Why LayerZero’s New Anti-Sybil Policy Is Getting Both Backlash and Praise

Amidst a week of major airdrop controversy, a crypto project goes on the offense – and its community reacts strongly. 

In a week when the EigenLayer stakedrop sparked substantial controversy, LayerZero announced it had, on Wednesday, taken a snapshot for delivering its first airdrop. The team also laid out a strategy for combatting sybil activities, which is when actors create multiple accounts or identities to gain undue advantages, such as, in this case, obtaining a larger allocation in the airdrop. The move sparked significant debate. 

Read more: 5 Reasons E-Beggars Are Not Happy With EigenLayer’s Airdrop

Airdrops have increasingly led to community backlash, with people getting angry about the eligibility criteria, and with teams grappling with the challenge of airdrop farmers quickly capitalizing on giveaways and then leaving. The issue is not unique to LayerZero; similar challenges have been faced by other projects like Starkware, Parcl, Renzo, and many others, highlighting a widespread problem in the industry.

Read more: Starknet Usage Is Way Down Post-Airdrop, Showing No Signs of Stopping

A Better Airdrop?

LayerZero’s new policy, aimed at ensuring a fair token distribution, offers a self-reporting option for users engaged in sybil-like behaviors, with severe repercussions for those who fail to comply. In return, the protocol will give them 15% of their allocation “no questions asked.”

Bryan Pellegrino, founder of LayerZero, told Unchained that this initiative is part of LayerZero’s broader goal to prioritize and incentivize durable users—those who are likely to continue engaging with the protocol and upholding its core values over time. He explained, “Our belief is that durable users, including developers creating legitimate applications and community members who resonate with our values, should be the ones incentivized.”

While intended to ensure fair token distribution, the policy has been criticized for potentially undermining the principles of decentralization and permissionless interaction that many hold dear in the crypto world, while others have praised it for being “clever.”

Self-report for 15% of intended allocation. pic.twitter.com/FOcaXX05j7

— Danny Pipelines ⨀ (@opendanny) May 3, 2024

Critics Voice Concerns 

Criticism came swiftly from various corners of the crypto community. X user @CC2Ventures, commonly known for his airdrop farming strategies, pointed out what they see as a contradiction in LayerZero’s approach. “We preach censorship resistance, decentralization, and permissionlessness. But if you aren’t part of our inner circle and cabal, we will flag you for doing certain interactions,” they wrote.

Zach Rynes, also known as ChainLinkGod in Crypto Twitter, also expressed disapproval, highlighting the potential hypocrisy in the sudden negative stance on airdrop farming. Rynes argued that such practices were previously beneficial to LayerZero, helping to “stress test infrastructure” and boost early adoption metrics. He criticized the move as overlooking the contributions of those who helped build the platform’s initial success.

@BlurCrypto, another X user known for their airdrop strategies, further commented on the ambiguity in defining what constitutes a sybil, suggesting that even highly active users could be unfairly labeled if they merely took advantage of the network’s features as promoted by LayerZero itself, such as Merkly, a bridge powered by LazerZero’s technology.

LayerZero Founder Responds to Criticism

In response to the backlash, Bryan Pellegrino, founder of LayerZero Labs, took to social media to clarify the intentions behind the policy. Pellegrino emphasized that the policy targets those exploiting the system, not genuine users. “Listen guys, it’s very simple. If you are a real user doing real things, you should be fine,” he posted on X, attempting to reassure concerned users that the focus is on fairness and rewarding long-term, genuine engagement with the platform.

Meanwhile, popular DeFi investor Ansem wrote “definitely important for industry as a whole to figure out the airdrop situation (…) this looks like good step in anti-sybil direction.”

Additionally, Kenton Prescott from Sense Finance referred to the anti-sybil strategy as a “clever way to force the prisoner’s dilemma on sybilers.” He added: “Sybilers can’t predict the effectiveness of LZ’s filtering efforts, so there’s some uncertainty. Instead of allowing them to be helpless, LZ is using that uncertainty to *fuel* their filtering efforts.”

Conversely, Haseeb Qureshi, managing partner of VC firm Dragonfly, seemingly referring to EigenLayer stakedrop (covered in the latest episode of Unchained), praised the initiative, noting, “This whole month is going to rewrite the playbook on points & airdrops. The industry is learning in real-time.” 

With the LayerZero community poised at a crossroads, the effectiveness of this defensive approach to managing sybil activities could set a precedent — or just be another battle in the token distribution wars.