LayerZero has been criticized following a controversial airdrop, with the negative publicity provoking a nosedive in its native token, ZRO.
Amid fleeing airdrop farmers, daily transactions have plummeted to remarkable depths.
LayerZero Called Out For Controversial Airdrop
Omnichain interoperability protocol LayerZero was criticized harshly one day after the launch of its native token, ZRO. It comes amid controversy over its chosen claiming mechanism for its ZRO token. The network introduced a new strategy for users to claim airdrop tokens.
LayerZero employed this strategy to curb Sybil entities, which are manipulative, airdrop farming bots. The protocol required airdrop participants to deposit or donate $0.10 in USDC, USDT, or ETH to Protocol Guild, a collective of Ethereum developers, to claim each ZRO token.
According to LayerZero, this token distribution model aligns with the protocol’s commitment to its long-term future. Further, the foundation committed to matching up to $10 million in donations to the Protocol Guild in support of Layer-1 (L1) developers on Ethereum.
Read more: Best Upcoming Airdrops in 2024
The condition did not sit well with crypto traders. While some likened it to a “tax,” others called it out for the “proof of donation” impression it gave and criticized the protocol. In their opinion, this was nothing close to an airdrop.
“Because the token is in exchange for a donation, it’s technically not an airdrop, and the team didn’t call it an airdrop anywhere in their comms… they explicitly say “This is not an airdrop”. Anyone could’ve bought the no side for like 5c just hours ago and be up 10x already,” X user DCF GOD said.
In hindsight, LayerZero had clarified that as it neared its token generation event, the term ‘airdrop’ was deliberately avoided because the event was not an airdrop. LayerZero Labs explained in a Thursday blog post that this distinction was intentional.
The user also highlighted a drop in prediction platform Polymarket odds for the LayerZero airdrop, which crashed to 50% despite the token’s recent debut.
LayerZero Daily Transactions Plummet
Amidst the controversy, on-chain metrics suggest a bearish sentiment in the LayerZero ecosystem. Dune analytics data shows a drop of over 90% in daily transaction count. This repulsion away from its peak levels comes as airdrop farmers flee.
A drop in daily transactions may suggest fewer users actively use the crypto project. This could reflect the overall market sentiment towards the crypto project. Investors or users have done this, moving away from protocols due to negative news, regulatory concerns, or lack of development progress.
Read more: LayerZero Explained: A Guide to the Interoperability Protocol
The negative sentiment has also extended to the protocol’s native token, ZRO, which has been down 22% in the past 24 hours. As of writing, the token is trading for $3.15, down from its $4.71 peak.
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