LayerZero Airdrop Set for Imminent Distribution, Sparking Excitement and Caution

LayerZero, a cross-chain interoperability protocol, is preparing to launch its long-awaited airdrop for users. The first snapshot for the airdrop has been completed, with further details to be announced soon. LayerZero's ZRO token, which launched on HyperLiquid in 2023, has a potential fully diluted valuation of $17 billion.

LayerZero Announces Imminent Airdrop Distribution, Prompting Speculation and Concerns

LayerZero, a highly anticipated cross-chain interoperability protocol, has initiated preparations for its eagerly awaited airdrop. The company completed the first snapshot for the airdrop on May 2, 2024, according to an official announcement from LayerZero Labs. Further details are expected to be released shortly.

This airdrop is a common practice employed by decentralized finance (DeFi) protocols to generate interest and reward early adopters with newly issued cryptocurrencies. LayerZero's native token, ZRO, was introduced as the first Hyperp (Hyperliquid-only perp) on the HyperLiquid perpetual futures decentralized exchange (DEX) in September 2023.

The ZRO Hyperp is currently trading at $8.3, implying a fully diluted valuation (FDV) of approximately $17 billion, as indicated by Xulian, the pseudonymous core contributor of HyperLiquid, in a May 2 post. Hyperps share similarities with perpetual futures contracts but do not rely on an underlying spot or index oracle price. HyperLiquid boasts the world's largest trading volume and Open Interest for perpetual futures DEXes.

Despite LayerZero Labs' limited disclosure regarding the airdrop mechanics, the company had previously hinted at a token launch in early 2024, as stated in a December 7, 2023 post:

"LayerZero has always been designed with the capacity for a native token within the protocol, as evidenced by the immutable code deployed on day one... We unequivocally affirm that there will be a LayerZero token. Its distribution is a matter of utmost importance to us, and we anticipate its release within the first six months of 2024."

Airdrops and the Potential Long-Term Impact on DeFi Protocols

While airdrops aim to boost protocol usage through early adopter incentives, they have also raised concerns about the potential exploitation by professional airdrop hunters or squatters. These individuals may create multiple cryptocurrency wallets to farm the same airdrop, with no genuine intention of utilizing the protocol. They often sell the rewards immediately after claiming them, potentially undermining the value of the airdropped token.

In February 2024, Banteg, an anonymous developer for Yearn.finance, expressed concerns that Starknet's airdrop eligibility list was heavily populated by airdrop squatters. Approximately 701,544 out of 1.3 million eligible wallet addresses were reportedly linked to repeated or renamed GitHub accounts controlled by airdrop squatters.

On May 1, 2024, Chinese authorities apprehended a StarkNet airdrop identity forger who had impersonated other users, claiming over 40,000 STRK tokens on their behalf and converting them into approximately $91,000 worth of Tether (USDT).

In March 2023, airdrop hunters were found to have consolidated $3.3 million worth of tokens from the Arbitrum (ARB) airdrop from 1,496 wallets into just two controlled wallets.

These airdrop squatters tend to dispose of their accumulated rewards swiftly, often leading to a rapid decline in the value of the newly airdropped token. Such practices can also hinder genuine community participation and the long-term sustainability of DeFi protocols.