The controversy caused by the ZKSync airdrop reveals the challenges of cold-starting Web3 projects.

Author of the original text: @Web3 Mario（_mario）

The hottest topic last week must have been the public airdrop verification event of ZKsync. I was originally learning and writing about my experience in developing DApps for TON, but when I saw this controversial event and the extensive community discussion it sparked, I had some feelings. Therefore, I wrote an article hoping to share it with everyone. In general, ZKSync’s airdrop solution adopts a distribution method based on proof of property, focusing 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 fur studio is calling out.

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

For a long time, the Web3 industry seems to have formed a paradigm of attracting users to use products through Airdrop, thus achieving the cold start of the project. This is especially true in the Layer 2 track, where developers and users are stimulated to actively build and maintain DApps by guiding their expectations for potential airdrops. At the same time, users are encouraged to bridge funds to the target Layer 2 in the early stages of development and actively participate in DApps running on the target Layer 2, thus serving the purpose of an active ecosystem, which has become a standard practice.

Therefore, in the past, users generally expected ZKSync’s airdrop to be comparable to its two direct competitors, Arbitrum and Optimism. Of course, this conclusion is logical in terms of industry influence, VC background, fundraising scale, etc. However, the result is quite different, which has led to a wide debate in the community as many users who participated in ZKSync without the expected amount of rewards based on past experience.

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 of Arbitrum and Optimism. First, let’s review the Airdrop activity of Arbitrum, which dates back to March 2023, where it allocated 11.62% of the total supply of Arb Airdrop to Aribitrum users and 1.13% of Arb Airdrop to the DAOs operating in the Arbitrum ecosystem. The Airdrop activity was based on the snapshot data of February 6, 2023, and the specific rules for users are as follows:

• Cross-Chain Interaction with Arbitrum: Users need to transfer funds to Arbitrum One or Arbitrum Nova.
• Transactions in different time periods: Users have conducted transactions in two different months, six different months, or nine different months.
• Trading Frequency and Interaction: Users have conducted more than 4, 10, 25 or 100 transactions, or interacted with the corresponding number of smart contracts.
• Trading value: Users’ total trading value exceeds $10,000, $50,000, or $250,000.
• Provide Liquidity: Users have deposited liquidity funds of over $10,000, $50,000, or $250,000
• Arbitrum Nova Activity: Users have made more than 3, 5, or 10 transactions on Arbitrum Nova.

Each rule has a specific scoring calculation 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 starting reward starts at 3 points, with a maximum reward of 10,200 Arb. As for the rewards for DAO, the specific amount is determined directly based on the activity evaluation. From the results, a total of 137 DAOs received the airdrop, with Treasure and GMX receiving the most, 8 million Arb each. Given the current situation, this is indeed a substantial income.

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

• Round 1: Divided users into regular and active users based on transaction frequency, corresponding to addresses with 1 transaction and addresses with more than 4 transactions, as well as participants in 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 for the latter three can be stacked.
• The second round: users with a total transaction gas fee greater than $6.1 or a coin age of more than 2000 participating in delegated governance can share 11,742,277 $OP;
• The third round: Users participating in delegated governance with a coin age exceeding 18000 can share 19, 411, 313 $OP;
• Round 4: 10,343,757 $OP tokens were allocated to NFT creators;

From the above review, we can see that the number of interactions is an important reference indicator in the specific activity settings, and users who interact more frequently usually receive more rewards. However, this unwritten rule seems to have been abandoned by ZKSync. In the airdrop design of ZKSync, the qualification and distribution of ZKSync users are selected and calculated in four consecutive steps, and the specific rules are roughly as follows:

