LayerZero Airdrop Sparks Controversy, Token Distribution Model Faces Challenges

After more than a month of witch cleaning activities, the LayerZero Foundation recently announced the launch of the Airdrop eligibility inquiry page on social media. However, the Airdrop results left many users disappointed.

As one of the potential airdrop projects that the community is highly focused on, LayerZero's airdrop has sparked widespread anticipation, with people hoping for a "big gesture" in token distribution. However, with the initiation of the witch cleanup activities, a large number of accounts were marked as witch accounts, and many users found themselves empty-handed after six months of effort.

Compared to another large Airdrop project that has recently attracted much attention, the controversy surrounding LayerZero is quite significant. Users not only question the project's "sincerity" but also begin to ponder whether the current industry needs a new Token distribution model.

Before delving into the discussion, we need to understand what a witch cleanup activity is.

One Month Witch Cleanup

LayerZero was established in November 2021, during a bull market in the blockchain space. With strong capital support and promotion from industry opinion leaders, LayerZero rapidly rose to prominence in just one year. The announcement of plans to launch a governance Token Airdrop generated a huge response within the community. The strong capital background, high project valuation, and industry-leading position have led many to expect generous Airdrops, attracting a large number of Airdrop hunters. According to data platform statistics, since last April, the interaction volume on the LayerZero chain has significantly increased, with daily transaction counts exceeding 200,000, peaking at 490,000. Such high-frequency interactions not only enhance the platform's data performance but also bring substantial revenue. For instance, a cross-chain DApp within the LayerZero ecosystem has monthly revenues exceeding $1 million.

With such high expectations, the community's anticipation for LayerZero's Airdrop has remained high. Although news of the Airdrop has been frequent, the actual distribution time has been postponed repeatedly. On May 2nd of this year, LayerZero announced on social media that the first phase snapshot had been completed, and market sentiment reached a peak.

According to a research institution's prediction, the value of LayerZero's airdrop could be between 600 million and 1 billion USD. A conservative estimate suggests that if the TGE valuation is 4 times and the initial circulating supply is 15%, the FDV would be 12 billion USD, and the airdrop value would be approximately 600 million USD, with each user expected to receive between 750 and 1500 USD. In an optimistic scenario, if the circulating supply is 20% and the TGE valuation is 4.5 times, the FDV would be 13.5 billion USD, and the total value of the airdrop is expected to reach 1.08 billion USD, with each user expected to receive between 1350 and 2700 USD.

However, just as users were filled with anticipation, LayerZero suddenly announced an unexpected piece of news. On May 3rd, the project team released a notice stating that to ensure the fairness of the Airdrop, a month-long witch review campaign would be conducted.

This review introduces a brand new "Bounty Reporting Mechanism". According to the official announcement, the review is divided into three stages. The first stage is a 14-day self-exposure stage, where users can self-report witch behavior, and the official will reserve 15% of the Airdrop allocation for such accounts; the second stage is the official review stage, where LayerZero will screen according to specific rules, and any discovered witch accounts will not retain any Airdrop allocation. The most controversial is the third stage—the bounty reporting stage, from May 18 to May 31, where anyone can submit reports, and successful reporters will receive 10% of the reported person's Airdrop allocation, while the remaining 90% will return to the Airdrop pool, and the reported person will no longer receive any Airdrop.

Finally, the CEO of LayerZero Labs announced on social media that there are a total of 1.28 million eligible addresses; and about 10 million Tokens that are recovered will be returned to real users. The witch hunt review comes to a close. There are 803,000 addresses identified as potential witches, among which more than 338,000 addresses self-identified as witches.

The "Mouse Warehouse" Incident and Off-Exchange Token Prices

As the witch's review comes to an end, users eagerly await the Airdrop, but LayerZero has once again fallen into the "mouse warehouse" controversy. While most users are dissatisfied with the Airdrop results, some users report receiving a large amount of ZRO Tokens. Most of these lucky ones hold collectibles from a certain NFT project. For instance, an address holding 50 of that NFT received 5335.55 ZRO Tokens, while another address received 10,000 ZRO Tokens for holding 152 NFTs. On average, each NFT earned about 100 ZRO, adjusted based on the rarity of the NFTs.

Due to the fact that this NFT project is not widely known, it has raised users' suspicions about "rat trading." However, according to statistics from the data platform, there is no significant correlation between the trading volume peak of this NFT project and the LayerZero Airdrop snapshot time, and the official social media has been operating normally. Therefore, the accusations of "rat trading" regarding this project have not been confirmed.

