LayerZero airdrop sparks controversy, has the era of farming come to an end?

After more than a month of the witch cleansing activity, the LayerZero Foundation announced today on the X platform that the airdrop eligibility inquiry page is now live. However, the results of the airdrop have left many users feeling "broken."

As one of the most anticipated potential airdrop projects in the community, LayerZero's airdrop was highly anticipated, with people expecting a "generous" distribution. However, as the witch cleansing activity unfolded, many accounts of studios and even ordinary users were reported as witch accounts, ultimately leading to disappointment after months of hard work.

As one of the two major airdrop projects recently emphasized alongside Zksync, LayerZero has sparked considerable controversy, with users questioning the project's "sincerity" while also contemplating whether a new token distribution paradigm will emerge in the current industry.

Before diving deeper, let's first understand what the witch cleansing activity is.

One Month of Witch Cleansing

LayerZero was established in November 2021, during a bull market in the blockchain space. With strong capital support and promotion from key opinion leaders in the industry, LayerZero rapidly rose to prominence within a year. The announcement of plans to launch a governance token airdrop garnered significant attention in the community. The strong capital background, high project valuation, and top-tier status led many to expect a substantial airdrop, attracting a large number of airdrop hunters. According to Dune, since last April, the interaction volume on the LayerZero chain has significantly increased, with daily transaction counts exceeding 200,000 and peaking at 490,000. Such high-frequency interactions not only enhanced the platform's data performance but also brought considerable revenue. For instance, the first cross-chain DApp on LayerZero, Stargate, generated over $1 million in monthly revenue, and this is just one product within its ecosystem.

With such high expectations, the community's anticipation for LayerZero's airdrop remained high. Despite frequent rumors about the airdrop, it was continually postponed. Finally, on May 2 of this year, LayerZero announced on the X platform that the first snapshot had been completed, reaching a peak in market sentiment.

According to WOO X Research, the value of LayerZero's airdrop could range between $600 million and $1 billion. Conservatively estimating, if the TGE valuation is 4 times and the initial circulation is 15%, the FDV would be $12 billion, with the airdrop value around $600 million, and each user expected to receive between $750 and $1,500. In an optimistic scenario, if the circulation is 20%, the TGE valuation is 4.5 times, and the FDV is $13.5 billion, the total airdrop value is expected to reach $1.08 billion, with each user anticipated to receive between $1,350 and $2,700.

However, just as users eagerly awaited the airdrop, LayerZero suddenly announced an unexpected message. On May 3, LayerZero released a statement saying that to ensure the fairness of the airdrop, a month-long witch review action would be conducted.

Conducting witch reviews during an airdrop is not uncommon. "Witches" typically refer to those who engage in meaningless or small transactions through multiple accounts to obtain airdrops. However, this review introduced a brand new "bounty reporting mechanism." According to the official announcement, the review would be conducted in three phases. The first phase is a 14-day self-reporting phase, where users can self-disclose their witch behaviors, and the official will reserve 15% of the airdrop allocation for such accounts; the second phase is the official review phase, where LayerZero will screen based on specific rules, and any identified witch accounts will not retain any airdrop allocation. The most controversial is the third phase—the bounty reporting phase, from May 18 to May 31, where anyone can submit reports on GitHub, and successful reporters will receive 10% of the reported account's airdrop allocation, with the remaining 90% returning to the airdrop pool, and the reported account will no longer receive any airdrop.

Ultimately, with LayerZero Labs CEO Bryan Pellegrino stating on X today that there are a total of 1.28 million eligible addresses, and approximately 10 million tokens will be returned to real users, the witch review has come to a close. A total of 803,000 addresses were identified as potential witches, with over 338,000 addresses self-reporting as witches.

"Mouse Warehouse" Scandal and Off-Exchange Prices of 3U

As the witch review concluded and users eagerly awaited the airdrop, LayerZero found itself embroiled in a "mouse warehouse" scandal. While most users expressed dissatisfaction and ridicule over the airdrop results, some users claimed to have received a large amount of ZRO tokens. These lucky individuals mostly held Kanpai Pandas NFTs. For example, an address holding 50 Kanpai Pandas NFTs received 5,335.55 ZRO tokens, while another address starting with 0x816 received 10,000 ZRO tokens for holding 152 NFTs. On average, each NFT received about 100 ZRO, adjusted according to the rarity of the NFTs.

