The airdrop that was thought to bring benefits overnight turned into a war over humanity.
On June 11, regarding LayerZero’s ongoing Sybil review, LayerZero co-founder Bryan Pellegrino announced on the X platform that the final list of Sybils will be announced before the end of June, and once again emphasized that the review will focus on real users and fair distribution.
The statement, which seemed to be consistent with the identity of the project party, still caused an outcry from the community. Regarding this massive witch-hunt, the market had different opinions, with some people strongly supporting it and others saying that it was a waste of time.
To explain the connection clearly, we must start with LayerZero.
As a star project of cross-chain protocols, it is not an exaggeration to describe LayerZero as being born with a golden key.
LayerZero was founded in November 2021, during a bull market when capital was particularly fond of infrastructure. It was also the period when cross-chain interoperability technology received the most attention, and the cross-chain asset ecosystem was initially established, but other than that, the field of data transmission was relatively blank.
LayerZero hit the mark exactly. Unlike the cross-chain bridges on the market at the time, it chose an oracle network to replace the traditional cross-chain continuous streaming transmission, outsourced the burden of verifying on-chain information transmission to a third-party oracle, and adopted the form of a light client, which is easy to use and low-cost.
Although the founding team is Canadian, the core members have all completed their education in the United States, and the team also has sufficient industry background. Against this background, Wall Street star FTX quickly connected with the project. In March 2022, LayerZero's development team LayerZero Labs announced the completion of a $135 million A+ round of financing led by FTX Ventures, Sequoia Capital and a16z, with a post-investment valuation of $1 billion. Capital stars shine, and less than 5 months after its establishment, LayerZero successfully became a new crypto unicorn.
In the following year, with the support of capital and the promotion of industry KOLs, LayerZero has developed rapidly and has been integrated and used by more than 50 projects, covering DeFi, NFT, stablecoins and other directions. Even the collapse of FTX did not have a huge impact on it. In April 2023, LayerZero completed another $120 million Series B financing, with a valuation of $3 billion. In addition to the original capital, traditional capital such as Christie's and Samsung also supported it.
It was at that time that LayerZero announced that it would consider airdropping governance tokens. After this statement was released, the community responded strongly. Large capital + high valuation + top project, this configuration often means feedback from large airdrops. Affected by this, airdrop hunters quickly listed it as a target, and individual furriers and gold-making studios flocked in. The dune data dashboard shows that since April last year, the interaction volume on the LayerZero chain has surged, with the number of transactions per day exceeding 200,000, and the highest single-day even soaring to 490,000. High-frequency interactions not only bring impressive data, but also bring huge income. Taking Stargate, the first cross-chain DApp launched on LayerZero, as an example, the monthly income of the protocol exceeds 1 million US dollars, and this is just a product within the ecosystem.
With this expectation, LayerZero's airdrop expectations have never stopped, and there have been frequent reports of airdrops in the following year, but they have been postponed one after another. Finally, on May 2 this year, LayerZero officially announced on the X platform that the first snapshot had been completed. Market sentiment reached its peak, and many users said on social platforms that "the big one is coming."
This is indeed the case. According to WOO X Research, the value of the airdrop by LayerZero will be between $600 million and $1 billion. Under conservative estimates, TGE is calculated at 4 times the valuation, 15% of the initial circulation, and FDV is $12 billion. The airdrop value is expected to be $600 million, which translates to a value of between $750 and $1,500 per user. In an optimistic forecast, based on a circulation of 20% and TGE 4.5 times, the FDV is $13.5 billion, and the airdrop value is expected to increase to $1.08 billion, with an average value of between $1,350 and $2,700 per user.
But just when users were immersed in cheers and hoping for another airdrop, Layer Zero gave them a wake-up call. On May 3, Layer Zero issued an official announcement, saying that the airdrop tokens would be released soon, but to ensure the durability of airdrop users in order to formulate a token distribution plan, it was expected to launch a Sybil review operation lasting one month.
Sybil censorship is not uncommon, especially in airdrops. Sybils usually refer to a single entity that uses a large number of accounts to conduct meaningless or extremely small transactions in batches to obtain interactive data in order to obtain airdrops. Considering that Layer Zero has 6 million users, it is understandable that Sybils are screened to protect the interests of the project and users.
However, in this witch operation, an extremely strange "bounty reporting mechanism" appeared. According to the official announcement, the witch operation will be divided into three stages. The first is the 14-day self-exposure stage. During this stage, users can voluntarily expose their personal witch behavior, and the official will retain 15% of the airdrop allocation for such accounts; the second is the official review stage. LayerZero officials will screen witches according to specific rules during this stage, and the accounts found by the official review will not retain any airdrop quota. The most controversial is the third stage - bounty reporting, which will last from May 18 to May 31. Anyone can submit a report on Github. The successful report will receive 10% of the airdrop allocation of the reported person, and the remaining 90% will go to the airdrop pool, and the reported person will get nothing.
Reporting each other is undoubtedly a test of human nature. In fact, although everyone knows that reporting will not maximize benefits, under the premise of not knowing whether others will report you, according to the prisoner's dilemma, the most appropriate choice is to report others to get an additional 10% share. In this case, human nature is extremely magnified, and a wave of reporting has been set off in the market, and various incidents have followed.
