ZKSync airdrop sparks controversy over the challenges of cold-starting Web3 projects

Author: ++@Web3Mario++（https://x.com/web3_mario）

Abstract: The hottest topic last week was undoubtedly the public airdrop verification event of ZKsync. Originally, I was learning and writing about my experiences in developing DApps on TON, but upon seeing this controversial event and the extensive discussions it sparked in the community, I felt compelled to write this article to share my thoughts. Overall, ZKSync's airdrop plan adopted a distribution method based on proof of assets, focusing more on rewarding developers, core contributors, and native Degen whales of ZKSync, which resulted in a situation where native Degen whales were laughing while the yield farming studios were complaining.

Focus of Community Debate: Is Interaction Key or Funding Amount Key?

For a long time, the Web3 industry seems to have formed a paradigm of attracting users to use products through airdrops, thereby achieving a cold start for projects. This is especially true in the Layer 2 track, where guiding developers and users' expectations for potential airdrops stimulates developers to actively build and maintain DApps, while also encouraging users to bridge funds to the target Layer 2 during its early development and actively participate in the DApps running on the target Layer 2, thus activating the ecosystem. This has become a standard practice.

In the past, users generally had expectations for ZKSync's airdrop that were benchmarked against its two direct competitors, Arbitrum and Optimism. Of course, considering factors such as industry influence, VC background, and fundraising scale, this conclusion is logical. However, the results were vastly different, leading many users who reused past experiences to participate in ZKSync to feel disappointed with the amount of rewards they received, thus plunging the community into widespread debate.

To explore the reasons behind this debate and discuss some implications for the future, it is necessary to review the airdrop rules set by Arbitrum and Optimism. First, let's look back at Arbitrum's airdrop activity, which dates back to March 2023. It allocated 11.62% of the total supply of Arb tokens to Arbitrum users and 1.13% to DAOs operating within the Arbitrum ecosystem. The airdrop activity was based on snapshot data from February 6, 2023, with specific rules for users as follows:

• Cross-chain to Arbitrum: Users needed to transfer funds to Arbitrum One or Arbitrum Nova.
• Transactions over different time periods: Users had transactions in two different months, six different months, or nine different months.
• Transaction frequency and interaction: Users made more than 4, 10, 25, or 100 transactions or interacted with the corresponding number of smart contracts.
• Transaction value: The total value of transactions made by users exceeded $10,000, $50,000, or $250,000.
• Providing liquidity: Users deposited more than $10,000, $50,000, or $250,000 in liquidity.
• Arbitrum Nova activity: Users made more than 3, 5, or 10 transactions on Arbitrum Nova.

Each detail had a specific scoring calculation method, with a maximum score of 15 points. This score was used to determine the amount of Arb tokens users could claim, with a calculation method that could be approximated as a linear relationship, but the starting reward began at 3 points, capping at 10,200 Arb. For DAO rewards, the specific amount was determined based on activity levels, resulting in 137 DAOs receiving airdrops, with Treasure and GMX receiving the most, at 8 million Arb each, which is indeed a substantial gain.

Next, let's review Optimism. Unlike Arbitrum, Optimism's airdrop was conducted in multiple rounds, with a total reward allocation of 19% of the total supply. The earliest first-round airdrop activity dates back to June 2022, where 5% of the rewards were distributed to 260,000 addresses. So far, four rounds of airdrops have been conducted, with specific rules for each round as follows:

• First Round: Divided ordinary users and active users based on transaction counts, corresponding to addresses with 1 transaction and those with more than 4 transactions, as well as participants from Ethereum DAOs, Ethereum multi-signature wallet users, Gitcoin donors, and cross-chain bridge users. Each identity corresponds to a fixed reward, with the latter three rewards being stackable.
• Second Round: Users with total transaction gas fees greater than $6.1 or who participated in delegated governance with a coin age of over 2000 can share 11,742,277 $OP.
• Third Round: Users with a coin age of over 18,000 who participated in delegated governance can share 19,411,313 $OP.
• Fourth Round: 10,343,757 $OP were allocated to NFT creators.

From the above review, we can easily see that the specific activity settings use interaction frequency as an important reference indicator; users with more frequent interactions typically receive more rewards. However, this unspoken rule seems to have been discarded by ZKSync. In ZKSync's airdrop design, the qualification and distribution for ZKSync users are divided into four continuous steps for selection and calculation, with the specific rules roughly as follows:

• Qualification Screening: Each address that has transacted on ZKsync Era and ZKsync Lite will be checked against qualification standards. Seven criteria are set to filter eligible users, such as interacting with more than 10 non-token contracts, with those contracts needing to have at least 30 days of activity, and sending at least 5 transactions on ZKsync Era.
• Distribution: When calculating the specific reward amount for an address that meets the above standards, a value scaling formula is used, which calculates a time-weighted average based on the amount sent to ZKsync Era and the time these crypto assets are held in the wallet. This adjusts the distribution for each address, while funds participating in DApp protocols receive a 2x bonus, meaning that if you transfer a large amount to ZKSync, hold it for a long time, and actively use those funds to participate in some risky products, such as providing liquidity to DEXs, you will receive more rewards.
• Multiplier: Addresses meeting specific criteria can receive multipliers in the distribution. These criteria usually involve holding some high-risk native ZKSync tokens or NFTs.
• Sybil Detection: Finally, ZKSync also conducts witch attack detection to ensure that most bots are filtered out. The detection criteria are based on two aspects: the source of the first ETH after an EOA address is created and the interaction between that EOA address and CEX deposit addresses. This also utilizes the characteristics of CEX KYC.