At the same time, many users indicated that they invested a lot of manpower and effort, spending hundreds of dollars, but might only receive 25 ZRO Tokens. Based on an off-market price of 3 dollars each, this is far from enough to cover the costs. These users believe that LayerZero's recent Airdrop is "insincere."

A user holding 36 NFTs (approximately 36E) expressed on social media that he received an airdrop of 10,000 LayerZero (ZRO) tokens. He stated that the airdrop allocation provided to on-chain users by LayerZero is disappointing: "The top 1% of wallets only received 200-500 tokens, which is just insane... My family and I also made efforts to interact to obtain airdrop allocations, and although we ranked in the top 1%, these interactions only resulted in a small airdrop."

Some users even believe that the end of two highly anticipated airdrop projects recently will mark the end of airdrops.

Not only the ZRO Airdrop, but another highly anticipated Airdrop has also sparked similar controversies recently. The number of qualified addresses is far below expectations, the decision-making process is opaque, there has been a disassociation from a certain data platform, and there are frequently occurring suspicious addresses, yet the official response has been silent. This series of actions has plunged the Airdrop into the "mouse warehouse" storm. Previously, another project was also questioned by the community about the existence of a "mouse warehouse" due to its OG NFT.

The root of the problem lies in the community's dissatisfaction with the Airdrop distribution. Retail investors cannot determine how to meet the official Airdrop criteria, and the official "final interpretation right" only increases suspicions of operational opacity, leading to Airdrop Tokens being allocated to "mice," who sell off the Tokens, leaving retail investors to pick up the pieces, while the remaining Token supply continues to unlock and further suppress the market.

In contrast, the airdrops of early representative projects appear to be more transparent and fair. The project officially states that as long as users have used its platform, regardless of whether the exchange was successful, each person can receive an airdrop of 400 Tokens. At the same time, holding the Tokens also allows users to enjoy a series of benefits such as other Tokens.

Although this no-threshold Airdrop has faced criticism, in today's era where Airdrop projects are often criticized for backlashing and being taken over, the Airdrop of this project is regarded as a success story.

Some believe that the real reason for the strong dissatisfaction caused by the ZRO Airdrop is that these airdrop project parties have disrupted the balance between VC, project parties, and "haircut" users.

"Luo Mao" users or studios are the weakest party in the game of VC pushing up valuations and crazy money spending. Project parties need user interaction data to attract VC investment, and VCs need project parties to issue tokens to cash out. Project parties attract "Luo Mao" users to work for their data growth for free with the promise of future tokens. However, there are also viewpoints arguing that whales should not receive all tokens just because they invest a large amount of capital, but the smallest users should still receive some basic amount of tokens.

This is also the origin of the widespread anti-institution sentiment in the current Web3 field, because, due to the greed of VCs or investment misjudgments, these projects have received excessively high valuations but cannot form a reliable and stable business model, and can only rely on issuing Tokens to make retail investors pay for their indigested assets.

However, despite the recent two highly publicized Airdrops being surprising, for ordinary users, "撸毛" is still a way to gain profits, even though the returns are continuously declining.

Airdrops to Watch After LayerZero

Manta Network: Manta Token is an OFT Token, with the team deploying OFT Manta Token on different chains, supporting cross-chain Manta Token across multiple chains.

Allocation plan: 10% allocated to developers; 30% allocated to early adopters; 20% allocated to ecosystem partners; 40% allocated to LP providers.

Canto: Canto is a Layer 1 blockchain built using the Cosmos SDK. Through the OFT standard, the cross-chain representation of CANTO has been deployed to Ethereum, allowing users to provide liquidity and trade CANTO on the main net, thereby also providing an additional bridging path for Canto.

Allocation Plan: 70% allocated to CANTO OFT cross-chain users, with at least 50 CANTO cross-chain to/from Ethereum in total, where 20% is evenly distributed, and 80% is allocated proportionally based on cross-chain volume; 20% allocated to CANTO/WETH LP on a certain trading platform (Ethereum), distributed according to the ownership percentage of the liquidity pool at the time of the snapshot; 10% allocated to Canto developers.

DappRadar: DappRadar is a DApp data analysis platform.

Distribution plan: 10% allocated to developers; 90% allocated to RADAR stakers.

KelpDAO: KelpDAO is a liquidity re-staking protocol, and its rsETH can use OFT to cross-chain to other L2s.

Distribution plan: 40% allocated to users bridging to various L2s; 20% allocated to users who natively mint rsETH on L2s; 20% allocated to the top 500 liquidity providers on the mainnet and L2; 10% allocated to rsETH holders on the mainnet; 10% allocated to the core team of Kelp to pay for developer fees and audits.

Pendle: Pendle is a yield trading protocol.

Distribution plan: 10% allocated to developers; 90% allocated to vependle holders.