Is LayerZero an airdrop? ZRO surged and then plummeted

Author: Ciaran Lyons, CoinTelegraph; Compiler: Tao Zhu, Golden Finance

LayerZero (ZRO), the newly launched token of cross-chain interoperability protocol LayerZero, fell 17% just one day after its launch as its founder defended the controversial donation criteria for claiming the tokens, which some have likened to a "tax."

Some disagree and believe that the mechanism may be the right step to solve the problems that have plagued recent token airdrops.

After launching on June 20, ZRO surged 15.15% to $4.71 in just 20 minutes before plummeting 22% in two hours, a pattern that often occurs in token airdrops as people sell off their newly acquired tokens.

In this case, the launch of ZRO also brought its own unique controversy. LayerZero has made it so that users who want to claim the tokens will need to donate a small amount of money for each ZRO token.

Source: LayerZero Foundation

“To claim ZRO, users must donate $0.10 USDC, USDT, or native ETH for each ZRO. This small donation will go directly to the protocol association,” LayerZero wrote in a June 20 post.

LayerZero predicts that these donations will contribute approximately $18.5 million to the Protocol Guild, the collective funding mechanism for Ethereum developers.

The move was met with backlash from the crypto community, as users argued that having to pay a “tax” changed the nature of the “airdrop” to one more like an Initial Coin Offering (ICO).

Users flocked to LayerZero’s post with comments including “is this a joke” and “how about you paying for this”.

LayerZero Confirms ZRO Launch ‘Not an Airdrop’

LayerZero has insisted that its recent launch “is not an airdrop”.

In a June 20 statement, LayerZero argued that airdrops no longer contribute to the “goals of fair distribution, community building, and protocol health, which airdrops were originally intended to address.”

This is largely due to the increase in airdrop mining and Sybil entities (entities that create and use a large number of wallets to conduct airdrops), with token recipients having “little to no interest” in the long-term success of the project.  

LayerZero co-founder Bryan Pellegrino seemed to defend the token release throughout the day, reiterating that no one is entitled to the tokens and that users should refrain from claiming them if they don’t want to donate.

“There is no forced donation, and if you don’t want to donate… don’t ask for it. It’s not something you own, it’s something that’s been offered,” he said.

ZRO briefly hit a high of $4.7 before falling below $3.50. Source: CoinMarketCap

"What an unreal day, I've never been so tired in my life. Turned off notifications and went to sleep for an unknown time. All the best," Pellegrino added.

Meanwhile, some members of the cryptocurrency community agree that ZRO’s donation collection mechanism could be a step in the right direction for future airdrops.

“People complaining about the LayerZero airdrop donation are stupid,” Adam Cochran said in a June 20 post, explaining that the donation will be used to support the “greater ecosystem” and “a good way to set a base cost value for the project.”

“This is a good way to increase the cost of Sybil operations, making them less likely to perform Sybil attacks in the future,” he explained.

Last week, ZkSync noted that during the June 17 airdrop launch, despite the use of “explicit” Sybil detection and a “unique airdrop design” to ensure the maximum number of organic users, some Sybil wallets were able to bypass the system.

“While people are sneering at the ZRO airdrop, I want to give it some praise because the claims page UI/UX is very clean and by far the smoothest I’ve seen. It’s like Spotify Wrapped,” added Irys developer Connor King.

ZRO is currently trading at $3.35, down 17% in the past 24 hours, according to CoinMarketCap data.