LayerZero (ZRO) price falls after the post-airdrop pump

LayerZero (ZRO), the token associated with the cross-chain interoperability protocol LayerZero, has experienced significant volatility since the ZRO token airdrop claims opened on June 20, 2024.

Initially surging by nearly 15%, ZRO’s price has quickly tumbled amid a controversial donation mechanism.

LayerZero price has dropped 20%

Following its launch, LayerZero’s ZRO token rallied to a high of $4.40 within the first 20 minutes of launch positioning its market valuation above several well-known brands such as Flow (FLOW), Ethena (ENA), Quant (QNT), and Ethereum Name Service (ENS).

The price surge was influenced by a combination of speculative trading and the strategic listing of the ZRO token on tier-1 exchanges, including Binance, KuCoin, Bitfinex, OKX, ByBit, and HTX. These listings provided significant liquidity and visibility, contributing to the initial price surge.

However, the surge was short lived and at press time on June 21, 2024, ZRO was trading at $3.26, down 20% in 24 hours.

ZRO price chart

So, why is the ZRO price dropping?

The primary reason behind the current drop in the price of the ZRO token is the controversy surrounding the token’s airdrop claim mechanism.

Unlike traditional airdrops, LayerZero’s ZRO token claim mechanism required users to donate $0.10 in USDC, USDT, or native ETH per ZRO token to claim their allocation. These donations were directed to the Protocol Guild, a collective funding mechanism for Ethereum developers, with the aim of raising approximately $18 million.

This airdrop claim mechanism sparked significant backlash from the crypto community, with many likening the donation requirement to a “tax” or an initial coin offering (ICO).

Critics argued that this approach undermined the nature of airdrops, which are typically free distributions of tokens aimed at fostering community engagement and equitable distribution.

Negative comments flooded LayerZero’s social media posts, expressing dissatisfaction with the perceived “tax.”

LayerZero’s defense

In defense, LayerZero co-founder Bryan Pellegrino reiterated that the launch was “not an airdrop” and aimed to address issues such as airdrop farming and Sybil attacks, where multiple wallets are created to exploit airdrop distributions.

Pellegrino emphasized that the donation was optional, and users were not entitled to claim the tokens without contributing to the Protocol Guild.

Notably, Pellegrino’s statement comes after LayerZero flagged over 800k sybil addresses in May as they cracked down on airdrop farming. The company had also announced an airdrop eligibility checker for users a day before the token claims opened.

Some members of the crypto community have also come out to support the donation mechanism, saying it as a step towards sustainable funding for blockchain projects and a deterrent to Sybil attacks. They argued that the small fee helped set a base cost value for the token and added credibility to the project’s long-term goals.

Nevertheless, as the token controversy continues, LayerZero, which is currently headquartered in Vancouver continues to garner attention as one of the biggest airdrops of 2024.

In addition, notable decentralized applications (dApps) like Ethena, Stargate, Conflux, and AAVE are already using the LayerZero network, setting the network for further growth and adoption.

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