable DeFi analyst, operating under the pseudonym Ignas, cautioned against complacency, hinting at potential future challenges and stressing that owning LRTs carried intrinsic vulnerabilities. This underscored the importance of exercising vigilance, especially when engaging in 'farming' LRTs through point-based programs that may lack full transparency regarding token allocations prior to participation.