ZKsync Token Airdrop Leads to Price Plummeting Amidst Controversy & Scam Wave: Will the Downward Trend Persist?

Airdrops present a lucrative opportunity in the crypto market with minimal investment.

Typically, these airdrops are free and straightforward, offering significant profit potential as a promotional strategy.

Historically, savvy investors have capitalised on these opportunities, making substantial gains from past airdrop events.

On 17 June, ZKsync's (ZK) token airdrop went live as planned, with the first wave ending on 3 January 2025.

However, it was met with criticism regarding its criteria, network issues, and insufficient measures to prevent Sybil attacks.

To exacerbate the situation, the ZK token has been experiencing a steady decline in value.

For the Layperson, What Exactly is ZKsync?

ZKsync is a groundbreaking Layer 2 scaling solution designed to enhance transaction speed and significantly reduce gas fees on the Ethereum network.

Developed by Matter Labs, ZKsync employs Zero-Knowledge Rollups (ZK-Rollups) to aggregate transactions off-chain, verify them, and then relay them back to the Ethereum mainnet.

The core technology of ZKsync, known as ZK-Rollups, utilises cryptographic proofs (ZK-SNARKs or ZK-STARKs) to verify transactions without disclosing the underlying data.

This approach ensures transaction privacy while maintaining high security.

Unlike other Layer 2 solutions, ZKsync relies on mathematical proofs rather than third-party validators, creating a genuinely decentralised and trustless environment ideal for DeFi applications.

This process ensures high-speed transactions and lower costs while preserving Ethereum's robust security and privacy features.

As one of the leading Ethereum Layer 2 protocols, ZKsync ensures that all validity proofs are verified on the Ethereum mainnet, maintaining the same security assurances as Layer 1.

In the Layer 2 ZK rollup, transactions are aggregated into batches, which then generate a validity proof, thereby optimizing efficiency and reducing costs.

Since the release of ZKsync Version 1.0 on the Ethereum mainnet on 15 June 2020, which achieved a transaction throughput of approximately 300 TPS, Matter Labs has shifted its focus to developing zkSync 2.0.

Founders & Funding

ZKsync, developed by Matter Labs and founded in 2018 by Alex Gluchowski and Alexandr Vlasov, has made significant strides in the crypto space.

Matter Labs has secured an additional $200 million in a Series C funding round which ended on 16 November 2022, from investors such as Blockchain Capital, Dragonfly, LightSpeed Venture Partners, Variant, and a16z.

In total, they have raised an impressive $458 million.

This funding level exceeds that of many other blockchain and Layer 2 projects, positioning zkSync for substantial impact.

With over 150 projects already integrated into its ecosystem, zkSync's potential is vast.

This strong financial backing underscores zkSync's potential to revolutionize the crypto landscape.

Alex Gluchowski

Gluchowski, a seasoned software engineer with over 15 years of experience, has had a profound journey into the world of cryptocurrency.

Born in Soviet Ukraine, he witnessed his homeland’s transition to independence and endured a year of hyperinflation at just seven years old, with prices escalating by an astonishing 30% daily.

These formative experiences left a lasting impact, fostering a deep-seated distrust of centralised institutions.

Driven by these early challenges, his mission became clear: to eliminate centralisation and empower individuals with financial freedom.

His socials are: X, LinkedIn

Alexandr Vlasov

Vlasov, co-founder of Matter Labs, brings a unique blend of expertise to the blockchain industry.

A Russian nuclear physicist with a master's degree in high-energy physics and a doctorate in electrical engineering, Vlasov has extensive experience working with plasma environments and scaling solutions.

His deep knowledge positioned him as a key participant in early discussions about plasma technology at the dawn of the blockchain revolution.

It was during these formative discussions that the concept of zkSNARKs checkpoints, a foundational element of ZKsync, began to emerge.

His socials are: X, LinkedIn https://twitter.com/shamatar https://www.linkedin.com/in/alexandr-vlasov-4863404a/

The ZKSync's ZK Airdrop Allocation & Eligibility

On J11 une, ZKsync announced the highly anticipated airdrop of its ZK token, with distribution scheduled for 17 June.

ZKsync confirmed the distribution of its much-anticipated ZK token airdrop through a blog post, announcing the allocation of 3.675 billion ZK tokens.

Notably, it offers 67% of the total ZK token supply to the community, with 17.5% earmarked for the airdrop.

This airdrop garnered significant attention within the crypto community, yet only 695,232 wallets are eligible to receive these tokens.

Valued at $0.66 per token by Aevo, a crypto perpetual exchange, the airdrop totals approximately $2.4 billion.

Gluchowski that the airdrop might disappoint some due to its limited allocation.

He noted:

“We have put a lot of thought into the design of the airdrop. No matter what you do, some people are going to be disappointed, but we have looked into others.”

Matter Labs wrote in a statement:

“Awarding more tokens in the airdrop than to the Matter Labs team and investors is more than a symbolic decision for the community. When the ZKsync governance system launches in the coming weeks, the community will have the largest supply of liquid tokens to direct protocol governance upgrades.”

Of the airdropped tokens, 89% went to ZKsync holders who have previously transacted ZK tokens, emphasizing interaction with the network as a key criterion.

The remaining 11% was designated for other contributors: 5.8% for ZKsync native projects, 2.8% for on-chain communities, and 2.4% for builders.

Users can check their eligibility on zkSync.io, with the allocation concluding on 3 January 2025.

The airdrop can be claimed without any transaction fees, as it remains liquid under all conditions.

Eligibility is determined by seven factors, each worth one point, for addresses that transacted on ZKsync Era or Lite chains before 24 March 2024.

Points will be multiplied by the assets held on ZKsync Era over time.

Other considerations include Ethereum airdrop recipients and smart contract usage.

