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News/728M Token Airdrop Drama: Starknet to Learn Community Lesson?

728M Token Airdrop Drama: Starknet to Learn Community Lesson?

Van Thanh Le

Feb 21 2024

3 months ago4 minutes read
Chibi robot balances on a tightrope, symbolizing the precarious situation

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Starknet Airdrop’s Excitement Turns to Frustration as User Spike Crashes

Starknet, the Ethereum roll-up aiming to boost scalability, made a splashy debut on major exchanges like Binance and Bybit yesterday. The hype was real, fueled by a massive airdrop of 728 million tokens. The airdrop's allure was undeniable, with 45 million STRK tokens snapped up in the first 90 minutes alone, a number that would swell to over 220 million claimed. 

The moment it hit the trading floors, STRK's value surged, reaching a remarkable $5 on Kucoin and soaring even higher to $7 on Binance. But euphoria gave way to a swift reality check as the token's value plummeted 53.8% sparking debate, with only 4.8% of eligible users claiming their tokens early on.

chart.webp

Network activity mirrored the sentiment, experiencing volatile swings. Trading volume surged to $122 million then dropped significantly, with a partial rebound to $89 million. Although the initial sell-off by entities such as Flow Traders and Nethermind introduced volatility, it underscored the high level of interest and speculative nature surrounding new token launches.

STRK isn't just a token; it's a governance tool, fee payment method, and key to participating in Starknet's consensus mechanism. An attractive 12% staking APY further incentivizes holding over selling.

The user base, fueled by airdrop aspirations, ballooned from under 20,000 to over 225,000 in just five days since February 9, marking a three-month high for the network. However, the tide quickly turned on February 20 when the airdrop details landed, leaving many users feeling excluded and frustrated.

active accounts.png
Source: Starkscan

The crux of the discontent lies in the eligibility criteria. The airdrop snubbed accounts holding less than 0.005 Ether (roughly $10 at the time) on November 15, 2023, sidelining a sizeable portion of the community. This sparked accusations of elitism and concerns about the project's inclusivity.

Further fueling the flames was the token unlock schedule. With 1.3 billion STRK (a hefty 13% of the total supply) slated to unlock for Starknet investors and early contributors on April 15, just two months post-launch, many felt this favored insiders over regular users.

The pre-market trading of STRK at up to $1.98 added another layer of complexity. While some saw it as a sign of bullish potential, pushing the market cap to a staggering $1.38 billion at launch, others worried about inflated expectations and a potential bubble.

Starknet Code fragments scatter like puzzle pieces, reflecting the airdrop's impact.webp

Despite the tumble, Starknet boasts a $1.4 billion market cap, ranking among the top 60 cryptos. This hints at investor faith in its technology, a Layer 2 solution designed to solve Ethereum's scalability woes. Its journey, backed by giants like Sequoia Capital and Paradigm, has been nothing short of stellar, with $261 million raised and a valuation hitting $8 billion in its Series D round.

But can Starknet sustain its momentum? DeFi researcher "DeFi Ignas" believes so, pointing to three factors: its unique cryptography, robust token utility, and resistance to copy-paste projects. These elements could attract users and DeFi applications, boosting the network's "wealth effect" and Total Value Locked (TVL).

Starknet's Airdrop Fiasco: From Anticipation to Exodus

Starknet recently navigated through stormy waters. At the heart of the storm was a sudden policy shift that ruffled feathers across its vast community landscape. 

Initially, Starknet had laid out plans to distribute a generous sum of over 700 million STRK tokens to nearly 1.3 million addresses on February 20, 2024. This move was aimed at rewarding its community members and boosting engagement. However, as the dawning of the airdrop day approached, a sudden revision in the eligibility criteria left many out in the cold, sparking widespread dissatisfaction and a significant exodus of users.

In response to the outcry, Starknet moved swiftly to implement immediate corrections, offering over 15 million STRK tokens up for grabs in an attempt to quell the unrest. These adjustments were tailored to address concerns raised by validators, solo stakers, and those affected by squatted GitHub handles. Despite these efforts, the community's response was lukewarm, with many expressing feelings of neglect, particularly among smaller stakeholders and dedicated users.

This policy pivot resulted in a staggering 57% drop in active users, plummeting from 196,910 to just 84,260 in less than a week, before surging again on the airdrop claiming day. This sharp decline underscored the fragility of community trust in the digital age. Yet, paradoxically, Starknet's Total Value Locked (TVL) hovered near all-time highs, painting a complex picture of financial resilience amidst community turmoil.

tvl.png
Source: DefiLlama

The backlash was palpable across social platforms, with many voicing their frustrations over being sidelined due to the revised criteria. Among the most poignant was the plight of users who, despite substantial transactions and liquidity contributions, were disqualified for having less than 0.005 Ethereum (ETH) in their wallets.

