LayerZero’s anti-Sybil strategy shines a light on mounting tensions within the DeFi sector

LayerZero, a protocol for cross-chain interoperability, is preparing for its first token airdrop. However, its approach to dealing with token farmers has caused controversy. The main issue revolves around LayerZero’s “anti-Sybil strategy.” Sybil activity occurs when individuals or groups create multiple wallets to participate in a protocol’s airdrop multiple times. While this may temporarily boost the protocol’s popularity, it adds no long-term value. LayerZero aims to connect previously isolated blockchains, enabling cross-chain messaging and applications. The controversy stems from LayerZero’s negative portrayal of Merkly, a cross-chain bridging decentralized app (DApp) that LayerZero labels as a “Sybil farming application.” Interestingly, LayerZero prominently features Merkly on its own website as part of its application ecosystem. Cointelegraph interviewed CC2, an airdrop farmer and advisor at Merkly, to gain insight into the situation. CC2 acknowledged the frustration but also recognized LayerZero’s perspective. CC2 argued that Merkly’s usage should not automatically disqualify airdrop hunters, only excessive usage should. CC2 also criticized LayerZero CEO Bryan Pellegrino’s Sybil hunt campaign, questioning its necessity. While some community members have been alienated by LayerZero’s Sybil hunt, others have praised it. Pellegrino emphasizes that the hunt aims to ensure airdrop tokens are sent to genuine users, whom LayerZero refers to as “durable users.” Venture capital firms are interested in airdrop strategies and how tokens are distributed within communities. George McDonaugh, co-founder and co-managing director of KR1, explains that the best airdrops are those that aim to distribute tokens to form a community. LayerZero’s Sybil hunt may resonate positively in the wider industry. LayerZero’s challenge in identifying Sybil farms without alienating their community highlights the tension between protocols and users. One potential solution is to introduce liveness checks, which would require users to confirm their uniqueness through video feeds. However, users in the crypto industry are skeptical of ID checks and reluctant to provide personal information or biometric data. While identity protocols could eliminate Sybil farming, they have not become standard practice due to various risks and challenges. Protocols may be hesitant to use better verification processes, including decentralized ones, due to reputational concerns and the potential exclusion of a large group of users. Additionally, many stakeholders in the industry prefer to participate without verification to maintain their anonymity. This issue will continue to be a challenge for protocols and their executives, even if it leads to community backlash.