LayerZero implements controversial "Proof-of-Donation" system: ZRO price drops by 30%

LayerZero implements controversial "Proof-of-Donation" system: ZRO price drops by 30%

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by Eve Adams

2 years ago

On June 20, LayerZero launched the long-awaited ZRO token and began distributing it, requiring donations from users.

ZRO Price Movement

Amidst debates over the new Proof-of-Donation mechanism, ZRO prices dropped by nearly 30%. The token was listed on major exchanges like Binance, OKX, Upbit, Kraken, KuCoin, Coinbase, Bitfinex, and Crypto.com. According to CoinGecko, the coin started at $4.45 with a market cap of over $1 billion.

ZRO's peak price was $4.79, but it then dropped 33.5% to $3.16. The token's market value fell to $796 million.

ZRO Price Chart

A price drop after a launch and airdrop is common, but in LayerZero's case, it sparked active discussions in the crypto community.

Proof-of-Donation Mechanism

To receive ZRO, users must donate $0.10 in USDC, USDT, or ETH per token. All funds will go to the Protocol Guild to support Ethereum developers. Expected funds amount to $18.5 million, plus $10 million from LayerZero.

The LayerZero initiative received negative reactions, with users comparing donations to taxes and ICOs. Yearn.Finance developer banteg expressed dissatisfaction, suggesting support for less funded initiatives.

ZRO Distribution is Not an Airdrop

LayerZero insists that ZRO distribution is not a classic airdrop. In a Medium post, the team explained that airdrops no longer achieve fair distribution and project strengthening.

Over the past year, the culture of airdrops has faced significant problems, particularly with sybils creating multiple addresses to receive more tokens, resulting in minimal long-term interest in the project's success. Additionally, airdrop farming in DeFi has led to hired capital moving from one newly tokenized project to the next, which has no tokens yet, commented LayerZero representatives.

LayerZero co-founder Bryan Pellegrino defended the ZRO launch and distribution, noting that users are not obligated to claim tokens if they oppose donations.

Some see Proof-of-Donation as a step in the right direction for future airdrops. Crypto expert Adam Cochran supported LayerZero, writing:

People complaining about LayerZero's donation mechanism are just dumb.

Criticism of airdrops in the crypto community is growing. Recently, EigenLayer faced mixed reactions due to the distribution of the EIGEN token to early users.

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