LayerZero's ZRO token faces mixed reactions as sybil crackdown continues

We talked a few weeks ago about the LayerZero ZRO -8.56% airdrop, and we are at the crescendo.

LayerZero, the cross-chain communication and messaging protocol, launched its native token, $ZRO, last week. With a total supply of 1 billion, the token opened at $4 billion FDV before briefly hitting a high of $4.7 billion FDV. Since then, it has trended down and, at the time of writing, is at a $3 billion FDV, on par with competitor Wormhole ($W), which launched its token earlier this year.

The details for the $ZRO token generation event (TGE) are as follows: 25% of the tokens unlocked on Day 1, with 8.5% available immediately at the TGE, 11.0% reserved for future snapshots and Requests for Proposals (RFPs), 5% allocated to the LayerZero Foundation, and 0.5% distributed to community members.

The airdrop didn’t come without its share of drama, however. A surprise twist in claiming the airdrop sparked a heated debate, with people both criticizing and defending the protocol.

In a post before the claim went live, LayerZero announced it would introduce a new mechanism called “Proof-of-Donation,” which required claimers to donate $0.1 per token in USDC, USDT, or ETH to claim their airdrop. The donation supported The Protocol Guild, an initiative designed to support Ethereum’s core protocol contributors by providing them with financial incentives and resources. According to LayerZero, the mechanism will generate up to $18.5 million in donations to Protocol Guild. LayerZero also announced plans to match these donations up to $10 million.

Some spoke out against the new requirement, commenting that the new “ forced donation ” criteria feel counterintuitive to the ethos of an airdrop, a reward for contributing to and using a protocol. Others applauded the team's efforts in spearheading this initiative and raising substantial capital for the cause. At the time of writing, 57.5% of ZRO has been claimed.

The airdrop also concludes a weeks-long crusade led by LayerZero founder Bryan Pellegrino against sybils, who only use the protocol to accrue a larger airdrop. Pellegrino said that 1.28 million wallets out of 6 million unique wallet addresses that interacted with the LayerZero protocol were eligible for the airdrop.

A quick refresher: the LayerZero airdrop drew big crowds in the last few weeks as Bryan and the team worked feverishly to hunt down thousands of industrial airdrop sybils who worked to maximize their airdrop allocation. These users are not ideal for protocols as often they withdraw any collateral and evacuate the protocol.

LayerZero collaborated with Nansen and Chaos Labs to identify these wallet clusters. Initial analysis identified more than 800,000 addresses as potential sybils.

As a result of many sybils leaving the protocol, daily messages on LayerZero dropped 90% from 348,000 messages the day before the snapshot to a low of 31,000 on June 17 before spiking back to 300,000 towards the end of last week.

A large portion of the airdrop will continue to be distributed to users over the next 36 months with additional retroactive distribution to occur every 12 months, according to Pellegrino. It will be interesting to see if this level of activity will be sustained over the coming months.

This is an excerpt from The Block's Data & Insights newsletter . Dig into the numbers making up the industry’s most thought-provoking trends.