Due to the Kanpai Pandas project not being widely known, users began to suspect "mouse warehouse" activities. However, according to data from nftgo, the trading volume peak of Kanpai Pandas did not show a significant correlation with the LayerZero airdrop snapshot time, and the official Twitter account has been operating normally. Therefore, the accusations of "mouse warehouse" regarding Kanpai Pandas have yet to be substantiated.

Meanwhile, many users expressed that they invested a significant amount of time and effort, spending hundreds of dollars, but might only receive 25 ZRO tokens. At an off-exchange price of $3 per token, this is far from covering their costs. These users believe that LayerZero's airdrop is "insincere."

An X user holding 36 Kanpai Pandas NFTs (approximately 36E) received 10,000 LayerZero (ZRO) airdrop tokens. He posted that the airdrop share given to on-chain users by LayerZero is disappointing: "The top 1% of wallets only received 200-500 tokens, which is just crazy… My family and I also worked hard to interact to receive airdrop shares, and although we ranked in the top 1%, these interactions only earned us a small airdrop."

Some users even believe that the end of the Zksync and LayerZero airdrops will mark the end of airdrops as we know them.

Not only the ZRO airdrop but also the recent ZK airdrop has sparked similar controversies. The number of eligible addresses is far below expectations, the decision-making process is opaque, Nansen has distanced itself from the situation, and frequently appearing suspicious addresses have led to a lack of direct response from the officials, plunging the ZK airdrop into a "mouse warehouse" scandal. Previously, AltLayer was also questioned by the community for having a "mouse warehouse" due to OG NFTs.

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

In contrast, the earliest representative airdrop, Uniswap's airdrop, appears more transparent and fair. Uniswap officials stated that anyone who has used Uniswap, regardless of whether the exchange was successful, can claim 400 UNI tokens in the airdrop. Additionally, holding UNI also grants access to a series of benefits such as SOCKS tokens.

Although this no-threshold airdrop has also faced criticism, in today's era where airdrop projects are often accused of being exploited and dumped, UNI stands out as a successful airdrop case.

Some believe that the real reason for the strong dissatisfaction with the ZRO airdrop is that these airdrop projects have disrupted the balance between VCs, project parties, and "exploiting" users.

"Exploiting" users or studios are already the weakest party in the game where VCs inflate valuations and spend money recklessly. Project parties need user interaction data to attract VC investment, and VCs need project parties to issue tokens to cash out. Project parties lure "exploiting" users to work for free to grow their data with promises of future tokens. However, there is also a viewpoint that whales should not receive all tokens just because they invested a large amount of capital, but the smallest users should still receive some basic amount of tokens.

This also reflects the widespread anti-institution sentiment in the current Web3 space, as due to the greed or investment misjudgments of VCs, these projects have achieved extremely high valuations but fail to establish a reliable and stable business model, relying solely on issuing tokens to make retail investors pay for their indigested assets.

Despite the shocking outcomes of the ZK and LayerZero airdrops, for ordinary users, exploiting remains a viable way to gain profits, even though the returns are continuously declining.

Airdrops Worth Watching After LayerZero

Manta Network: Manta tokens are OFT tokens, with the team deploying OFT Manta Tokens across different chains, supporting cross-chain transactions of Manta tokens.

Distribution 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, and through LayerZero's OFT standard, CANTO's cross-chain representation is deployed on Ethereum, allowing users to provide liquidity and trade CANTO on the mainnet, thus providing an additional bridging path for Canto.

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

DappRadar: DappRadar is a DApp data analytics platform.

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

KelpDAO: KelpDAO is a liquidity re-staking protocol, with its rsETH being OFT and capable of cross-chain transactions to other L2s.

Distribution Plan: 40% allocated to users cross-chaining to various L2s; 20% allocated to users who natively mint rsETH on L2; 20% allocated to the top 500 liquidity providers on mainnet and L2; 10% allocated to mainnet rsETH holders; 10% allocated to Kelp's core team 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.