LayerZero Airdrop Is Creating Chaos for Polymarket Bettors

LayerZero Labs’ charitable intentions created headaches for the Polymarket community Thursday, as bettors debated whether the provider of blockchain infrastructure actually airdropped tokens.

Following half a year of anticipation, LayerZero Labs unveiled the distribution process for 85 million ZRO tokens, underpinned by a new mechanism called “Proof-of-Donation.” Eligible claimants are required to donate $0.10 per ZRO to Protocol Guild, a not-for-profit collective of Ethereum’s core researchers and developers, LayerZero stated in a blog post.

The result was whipsawing odds on the blockchain-based prediction site Polymarket, where users have wagered $680,000 on whether a LayerZero “airdrop” happens by June 30.

Traders had penciled in a nearly 100% chance that LayerZero’s airdrop had happened on Wednesday. But the wager’s odds dove to 54% just before the final outcome “Yes” was proposed—which was subsequently disputed by Polymarket users.

LayerZero argued that airdrops, as they’re commonly known, aren’t conducive to “community building” or “protocol health.” In most cases, airdrops involve distributing tokens to a project’s users—for free—to generate buzz or incentivize actions that can help a project grow.

“As LayerZero has approached [its token generation event], the term ‘airdrop’ has not been used […] for a specific reason: This is not an airdrop,” LayerZero Labs explained.

That assertion is now being weighed through UMA, a Polymarket partner and DeFi protocol that settles disputes using tokens. UMA’s token holders have been tasked with voting on which outcome is indeed true, a process UMA describes as its “decentralized truth machine.”

Some Polymarket users, however, fear the process could be manipulated. “STOP THE STEAL,” one user who had bet around $1,000 on “Yes” commented through Polymarket’s website, claiming that “scammers are planning to lie to the UMA Oracle.”

Meanwhile, some Polymarket users took issue with LayerZero Labs’ use of crypto labels.

“LayerZero isn’t the authority on what is and isn’t an airdrop,” a user named Trophycase remarked within Polymarket’s Discord server. “Are criminals allowed to say something isn’t murder because ‘oh, it’s actually this other thing?’”

Other members of the Discord server pointed to a definition for airdrops within other Polymarket wagers, such as one that was disputed last year and resolved through UMA.

“In Response to Trader Inquiry: Token sales are not airdrops. Tokens need to be distributed to users’ wallets for free or through claiming with a gas fee for it to be an airdrop,” a page stated that ultimately found an airdrop for Lens Protocol had not taken place by a certain date.

However, a so-called “bulletin board rules update” was posted on Polymarket that said the wider context of LayerZero’s token distribution should be taken into consideration. As of this writing, there was an hour-long period left for users to raise a final dispute.

“The LayerZero token launch is considered to be an airdrop under the widely understood context of what an airdrop is, both by the public and the media,” the update read. “While LayerZero added a donation element to the distribution and stated it wasn’t an ‘airdrop’ because of that, the spirit of the market hinged around whether LayerZero would launch and widely distribute their token to network participants by the resolution date, which they did.”

Source