#332: LayerZero Reallocates Unclaimed Tokens

♻️ A wholesome version of 'robbing Peter to pay Paul'?

Last week I saw a a post from LayerZero, announcing that unclaimed tokens from their initial airdrop would be reallocated to eligible wallets. As a fortunate recipient of the initial airdrop several months ago, I wondered…would I be a lucky reallocation recipient?

There was one keyword that caught my eye though:

What is LayerZero and how did their TGE go?

LayerZero is a cross-chain protocol that allows different blockchains to interact and communicate with each other. Some applications of the protocol:

• Stargate: Allows users to bridge tokens across different blockchains, which has historically been a painful and complex process

• OFT (Omnichain Fungible Token) Standard: A smart contract that allows tokens to be created and tracked across different blockchains. Recently, BitGo adopted the OFT Standard, allowing WBTC (wrapped Bitcoin) to be used across 80+ blockchains.

• ONFT (Omnichain Non-Fungible Token) Standard: Similar to the OFT Standard, NFTs can be cross-chain as well, and Pudgy Penguins were an early adopter of this capability.

LayerZero conducted their TGE event on June 20th, after conducting a lengthy anti-sybil effort that included self-reporting and bounty hunting efforts (a topic for another day).

The LayerZero token (ZRO) supply is 1 billion tokens broken out by:

• 38.3% to LayerZero Community, which includes distributions to users, developers, and community members

• 32.2% to Strategic Partners with 3-year unlock, which includes investors and advisors

• 25.5% to Core Contributors with 3-year vesting, which includes current and future team members

• 4.0% Tokens Repurchased, which is pledged to the Community

From the 38.3% Community bucket, 8.5% (85 million) of the supply was allocated towards the TGE event with a 90-day claim window concluding on September 20th.

The second reallocated claim

After the initial claim period closed, LayerZero opened the reallocation claim. How did it work?

Eligibility for reallocation

• Ineligible: Wallets that claimed ZRO but had no qualifying transactions after the TGE (aka me 😭)

• Eligible: Wallets that claimed ZRO and used LayerZero at least once post-TGE

Allocation for eligible wallets

• Eligible wallets will receive a pro-rata share of ZRO based on their original claim from the TGE

• Tokens that would have gone to wallets with zero transactions post-TGE (i.e., ineligible wallets) will be reallocated to eligible wallets based on the amount of gas each user has spent since the TGE

Any tokens not claimed after 30 days will go to the LayerZero Foundation, which I’m assuming will be redistributed to the community for future incentives.

Essentially, this second claim had two components:

Why is this interesting?

With many projects and ecosystems, the battle has extended from just attention and incorporated retention. How do you keep encouraging users to stay using your products and hang in your ecosystem when there are a million other shiny things to use? Incentives are key to this, but allocating them prudently is key and I would say LayerZero has done this relatively elegantly.

The second claim was broadcasted with much less fanfare than the initial claim, which users may have spent months or even years farming. Additionally, this claim was a reallocation of the initial allocation, allowing the unclaimed portion to be repurposed for the active community.

This is like robbing Peter to pay Paul, but Peter was notified multiple times, had 90 days to claim, and is nowhere to be found.

As a result, an additional ~5M ZRO out of the 85M airdrop has been claimed so far, with several weeks left.

This concept has existed in various forms outside of crypto:

• In multiplayer strategy games like Clash of Clans, players can raid other bases and take their unclaimed resources. If you don’t collect your resources in a timely manner, you’ll eventually get raided and your resources will get ‘reallocated’.

• Some class action settlements distribute the total settlement amount via equal share distribution: The settlement fund is divided equally among valid claimants. If you don’t submit a claim you don’t get a share of the settlement.

• Lottery program proceeds benefit public initiatives like education and healthcare. In some jurisdictions, unclaimed winnings go to these public initiatives as well.

In the examples listed above and LayerZero’s claim, the reallocation is generally a carrot instead of a stick. The claim windows last months and for Clash of Clans, losing resources is more of a minor hindrance than a material handicap.

I wouldn’t be surprised if we see the concept of reallocation show up creatively in various onchain incentive, engagement, and loyalty programs in the future. And with smart contracts, the way they are applied will likely be more interesting than what we already see today.

See you next week! (I’ll be traveling later this week, so no Thursday edition)