From the specific rules, we can see that the calculation of rewards does not involve the dimension of interaction frequency, focusing more on the amount of funds in a single account and the willingness to allocate risk assets. Therefore, when the results were announced, many yield farmers or studios who had frequently interacted on ZKSync based on past experiences were taken aback, which was the source of the entire controversy. This part of the users, in order to increase the number of addresses eligible for potential airdrops, typically chose to disperse large amounts of funds across groups of addresses, often numbering in the hundreds or even thousands, and used small amounts to participate in certain protocols, frequently interacting through automated scripts or manually to complete tasks and increase potential earnings. However, ZKSync's airdrop settings rendered this strategy ineffective, leading many frequently interacting addresses to incur transaction fees that were even higher than the rewards received, naturally causing dissatisfaction among this group.

Moreover, we can easily find a large number of airdrop hunter KOLs on X, who publish content on how to conveniently obtain project airdrops, usually with a broad fan base and strong influence. Thus, they exert pressure on ZKSync's official channels through social media, hoping to change the situation. However, from the official stance, it seems quite firm, and they have not modified the rules under pressure, leading to the current situation. The accusations and defenses regarding some possible malicious behaviors triggered during the debate have become highlights of this public opinion battle.

From the results, it seems that both sides' demands can be understood; the right or wrong can only be discussed from different perspectives. However, I believe there are some things worth pondering: who exactly are the core value users for Web3 projects during the cold start phase today, or what kind of users should be incentivized during the cold start phase?

High Interaction Leads to Sybil Attack Issues, Proof of Assets Leads to Monopoly Issues

Airdrop rewards for early participants have proven to be an effective means for cold starting Web3 projects. A well-designed airdrop mechanism can help projects efficiently attract seed users in the early stages while stimulating users to engage in key behaviors of the protocol, thereby increasing product stickiness. This is also the fundamental reason why most Web3 projects' airdrop settings have focused on incentivizing interaction behaviors for a long time. However, this approach has a downside: it lowers the threshold for obtaining rewards, making it easy for activities to encounter Sybil attacks. Since interaction behaviors can be automated and conducted in bulk, this provides ample room for many professional teams to operate en masse. When a large number of bot accounts flood in, it may create a temporary false prosperity for the protocol, but these "users" typically move on once the incentives are obtained, failing to provide momentum for the project's future development. Most will cash out to increase capital turnover rates for profit, and this incentive mechanism dilutes the rewards for those truly valuable users, which is indeed counterproductive.

So why did this mechanism work well in the early stages? This is naturally because there were not as many similar professional teams at that time, and most users had not yet formed a habitual mindset regarding this incentive mechanism; interaction behaviors were still relatively pure and represented real users. This allowed incentives to be efficiently distributed to these users, and the resulting wealth effect helped the project achieve the aforementioned benefits. However, with the influence of the profit-seeking effect that followed, this method has clearly become ineffective in attracting real users. My personal experience is that the effectiveness of airdrop activities primarily incentivizing interaction peaked around the time of the Arbitrum airdrop.

This is also the fundamental reason why ZKSync wants to abandon using interaction counts as a basis for identifying valuable users in favor of focusing on relative asset scales. However, this proof of assets method is not without its problems. While it can effectively identify and exclude the risk of Sybil attacks, the new problem that arises is the unequal wealth distribution caused by monopolies.

We know that a core value of Web3 projects is a bottom-up distributed governance model. This means that support from grassroots users (real users with small amounts of funds) is the foundation for a project's development. It is precisely because of grassroots users that some whale users may flood in and form a more sustainable development model. After all, the capital advantage still exists in most scenarios; only when there are enough grassroots users can whale users reap sufficient rewards. Therefore, the proof of assets distribution system can lead to significant gains for whale users among early participants right from the start, making it difficult to effectively incentivize grassroots users, and naturally, a cohesive community cannot be formed.

Ultimately, for Web3 projects, when designing cold start mechanisms, it is crucial to carefully consider the profile of valuable users for their products and design corresponding mechanisms based on the current environment. Effectively incentivizing these valuable users while minimizing the risk of Sybil attacks is of utmost importance. Therefore, how to design one's cold start mechanism is a very valuable topic, and I welcome everyone to leave comments and discuss on my X. Let's brainstorm some interesting solutions together.