ParaSwap Launches Token Amid Controversy, Why Users Were Excluded
Decentralized exchange ParaSwap has joined the ranks of DeFi platforms that launch their native governance token, PSP, via an airdrop. In most cases, these events cause a lot of hype in the community, as users are rewarded for supporting the platform.
Related Reading | Real Vision CEO Raoul Pal Takes Bullish Stand On Ethereum
The ParaSwap airdrop was not an exemption with many users jumping into the platform to qualify and receive the funds in PSP. However, the platform employed a new logic to distribute its native token.
Unlike Uniswap, a decentralized exchange that sends every user that ever interacted with their smart contract a portion of their governance token, UNI, ParaSwap took a different approach. By making a tradeoff between more decentralization or allowing malicious actors to spoil the airdrop, according to an official post, the platform chose to “reward active users”.
This resulted in some users being excluded from the PSP airdrop. These users mainly expressed their nonconformity with the event via social media. Some went as far as accusing the platform of incompetence or malicious behavior. User Davis (@basedkarbon) said:
Never seen a company execute an airdrop in more bad faith than the Paraswap one. Heavily hyped only to exclude 99% of their community.
In a Medium post, the team behind the platform explained the airdrop’s logic. Therein, they claimed the event was designed to “target to the best of our ability genuine ParaSwap users that were not simply trying to game a potential token drop”.
Data provided by the DEX’s team claims that of the 1 million unique addresses that have ever used the platform, only 20,000 were eligible to receive PSP. In that sense, they added the following on the possibility of “genuine” users being left out of the process:
The ParaSwap team worked hard on the logic, yet we’ve received a significant amount of attention from airdrop hunters and had to make tradeoffs; and there might be genuine users left out, we’ve double checked our logic to make sure it’s minimized.
Related Reading | Over 100k Ethereum Exits Exchanges, What Does It Mean For The Price?
ParaSwap Protects PSP Distribution At Expense Of Its Community?
Furthermore, the team behind ParaSwap claims that due to the importance of the token and its role in the creation of private market makers, it was necessary to be extra cautious about the airdrop. For that reason, they claimed to have studied similar events from other platforms and ruled out a volume-based airdrop for “an engagement-based airdrop”.
In theory, this would prevent malicious actors and deep-pocket investors from taking advantage of the snapshot that determined the addresses eligible to receive PSP. For that reason, the ParaSwap team considered other factors, such as:
(…) the user first interacted with ParaSwap, if and how frequently he came back and how savvy the swaps were. There’s a lot that can be inferred from onchain data, and that’s precisely what we did. The goal was to find out our most engaged users: users of ParaSwap that were not here just to game a drop, but actually making sensible token swaps.
According to the post, the addresses that were to receive around 7% of PSP total supply were classified into three tiers. These levels were determined by each user’s level of activity with the platform, as explained above.
This new airdrop logic had many detractors, but others praise its ability to exclude malicious actors and prevent Sybil attacks. In the future, other platforms could imitate this approach, if they determined that the tradeoff is worth it.
Related Reading | TA: Ethereum Regains Strength, Indicators Suggest Fresh Run To $4,850
As of press time ETH trades at $4,573 with a 1.24% loss in the daily chart.