Starknet's team has since acknowledged the community's feedback, emphasizing their commitment to addressing the concerns raised and refining their policies based on community input. However, the incident has left an indelible mark on Starknet's reputation, with some labeling it as "the biggest scam of the layer two systems."

Starknet Airdrop: A Tale of Community Course Correction

The community's response towards Starknet’s airdrop was a mixture of excitement and exasperation, with vocal criticisms focusing on the inclusion of airdrop squatters and perceived inequities in token distribution. 

Starknet, through the Starknet Foundation and co-founder Eli Ben-Sasson, acknowledged these bumps in the road, committing to rectify minor issues and realign with the community's expectations. In a bid to soothe discontent, Starknet embarked on corrective measures, including token reallocation to previously overlooked participants and refining eligibility criteria to uphold fairness.

Further adjustments were swiftly made to redress significant criticisms. Starknet revised the eligibility of certain validators and reissued STRK tokens to solo stakers who had been incorrectly categorized. In a notable gesture towards community building, over 1 million STRK were earmarked for developers caught up in GitHub handle seizures post-announcement. Despite these efforts, a segment of the community remains critical, underscoring the delicate balance Starknet must maintain between encouraging widespread participation and implementing effective anti-Sybil measures.

Airdrop Tangled web represents the fractured trust within the Starknet community (2).webp

The airdrop saga sheds light on the intricate dynamics of decentralized governance and token distribution, stirring discussions around Starknet's tokenomics, particularly the vesting schedule for team and investor allocations. Criticism notwithstanding, Starknet's proactive stance on addressing community concerns and its continued focus on technological advancement highlight the evolving nature of blockchain project launches. 

As Starknet forges ahead, its journey is emblematic of the broader challenges and opportunities within the DeFi ecosystem, navigating the complex interplay of innovation, community engagement, and equitable distribution in the decentralized world.

StarkWare Revises STRK Token Lockup Schedule After Criticism

StarkWare, the innovative team behind the Starknet scaling solution, has taken a bold step to refine its approach to token distribution. After receiving feedback from the community, StarkWare has chosen to revise the lockup schedule for its STRK tokens, a move aimed at addressing concerns from early contributors and investors. This adjustment introduces a more gradual release of tokens, significantly altering the initial plans.

Originally slated to release a whopping 1.34 billion (1.34%) of its tokens on April 15, StarkWare has scaled this back to just 64 million (0.64%), with a commitment to maintain this more conservative monthly unlock rate until March 15, 2025. 

This change marks a strategic shift in how StarkWare plans to manage token liquidity and investor relations. Following the first year, the pace is set to pick up, with a monthly unlock rate of 1.27% extending over the next 24 months, culminating on March 15, 2027.

This recalibration of the unlock schedule means that by the end of the year, the market will see 580 million tokens made available, a stark contrast to the 2 billion tokens initially expected. StarkWare's decision underscores the company's responsiveness to community feedback and its commitment to fostering a healthy, sustainable ecosystem for its scaling solution. This move not only demonstrates StarkWare's adaptability but also its dedication to ensuring the long-term success and stability of its network.

Conclusion

Starknet's airdrop saga serves as a cautionary tale for future projects, highlighting the delicate dance between innovation, community engagement, and equitable distribution. While their proactive response is commendable, regaining trust takes time. 

Can they weather the storm and deliver on their technological promise? Only time will tell, but one thing is certain: the DeFi landscape demands constant learning and adaptation, and Starknet's ability to navigate this turbulent terrain will determine its ultimate success.

FAQs

1. What went wrong with the Starknet airdrop?

The airdrop sparked controversy due to revised eligibility criteria excluding many users with small holdings and concerns about unfair token distribution. This led to a significant user exodus and accusations of elitism.

2. How is Starknet responding to the backlash?

They have acknowledged community concerns, implemented corrective measures like token reallocation and revised eligibility, and committed to refining their policies based on feedback. Additionally, they are focusing on addressing technical development to regain trust.

3. Is Starknet still a viable project?

Despite the airdrop drama, Starknet boasts a strong market cap and remains backed by major investors. Its innovative technology and focus on addressing Ethereum's scalability issues hold potential, but regaining community trust and navigating tokenomic concerns are crucial for long-term success.

4. What lessons can be learned from the Starknet airdrop?

The incident emphasizes the importance of transparent communication, clear eligibility criteria, and community engagement in token distribution strategies. Additionally, projects navigating the DeFi landscape must be prepared to adapt and respond swiftly to evolving community sentiment.

This article has been refined and enhanced by ChatGPT.

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