Ethereum Layer-2 (L2) community Scroll has skilled a major drop in its whole worth locked (TVL). It shed $170 million since its peak on October 16, 2024.
The rise and fall of Scroll’s TVL is emblematic of a broader pattern within the crypto house. Brief-term incentives akin to airdrops can drive fast progress in TVL however might not foster lasting person engagement.
Scroll’s whole worth locked (TVL) surged forward of its extremely anticipated snapshot on October 19. The snapshot was a part of the protocol’s technique to distribute its native SCR tokens by way of an airdrop. As BeInCrypto reported, the announcement on October 9 triggered a rush of exercise as airdrop farmers scrambled to spice up their holdings in hopes of qualifying for the token rewards.
DefiLlama knowledge reveals that between October 9 and October 16, Scroll’s TVL jumped by $157.70 million. It moved from $838.05 million to $995.75, signifying a surge of virtually 20% in per week. Nonetheless, the spike in Scroll’s TVL was short-lived. It has been dropping for the reason that days main as much as the snapshot, recording $824.82 million as of writing.
Learn extra: What are Crypto Airdrops?
TVL refers back to the whole worth of property locked in a decentralized finance (DeFi) protocol. A surge in TVL often signifies a rise within the quantity of funds deposited and utilized inside DeFi platforms. Alternatively, TVL drops point out a lower within the quantity of property locked in DeFi protocols.
TVL drops typically level to varied causes like market volatility, adjustments in person conduct, or occasions affecting the DeFi house. For Scroll, the fast drawdown highlights a typical concern with airdrop farming. Whereas these occasions can create short-term liquidity surges, they usually don’t result in long-term person engagement or worth retention.
Whilst the watch for the Scroll airdrop ends, some contributors stay dissatisfied. Particularly, some customers expressed issues about insiders unfairly accumulating giant quantities of marks.
“Scroll team is so greedy! After allocating 23% to themselves, they also chose to Sybil the airdrop by allocating team addresses 1m+ marks each,” stated Anon Vee, a crypto investor and dealer on X.
The fast inflow of liquidity is typical of airdrop farming, the place short-term contributors desirous to qualify for the airdrop inject capital into the protocol. By quickly boosting their holdings on the platform, these contributors hoped to safe a share of Scroll’s SCR tokens forward of the airdrop.
Implications of Airdrops For Challenge Liquidity
The Scroll workforce seems to have used the airdrop snapshot technique to draw new customers. They leveraged the thrill surrounding such occasions, as airdrops supply contributors the potential to earn free tokens. Whereas some view this as a chance to carry property on the proper time, others take part purely for the token distribution with out long-term curiosity within the challenge.
One draw back to this technique is the dilution of rewards for loyal customers. Airdrop farmers, who solely add liquidity for a brief interval, can declare a big portion of the token distribution. This may frustrate long-term supporters who really feel their contributions are undervalued.
This concern just isn’t distinctive to Scroll. Airdrop farming has develop into frequent throughout the crypto house, with tasks like Mode Community, Manta, and ZKSync experiencing related spikes in whole worth locked earlier than a snapshot, just for the numbers to drop after the farming interval ends. This volatility impacts challenge stability and may erode belief amongst customers.
Learn extra: Greatest Upcoming Airdrops in 2024
Because the pattern grows, tasks should discover methods to design incentive constructions that reward long-term dedication with out being weak to short-term speculators. The problem for Scroll and others might be retaining customers after the airdrop occasion ends.
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