LayerZero Airdrop Sparks Controversy, Token Distribution Paradigm Faces Challenges

After more than a month of witch cleansing activities, the LayerZero Foundation announced the airdrop eligibility query results today, but this result left many users feeling disappointed.

As one of the highly anticipated potential Airdrop projects, LayerZero's Airdrop had the community filled with expectations. However, with the onset of the witch hunt activities, a large number of accounts were marked as witches, resulting in many users ending up empty-handed after investing a significant amount of effort.

Similar to another significant Airdrop project in recent times, LayerZero has sparked considerable controversy. Users not only question the sincerity of the project team, but also begin to ponder whether the industry needs a new Token distribution model.

Before delving into the discussion, we need to first understand the concept of witch washing activities.

One Month Witch Cleansing

LayerZero was established during the bull market in November 2021. With strong capital support and promotion from industry opinion leaders, LayerZero quickly rose to prominence. Its announcement of a governance Token Airdrop garnered significant attention within the community. The project's capital background, high valuation, and industry position have led many to anticipate substantial returns, attracting a large number of Airdrop hunters. Data shows that since last April, the on-chain interactions of LayerZero have significantly increased, with a peak of 490,000 daily transactions. This not only enhanced the platform's data performance but also brought considerable revenue.

With high expectations, the community has been very optimistic about the Airdrop of LayerZero. Despite frequent news about the Airdrop, it has been repeatedly delayed. On May 2nd of this year, LayerZero announced the completion of the first snapshot, and market sentiment reached its peak.

Research institutions predict that the value of LayerZero's Airdrop could be between 600 million and 1.08 billion dollars, with each user expected to receive between 750 and 2700 dollars.

However, just as users were filled with anticipation, LayerZero suddenly announced an unexpected decision. On May 3rd, to ensure the fairness of the Airdrop, LayerZero launched a month-long witch review action.

This review introduces a "bounty reporting mechanism" divided into three stages: the self-disclosure stage, the official review stage, and the bounty reporting stage. The most controversial is the third stage, where anyone can submit a report on a specific platform, and successful reporters will receive 10% of the reported person's Airdrop allocation.

Finally, the CEO of LayerZero Labs announced that there are a total of 1.28 million eligible addresses, of which about 803,000 addresses were identified as potential witches, and over 338,000 addresses self-disclosed as witches. The project team stated that they will return approximately 10 million Tokens recovered to real users.

"Rat Trading" Questions and Off-Market Price Disputes

When the witch's review ended and users awaited the airdrop, LayerZero found itself embroiled in the "mouse warehouse" controversy. Although most users were dissatisfied with the airdrop results, a few users still received a large amount of ZRO tokens. These lucky ones were mostly holders of a certain NFT project, with an average of about 100 ZRO per NFT, adjusted based on rarity.

This has raised users' suspicions about "rat trading." However, according to data analysis, there is no significant correlation between the peak trading volume of the NFT project and the LayerZero Airdrop snapshot time, and the official social media accounts have been operating normally. Therefore, the "rat trading" allegations have not been substantiated.

At the same time, many users have stated that they have invested a large amount of manpower and funds, but have only received a small amount of Tokens. Based on the over-the-counter trading price, this is far from covering the costs. Users believe that this Airdrop "lacks sincerity".

A user who received a large amount of Airdrop posted on a social platform, expressing that the Airdrop allocation given to on-chain users by LayerZero is disappointing, as even the top 1% of wallets only received 200-500 Tokens.

Some believe that the recent conclusion of two important Airdrop projects may mark the end of the Airdrop era.

The core issue lies in the community's dissatisfaction with the allocation of Airdrops. Retail investors find it difficult to determine how to meet the official Airdrop criteria, while the official "final interpretation rights" have raised suspicions of operational opacity. This has led to Airdrop Tokens being allocated to a small number of people, who then sell off the Tokens, leaving retail investors to pick up the pieces, while the remaining Token supply continues to be unlocked, further suppressing the market.

In contrast, some early airdrop projects appeared to be more transparent and fair. For example, a well-known project stated that anyone who had used its product could receive a fixed amount of token airdrop.

Some believe that the real reason behind the strong dissatisfaction caused by this airdrop is that the project party has disrupted the balance between investors, the project party, and ordinary users. Ordinary users are in the weakest position in this game. The project party needs user data to attract investment, while investors need the project party to issue tokens to cash out. The project party attracts users to contribute to its data growth for free by promising potential future tokens.

This is also one of the reasons why there is a widespread anti-institution sentiment in the current Web3 space. Due to the greed of certain investors or misjudgment in their investments, these projects have obtained extremely high valuations, but it is difficult for them to form a stable business model and can only rely on issuing tokens to make retail investors pay for their bad assets.

Despite the recent two major airdrops being disappointing, participating in airdrops remains a way for ordinary users to potentially gain profits, even though the returns have been declining.

Future Airdrop Projects to Watch

1. Manta Network: A cross-chain Token project that supports Token transfers across multiple chains.

2. Canto: A Layer 1 blockchain built on the Cosmos SDK, achieving cross-chain functionality through specific standards.

3. DappRadar: DApp data analysis platform.

4. KelpDAO: A liquidity re-staking protocol, its Token can be cross-chain to multiple L2 networks.

5. Pendle: Yield Trading Protocol.

These projects all have their own token allocation plans, distributing to different types of users and participants. Interested users can keep an eye on the development dynamics of these projects and the specific ways to participate.