Wallets holding fewer than 450 ZK tokens had their tokens recycled into the pool, while wallets with more than 100,000 tokens had only have the excess tokens recycled.

Each eligible wallet receives a minimum of 917 ZK tokens and a maximum of 100,000.

Airdrop Drama: Massive Sell-Off & Network Issues

Before the ZK token launch, ZKsync alerted users via X about high network load and degraded RPC service performance.

RPCs facilitate node communication and various network operations like data queries and transaction sending.

The team is actively expanding RPC capacity and promises updates soon.

In addition, many long-time users expressed dissatisfaction with their token allocations, feeling shortchanged compared to less active users.

Some eligible users reported being excluded despite meeting criteria.

Prominent zkSync projects such as Element and zkApes formed a coalition in response to their exclusion despite substantial gas fee contributions.

Post-airdrop, analysis of 10,000 addresses acquiring the token revealed 41% sold all assets, 29.2% sold some, and 30% held onto their tokens.

Almost half of the top wallets that received ZK tokens sold their entire allocation, causing a significant 34.5% drop in zkSync's crypto price since listing, with subsequent price dips following suit.

Gluchowski had mentioned a year ago that "there is no need for a token at this point."

Inadequate Anti-Sybil Attack Measures

Critics have raised concerns about the adequacy of the criteria used for the airdrop in preventing Sybil attacks, where individuals control multiple wallets to accumulate tokens and then sell them off after they are listed on exchanges.

The debate intensified due to the lack of anti-Sybil filtering, with reports indicating that 80 million ZK tokens were distributed to 47,000 Sybil addresses.

In response, ZKsync updated their guidelines, emphasizing their commitment to inclusivity.

They argued that overly strict Sybil filtering could unfairly impact legitimate users.

The airdrop was designed to reward genuine participants while upholding fairness and integrity.

ZKsync's approach aimed to benefit organic users while tolerating more Sybil accounts to minimise false positives.

After ZKsync announced that over 695,000 wallets were eligible for the ZK token airdrop, there has been a notable rise in malicious dApps (decentralised applications) masquerading as ZKsync.

The Blockaid web3 security platform has reported an increase in the number of malicious dApps targeting ZKSync.

Blockaid CEO Ido Ben-Natan said:

"The scams we're seeing are impersonation scams — malicious dapps that are using the ZK brand in order to get users to sign malicious transactions. These malicious dapps are using drainer SDKs to mitigate detection and reach users. The scammers are using Twitter/ X.com comment sections to reach their target audience."

Sybil Horror 6, an account that tracks Sybil activity, estimates that 135 million ZK tokens could be claimed by wallets involved in Sybil attacks.

Mudit Gupta, the Chief Information Security Officer (CISO) at Polygon (MATIC) Labs, was among the first to express worries about the apparent absence of effective Sybil filtering, which could allow individuals to exploit multiple wallets to increase their airdrop rewards.

Adam Cochran, a partner at Cinneamhain Ventures, shared similar concerns, noting that the airdrop criteria were easily met by those manipulating the system, yet potentially overlooked by genuine users due to the early stage of zkSync's ecosystem.

Binance Tries to Rescue ZK Users Left Out of the Airdrop

On Sunday, Binance announced its intention to list the ZK token on 17 June.

This additional airdrop pool will be active until 16 July.

In response to ongoing concerns, the exchange also unveiled a ZK token distribution programme.

According to the announcement, Binance will distribute 10.5 million ZK tokens to up to 52,500 eligible users.

This initiative aims to placate users who were dissatisfied with the launch of the new ZKsync Era's ZK token.

To qualify for the distribution, users must have initiated at least 50 transactions on ZkSync Era between February 2023 and March 2024 and conducted transactions in seven different months.

Additionally, the claim address must not have been eligible for the ZK Nation airdrop.

Binance listed the token at 6 am EST with spot trading pairs including ZK/BTC, ZK/USDT, ZK/FDUSD, and ZK/TRY. Withdrawals of ZKsync is available starting June 18, 2024, at 4 am EST.

Binance has acknowledged in its announcement that there are "ongoing concerns" from the community regarding the ZK token distribution, particularly about the methodology used in the airdrop program to filter out Sybil farmers.

It is traded on 27 markets and 24 exchanges, with Binance being the most active.

ZKsync Price Plummeted, Still on a Downward Trend

At the time of writing, the ZK token is trading with a predominantly bearish sentiment.

Following the recent ZKsync airdrop and the active selling of ZK tokens by asset holders, the cryptocurrency's price has shown a bearish trend.

Some users have suggested that customer dissatisfaction may have played a role in the price drop.

The current price of ZKsync is $0.1955, representing a -8.83% drop over the past 24 hours.

Its All-Time-High (ATH) of $0.3098 was reached on June 17, 2024, marking a 35.92% decline from that peak.

ZKsync currently holds a 0.03% share of the entire cryptocurrency market, with a market capitalisation of $718 million, down from $735 million just a few hours ago.

Is ZKsync a good investment?

While it is premature to make definitive ZKsync price predictions or forecast the behaviour of the ZK token, some analysts have already begun to share their thoughts on the potential price trajectory.

It has only been a few days since the ZKsync airdrop, and it will take time to accurately assess the trends of the ZK token.

Although some investors may be inclined to purchase new assets, the short history of the ZK token makes it challenging to determine whether its price will rise or fall.

The question of whether ZKsync represents a viable investment opportunity hinges on the project's ability to attract additional investors who are interested in acquiring the token.

Historically, broader cryptocurrency market trends have played a significant role in individual token performance.

Given the bearish trend that has persisted since the airdrop, Coinlive advises a cautious approach, suggesting that investors hold off on making decisions while closely monitoring price movements.