• Qualification screening: Each address that has conducted transactions on ZKsync Era and ZKsync Lite will be checked against qualification criteria. There are 7 inspection criteria set to screen eligible users, such as interacting with non-token contracts for more than 10 times and non-token contracts must have at least 30 days of activity, and sending at least 5 transactions in ZKsync Era, etc.
• Multiplier: Addresses that meet specific criteria can receive a multiplier in the allocation. These criteria usually involve holding some high-risk ZKSync native altcoins or NFTs.
• Sybil Detection: ZKSync will also conduct Sybil attack detection to ensure that most of the bots are filtered out. The detection criteria are twofold: the initial source of ETH after the creation of a certain EOA address, and the interaction between this EOA address and the CEX deposit address. 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 times, but focuses more 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 interaction on ZKSync based on past experience 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 to groups of addresses, which usually consist of hundreds or even thousands of addresses, and participate in a protocol using small funds. By predicting some possible incentive behaviors, they frequently interact through automated scripts or manual methods to improve potential returns. However, ZKSync’s airdrop settings render this strategy ineffective, as the transaction fees paid by many frequently interacting addresses are even higher than the rewards obtained, which naturally causes dissatisfaction among this group of people.

And we can easily find a large number of airdrop hunters KOL in X. This group of people mainly publishes content on how to easily obtain airdrops from project parties, usually having a wide range of fans and strong appeal. Therefore, they are pressuring the ZKSync official through social media, hoping to change this situation. However, from the official’s attitude, it seems to be very firm and has not modified the rules under pressure, which is why the current situation exists. The debate has also triggered accusations and defenses of possible misconduct, making it the focus of this public opinion war.

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 think there are some things worth pondering. That is, to this day, 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 problem of Sybil Attack caused by heavy interaction, while property proof brings about monopoly problem.

Airdrop-based rewards for early bird participants have proven to be an effective means of cold starting Web3 projects, and a good Airdrop mechanism can help the project efficiently attract seed users in the early stage, and at the same time complete user education by stimulating users to use protocol key behaviors and increase the stickiness of the product. This is also the fundamental reason why for a long time, the Airdrop settings of most Web3 projects focused on incentives for interactive behavior, but this brings a disadvantage, that is, it drop the threshold for obtaining rewards, which makes it easy for activities to encounter Sybil Attack. When a large number of robot account pour in, although it will make the protocol appear a short-term false prosperity, these “users” are usually living in the water short long and grass, unable to provide impetus for the future development of the project, and most of them will be cashed out to increase the capital turnover rate and improve the income after receiving the reward, which dilutes the number of rewards for those users who are truly valuable, which is really worth the loss.

So why did this mechanism work well in the early days? This is naturally because there were not so many similar professional teams at that time, and most users had not yet formed a habitual mindset for this incentive mechanism. The interaction behavior was relatively pure and belonged to real users, which allowed the incentives to be more efficiently allocated to these users. The resulting wealth effect also helped the project achieve the above benefits. However, with the impact of the money-making effect that followed, this method has obviously become ineffective in attracting real users. From my personal experience, the utility of airdrop activities with interaction as the main incentive target has basically reached its peak by the time of the Arbitrum airdrop.

This is also the fundamental reason why ZKSync wants to abandon the use of interaction numbers as the basis for identifying valuable users based on the relative size of assets. However, this proof-of-asset method may not be without problems. Although it can effectively identify and exclude the risk of Sybil Attacks, the new problem that comes with it is the uneven distribution of wealth caused by monopolies.

We know that a core value of the Web3 project is a bottom-up distributed autonomous model. This means that the support of grassroots users (real users with small amounts of capital) is the basis for the development of a project. It is also because of the grassroots users that some Whale users may enter and form a more sustainable development form. After all, financial advantages are still present in most scenarios. Only when there are enough grassroots users can the profits of Whale users be substantial. Therefore, the allocation system of proof of property will lead to the early Whale users among early bird users, making it difficult to effectively incentivize grassroots users, and naturally unable to form a cohesive community.

In the final analysis, for Web3 projects, when designing cold start mechanisms, it is necessary to carefully consider the value user profiles for their own products, and design corresponding mechanisms based on the current environment. Effectively incentivizing the above-mentioned value users while avoiding Sybil attacks as much as possible is the top priority. Therefore, how to design your own cold start mechanism is a very valuable topic, and everyone is welcome to leave a message in my X for discussion. Let’s brainstorm some interesting solutions together.