ZKSync airdrop stirs controversy to see the dilemma of Web3 project cold start

Author: @Web3Mario（_mario）

Summary: The hottest topic last week was undoubtedly the incident of the public airdrop verification of ZKsync. I was originally studying and writing about the experience of developing DApps on TON, but when I saw this controversial event and the extensive discussions it sparked in the community, I had some feelings, so I wrote this article to share with everyone. In general, ZKSync’s airdrop program adopts a distribution method based on proof of ownership, which focuses more on rewarding developers, core contributors, and native Degen whales of ZKSync. This has created a situation where the native Degen whales are laughing, and the Luma Studio is crying for being left out.

The focus of community debate: Is interaction key or is the amount of funds key

For a long time, the Web3 industry seems to have formed a paradigm of attracting users to use products through Airdrops to achieve project cold start. This is especially true in the Layer2 track, by guiding developers and users’ expectations of potential Airdrops, stimulating developers to actively build and maintain DApps, and stimulating users to bridge funds to the target Layer2 in the early stages of development and actively participate in DApps running on the target Layer2, thus achieving the purpose of active ecology, which has become a standard.

Therefore, in the past, users generally expected ZKSync’s airdrop to be comparable to its two direct competitors, Arbitrum and Optimism. Of course, whether you consider industry influence, VC background, fundraising scale, etc., this conclusion is logical. However, the results were quite different, which led to many users who participated in ZKSync based on past experience seemingly not receiving the expected amount of rewards, resulting in widespread debate within the community.

In order to explore the reasons behind this debate and discuss some implications for the future, it is natural to review the previous Airdrop rules for Arbitrum and Optimism. First, let’s review the Airdrop activity of Arbitrum, which dates back to March 2023. It allocated 11.62% of the total supply of Arb for Aribitrum users, and 1.13% of Arb for the DAOs operating in the Arbitrum ecosystem. The Airdrop activity was based on the snapshot data from February 6, 2023. The specific rules for users are as follows:

• Cross-Chain Interaction to Arbitrum: Users need to transfer funds to Arbitrum One or Arbitrum Nova.
• Trading in different time periods: Users have traded in two different months, six different months, or nine different months.
• Trading frequency and interaction: Users have made more than 4, 10, 25 or 100 transactions, or interacted with a corresponding number of smart contracts.
• Trading Value: Users’ total trading value exceeds $10,000, $50,000, or $250,000.
• Providing Liquidity: Users who have deposited liquidity funds of more than $10,000, $50,000 or $250,000
• Arbitrum Nova Event: Users have made more than 3, 5, or 10 transactions on Arbitrum Nova.

Each rule will have a specific scoring method, with a maximum score of 15 points. This score is used to determine the amount of Arb that users can claim. The calculation method can be approximated as a linear relationship, but the initial reward starts from 3 points, with a maximum reward of 10,200 Arb. As for the rewards for the DAO, the specific amount is directly determined by the activity evaluation. In the end, 137 DAOs received the airdrop, with Treasure and GMX receiving the most, 8 million Arb each. In essence, this is a substantial gain.

Next, let’s review Optimism. Unlike Arbitrum, Optimism’s airdrop is conducted in multiple rounds, with a total reward allocation of 19% of the total supply. The earliest airdrop activity dates back to June 2022, with 5% of the rewards distributed to 260,000 addresses. As of now, four rounds of airdrops have been conducted, and the specific rules for each round are as follows:

• Round 1: Regular users and active users are divided based on the number of transactions, corresponding to addresses with 1 transaction and addresses with more than 4 transactions, as well as participants of Ethereum DAO, users of Ethereum multi-signature wallets, donors to Gitcoin, and users of cross-chain bridges. Each identity corresponds to a fixed reward, and the rewards of the latter three can be accumulated.
• Round 2: Users with a total trading gas fee greater than $6.1 or a coin age of more than 2000 participating in delegated governance can share 11,742,277 $OP;
• Round 3: Users with a coin age of more than 18000 participating in delegated governance can share 19,411,313 $OP;
• Round 4: 10,343,757 $OP tokens were allocated to NFT creators;

From the above review, it is not difficult to find that the specific activity settings will use the number of interactions as an important reference indicator. Users with more frequent interactions usually receive more rewards. However, this unspoken rule seems to have been abandoned by ZKSync. In the airdrop design of ZKSync, the qualification and allocation of ZKsync users are selected and calculated in four consecutive steps, and the specific rules are roughly as follows:

