LayerZero's daily messages hit lowest level in over a year

Airdrops continue to be an outsized source of drama in the crypto industry.

The one we will discuss today is LayerZero, a cross-chain communication protocol. While information on the actual token launch is scarce, the protocol confirmed they had taken their snapshot for the airdrop, which determines which addresses quality, at the very end of May 1, with more information to come.

LayerZero Labs did announce a unique approach to fighting sybil farmers, or users who engage with the protocol only as a means of acquiring a larger airdrop allocation, as opposed to organically using LayerZero. LayerZero Labs posted that they would rather distribute their token to durable platform users since the typical point of an airdrop is both to reward early adopters but also build a group of users committed to decentralized governance going forward. The sybil farmers are more likely to dump their tokens as soon as they get them, simply just looking to get the reward.

The strategy involves allowing sybil farmers to self-report and receive 15% of the allocation they would have received. The reporting period would be open for two weeks, and these airdrop farmers would face the risk that if they did not report and were flagged by LayerZero Labs’ internal sybil report, they would get nothing.

By May 14, over 100,000 addresses had self-reported, with the data then being used to help identify the non-reported sybils. By the end of the reporting period, LayerZero, Chaos Labs, and Nansen had identified over 803,000 between the self-reports and separate analyses.

After LayerZero cleared out “industrial clusters” of sybil farmers with their analysis, the “bounty-hunter” phase of the sybil strategy began, allowing people to report other addresses as sybil farmers on the network and claim part of their airdrop allocation as a reward. This program had to be paused a day after it went live due to it already attracting 3,000 reports and 30,000 appeals. The downtime is expected to be temporary as the team improves the system, possibly requiring a small bond to submit a report. 

Regardless of how this experiment ends, it has weighed heavily on LayerZero’s activity. The number of messages being sent has dropped from 348,000 on April 30, right ahead of the snapshot date, to only 70,000 by May 5. The number has dropped below 40,000 more recently, pushing the daily message count down to levels not seen since March 2023, before activity really took off on the platform.

Given the significant drop, it seems like there are a lot of sybil farmers to catch. It will be interesting to see in the end how many addresses get access to their full claim and how many get nothing.

This is an excerpt from The Block's Data & Insights newsletter. Dig into the numbers making up the industry’s most thought-provoking trends.