ZKsync TVL Takes Hit amid Token Distribution Controversy

UTC by Anisha Pandey · 3 min read
ZKsync TVL Takes Hit amid Token Distribution Controversy
Photo: Unsplash

The distribution breakdown revealed that 16.1% of the tokens would be allocated to the ZKsync team and 17.2% to investors.

ZKsync’s recent announcement regarding the launch of its ZK token has sparked considerable debate and led to a significant decline in the protocol’s total value locked (TVL). According to data from DeFiLlama, the TVL plummeted to around $128 million following the controversial token distribution details.

On June 11, ZKsync announced that its ZK token would officially launch on June 17. The plan includes distributing 17.5% of the total 21 billion token supply to early users via a one-time airdrop. This allocation was intended to reward long-time supporters who have been part of the mainnet development since 2023.

The distribution breakdown revealed that 16.1% of the tokens would be allocated to the ZKsync team and 17.2% to investors. The remaining tokens are set aside for ecosystem initiatives and will be managed by the ZKsync Foundation and the ZK Nation governance process.

However, the community reacted negatively to the perceived inequity in the token allocation. Early users voiced their dissatisfaction, feeling that the rewards were insufficient.

Despite ZKsync’s clarification that 89% of the 17.5% tokens allocated for the airdrop would go towards significant network transactions and only 11% for developers and researchers, the discontent persisted.

The announcement triggered a notable outflow of assets from the protocol, as reflected by the drop in TVL from nearly $200 million to the current $128 million. This decrease signals a loss of confidence among users who felt sidelined by the distribution strategy.

Notably, the TVL has been on a downtrend since March, when the value reached a high of $189.45 million. In July last year, the TVL reached an all-time high of $196.55 million owing to the rise in demand for scalability projects.

Crypto Reacts

On social media, the backlash was evident. A user xqt1688 highlighted their reasons for not supporting the ZKsync tokens, stating:

“There are six reasons for not buying ZKSync tokens. The secondary investors have officially declared war on VCs and project owners. If we don’t buy, we won’t lose.”

The user also criticized the project as being a mere copycat in an unstable market, arguing that the “layer-2 narrative” has proven ineffective given the TVL drop.

Further, another X user stated that ZKsync has earned “recognition for its notable lack of professionalism, having abused hundreds of thousands of real users and shown a middle finger to all of them”. The user ImanOrace also added that ZKsync would “become just another ghost chain”.

Notably, prominent crypto analyst “0xy10” also wrote that ZKSync has 100% insider allocated the tokens that are a part of the airdrop, bringing the attention of the crypto community to an address 0x3efd3243683732738354cc10302ddc8d572ac187.

In response to the backlash, ZKsync has emphasized its commitment to transparency and community engagement. The team has invited further feedback from users to better align future decisions with the community’s expectations.

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