• Eligibility Screening: Addresses that have conducted transactions on ZKsync Era and ZKsync Lite will be checked for eligibility based on 7 criteria. These criteria include interacting with non-token contracts more than 10 times and the non-token contracts must have been active for at least 30 days, sending at least 5 transactions on ZKsync Era, etc.
• Distribution: When calculating the specific reward amount for an address that meets the above criteria, it is confirmed based on a value scaling formula. This formula calculates a time-weighted average based on the amount sent to ZKsync Era and the time these encrypted assets are held in the wallet, and adjusts the allocation for each address accordingly. At the same time, funds participating in the DApp protocol will receive a 2x bonus. This means that if you transfer a large amount of funds to ZKSync, keep it for a long time, and actively use these funds to participate in some risky products, such as providing liquidity to DEX, you will receive more rewards.
• Multiplier: Addresses that meet specific criteria can receive a multiplier in the distribution. These criteria are typically holding some high-risk ZKSync native alts or NFTs.
• Sybil Detection: ZKSync will also perform Sybil attack detection to filter out most of the bots. The detection criteria are based on two aspects: the source of the first ETH transaction after the creation of an EOA address, and the interaction between the EOA address and CEX deposit addresses. In fact, this also leverages 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, but focuses on the amount of funds in a single account and the willingness to allocate risk assets. Therefore, after the results were announced, many users who had a lot of interactions on ZKSync based on past experiences were surprised. This is also the source of the controversy. Because in order to increase the number of potential airdrop addresses, these users usually choose to distribute large funds as much as possible to groups of addresses, which typically consist of hundreds or even thousands of addresses. They use small funds to participate in certain protocols and, through anticipation of possible incentive behaviors, increase potential returns through frequent interactions using automated scripts or manual methods. However, ZKSync’s airdrop settings make this strategy ineffective, as the transaction fees paid by many frequently interacting addresses are even higher than the rewards received. Naturally, this has caused dissatisfaction among this group of people.

And it is not difficult to find a large number of airdrop hunters and KOLs in X. This group mainly focuses on teaching people how to easily obtain airdrops from project parties, usually with a wide range of fans and strong appeal. Therefore, they exert pressure on the ZKSync official through social media, hoping to change the situation. However, from the official’s perspective, it seems to be quite tough and has not changed the rules under pressure, hence the current situation. The debate has sparked discussions and defenses of possible malicious behavior, making it the highlight of this public opinion war.

From the results, it seems that the demands of both sides can be understood. The right or wrong can only be discussed from a certain perspective. However, I think there are some things worth considering, that is, up to now, who are the core value users of Web3 projects in the cold start stage, or what kind of users should be incentivized in the cold start stage.

The Sybil Attack problem brought by heavy interaction and the monopoly problem brought by proof of property

The Airdrop reward for early bird participants has been proven to be an effective means of cold starting a Web3 project. A well-designed Airdrop mechanism can efficiently attract early adopters to the project and educate users by stimulating key protocol behaviors, thereby increasing product stickiness. For a long time, the focus of most Web3 project Airdrop settings has been on incentivizing interactive behaviors, which has the drawback of lowering the threshold for receiving rewards and making the activity vulnerable to Sybil Attacks. This is because interactive behaviors are easily automated and scaled, providing ample space for professional teams to operate in bulk. When a large number of bot accounts flood in, it may lead to a brief false prosperity for the protocol. However, these “users” are usually transient and unable to provide impetus for the project’s future development. After receiving the rewards, most of them will cash out to increase capital turnover and enhance returns. This incentive mechanism dilutes the reward quantity for those truly valuable users, which is not worth it.

So why did this mechanism work well in the early days? This is naturally because there weren’t as many similar professional teams at that time, and most users hadn’t formed a habitual thinking about this incentive mechanism yet. Their interaction behavior was relatively pure, belonging to real users. This allowed the incentive to be more efficiently distributed to these users, and the resulting wealth effect also helped the project achieve the above benefits. However, with the influence of the money-making effect that followed, this method obviously could no longer effectively attract real users. Based on my personal experience, the utility of airdrop activities that primarily incentivize interaction has basically reached its peak when it comes to Arbitrum airdrops.

This is also the fundamental reason why ZKSync wants to abandon the use of interactive numbers as the basis for identifying the value of assets relative to scale. However, this kind of proof of property may not be without problems. Although it can effectively identify and eliminate the risk of Sybil Attack, the new problem it brings is the unequal distribution of wealth caused by monopolies.

We know that a core value of Web3 projects is a bottom-up distributed autonomous model. This means that the support of grassroots users (real users with small capital) is the foundation for the development of a project. It is precisely because of the grassroots users that some whales may enter and form a more sustainable development model. After all, capital advantage is still prominent in most scenarios. Only when there are enough grassroots users can whales gain sufficient profits. Therefore, the distribution system of proof of ownership may lead to a situation where the early bird users, especially the whales, have already gained significant profits during the cold start, making it difficult to effectively incentivize grassroots users, and naturally unable to form a cohesive community.

Ultimately, for Web3 projects, it is crucial to carefully consider the value user profile of their own product when designing the cold start mechanism, and to design corresponding mechanisms based on the current environment, effectively incentivizing the above-mentioned value users while minimizing the risk of Sybil Attacks. Therefore, how to design their own cold start mechanism is a very valuable topic, and everyone is welcome to leave a message on my X for discussion. Let’s brainstorm some interesting solutions together.

X Links: _mario