LuMao Studio became the first victim. A small studio claimed that more than 200 of its boutique accounts were identified as witches, and even some employees resigned and reported their former companies for profit. Security companies are even more active. There are market rumors that a certain organization provided 480,000 addresses to LayerZero at one time. Rumors and reports are also common. LayerZero co-founder Bryan Pellegrino said that not every report is valid. Due to the excessive number of reports submitted, many reporting accounts were once considered spam accounts by Github.
Judging from the final results, the witch operation still achieved impressive results. In the first round of witch self-exposure, 803,000 addresses were identified as potential witches, of which more than 338,000 addresses reported themselves as witches. During the reporting process, LayerZero received 3,550 witch hunting reports, each of which contained at least 20 addresses indicating witch operations. During the review process, Bryan Pellegrino revealed that 3 million of the 6 million initial wallets sent less than 5 transactions, and the weight of transactions below $1 and worthless NFTs was reduced by 80%.
Looking back at this massive witch-hunt, there has been no shortage of controversy in the market, but each party involved seems to have their own reasons.
For the project side, the need to interact only for airdrops is not an effective demand. After the airdrops are distributed, this type of user is likely to sell and then move on to the next target, rather than being the actual construction holder. Large-scale selling pressure will also affect the token price and further hinder the development of the ecosystem. The fact is exactly the same. After the snapshot, LayerZero's daily transaction volume dropped sharply, falling to 27,000 on June 7, reaching a new low in nearly a year.
But for users or studios who are actively making money, they have invested real money, contributed impressive interactive data to the project, and provided samples for project optimization. They obviously have the functions of builders, and the project party’s move is undoubtedly a case of killing the donkey after it has served its purpose.
The community is more concerned about the use of the reporting mechanism. Is such radical witch-hunting behavior worthy of praise? There are many discussions in the market about this issue. Those in favor believe that out of responsibility to early users, the project should not encourage wool-pulling behavior, and anti-witches are politically correct. No user would think that they want witches to participate in the project; opponents emphasize that the rules are too strict and ugly. If there are no wool-pullers to optimize the project and invest in it, the project will be difficult to continue.
Interestingly, Zksync also announced that it will release an airdrop next week. It did not launch a large-scale witch sniping, but it was widely criticized for this. Among the 690,000 addresses that received the airdrop, not only are the airdrop details vague, but there are also multiple witch addresses that have been checked. According to witch hunter Artemis, some insider trading obtained more than 2 million ZK tokens by depositing the same Ethereum funds on the same day, and almost all accounts were marked on LayerZero's witch list. From this point of view, witch detection is necessary.
Back to the airdrop itself, looking at the evolution of airdrops, this is not the first time that the abnormal dependency relationship between project owners and the profiteers has been discussed.
Airdrops were first used in the Auroracoin project in 2014, and then developed during the ICO boom in 2017. However, it was not until the rise of DeFi in 2020 that Uniswap really detonated this activity. From the development history, airdrops have gone through a development path from easy to difficult, from being able to be issued by joining the community at the beginning, to registering to obtain, from simple interaction to deep interaction, and then to witch screening of heavy users, and fund mixing verification. Today, airdrops can be said to be rolled up, not only are large airdrops difficult to appear, but the funding threshold is also increasing, and various odysseys allow users to describe them as PUA.
As for why projects need PUA, the reason is that it is difficult for most Web3 applications to have effective demand, and early users are very scarce. In order to gain users and interactive income, projects have to use various activities to stimulate user use, and airdrops are the most effective way. After 20 years, the benefit effect of airdrops has become prominent, and Apecoin, DYDX, Arbitrum, and ENS have also successfully made many early users realize their dreams of getting rich.
Under the influence of the benefit effect, the wool party has been around since the birth of airdrops. To date, the increased difficulty of airdrops has forced the wool party to develop towards professionalization, institutionalization, and scale, forming a complete wool industry chain. The studio will be equipped with professional teams such as investment research, anti-witch technology, and interaction, and some will also invest large amounts of money in the project. From a certain perspective, the wool team has even gradually become a participant in the primary market of the project.
In the meantime, the offensive and defensive battles between the projects and the Mao Mao Party continued, and the Mao Mao Party frequently experienced counter-money losses. The two maintained a tense and delicate balance. It can be said that this is the current status of airdrops for all projects and the fundamental reason why radical witch measures are controversial. However, in the long run, LayerZero's radical bounty mechanism is still expected to be widely used in large projects.
Back to another core issue, if we exclude the stimulus effect of airdrops, it is still questionable whether there is really effective demand for the project. Projects without long-term value rely on airdrops to obtain short-term users, and eventually decline is inevitable. This is also one of the reasons why many well-known projects continue to extend the timeline of coin issuance and take tough measures against witches. Comparing with the Web2 industry, airdrops are quite similar to the subsidy wars in the Internet, but airdrops are users who invest first and then subsidize projects, while traditional Internet initially subsidizes demand, and reduces the scope of subsidies after the network advantage is formed. There are also projects that swim naked after the subsidy ends. In the final analysis, the survival of a project must return to its self-sustaining ability.
In any case, the increasing cost of long-term profiteering is an inevitable trend, and the studio has foreseen this. As long as airdrops are profitable, the studio's evolution will continue. For individual users, although the secular saying "free is the most expensive" also holds true in crypto, airdrops are indeed one of the ways with the highest input-output ratio. Unfortunately, as the airdrop rules headed by financial points have gradually surpassed interactions and become the main trend of airdrops, there may not be much so-called big-money interactions left for users.
