Conversation with Dragonfly partner: controversy sparked by celebrity meme and zk airdrop

Organized & Compiled by: Deep Tide TechFlow

Guest Speakers:

Haseeb Qureshi, Dragonfly managing partner

Tom Schmidt, Dragonfly General Partner

Robert Leshner, CEO and Co-founder of Superstate

Tarun Chitra, Managing Partner of Robot Ventures

Podcast source: Unchained

Original Title: $Mother, Hamster Kombat, & zkSync - The Chopping Block

Air date: June 15, 2024

Highlights of this podcast

• Cryptocurrency market sentiment: discussing the latest market trends and how inflation data is impacting the community.
• Memecions and Celebrities: Analysis of Iggy Azalea’s $Mother and the Phenomenon of Memecions Launched by Celebrities.
• Emerging Memecions: Insights into new Memecions, including issues of fraud and hacked accounts.
• Tap-to-Earn Games: Overview of the rapid rise of simple click games like Hamster Kombat.
• Airdrop Controversy: Discussing recent controversies, especially those involving ZK SYNC and Layer 0, as well as the challenges of Sybil attacks.
• Future Airdrop Strategy: Discussing the evolution and demand for clear, non-playable indicators.

Current Market Sentiment

Robert mentioned that the recent market sentiment can be inferred in reverse from the price changes. He pointed out that encouraging inflation data was released today (Wednesday), and the market is very optimistic about it, believing that the Fed may drop interest rates this year, thereby bringing the market back on track.

However, this optimism lasted only a few hours, followed by a large sell-off in the market, causing prices to fall back. Ultimately, the market sentiment returned to a relatively calm and wait-and-see state.

Famous memecoins and market influence

$Mother

Tarun pointed out that the biggest news on Crypto Twitter today is Iggy Azalea promoting her memecoin.

Haseeb quoted Iggy Azalea in an interview, questioning Vitalik’s views on charities and hospitals, and implying that Vitalik profits from gas fees.

Haseeb introduces Iggy Azalea and the background of her Memecoin ‘Mother’, pointing out that she is now more of an internet celebrity and has conflicts with some well-known figures in the encryption community.

A meme featuring Iggy Azalea and Vitalik was displayed, with Vitalik depicted as a baby being breastfed by Iggy Azalea, implying that she is his “mother”.

Market Impact

Tarun mentioned that the Memecoin market is not calm this week, and many celebrities are starting to get involved in Memecoin.

Haseeb explains that Hulk Hogan’s Memecoin is a hacker attack and points out that hackers are now profiting by launching fake Memecoins.

He mentioned that Andrew Tate has launched a memecoin called ‘Daddy’ and is competing with Iggy Azalea’s memecoin ‘Mother’.

Haseeb emphasized that the celebrity involvement in the current Memecoin market has reached a peak, but believes there may be higher peaks in the future.

Haseeb discusses the future of monetizing celebrities through Memecoin and other means, pointing out that celebrity tokens may be a zero-sum game in some cases.

He mentioned the difference between celebrity tokens and traditional product endorsements, believing that celebrity tokens may create value in the early stages, but this value will be eroded as the market saturates.

Robert believes that monetizing celebrities through new businesses (such as wine brands, vitamin water, headphones, etc.) is the most valuable way, and these businesses are legitimate and value-creating.

He believes that Memecoin may create positive wealth during breakthrough success, but it is usually a zero-sum game.

Robert mentioned Doge’s unique value proposition. Doge is the first satirical crypto asset, attempting to mimic blockchain like Bitcoin, Litecoin, and other Bitcoin forks, aiming for greater longevity in cryptocurrency history, which other celebrity tokens lack.

Robert discusses the saturation of the Memecoin market, believing that the market demand is limited and will eventually reach a peak.

Tom believes that every market trend will eventually become saturated, and the current Memecoin market is no exception.

He mentioned the difference between celebrity tokens and traditional product endorsements, believing that Memecoin may create value in the early stages, but this value will be eroded as the market becomes saturated.

Tarun believes that the core truth of Memecoins is that they attempt to simplify revenue sharing protocols, but in reality, they do not solve this problem.

He discusses the uniqueness of Pump.fun as the first successful token launchpad project. Pump.fun is easy to use and fun. Tom believes it is closer to a truly viral consumer application than many blockchain gaming projects.

Robert Pump.fun is the first project similar to Launchpad, and it is well done.

Click to earn money game: Hamster Kombat vs Notcoin

Haseeb mentioned two blockchain gaming projects worth discussing: Notcoin and Hamster Combat.

Haseeb introduces Hamster Combat, a Telegram-based click-to-earn game where players earn feedback and points by clicking on hamster images on the screen.

Hamster Combat has over 100 million users, with daily active users exceeding Ethereum.

Haseeb believes that the success of blockchain games may be seen as a social problem, as these games can be addictive and time-consuming. Haseeb talks about the simplicity and virality of these games, believing that they satisfy people’s need for ‘digital rise’.

Robert believes that the success of click-to-earn games lies in their simplicity and ease of use, making them suitable for those who hope to earn rewards through light work.

Robert mentioned the short-term appeal of these games, believing that players will lose interest after a period of time.

Robert continued to discuss the economic cycle issues of these games, believing that once the airdrop ends, players may lose the motivation to continue playing. He also pointed out that the design of these games is very simple, requiring almost no technological innovation.

Tarun mentioned that the popularity of click-to-earn games may be a response to the proliferation of complex games and AI. He believes that the success of these simple games is related to their low computational requirements and ease of use.

Tom believes that the popularity of click-to-earn games may be a response to high-end games. People prefer simple games that don’t require too much investment.

Tom mentioned the cyclical nature of culture, believing that the current trend is a return to simplicity. He believes that the popularity of these games reflects people’s demand for ‘digital rise,’ which may be an expression of some kind of social dissatisfaction.

Airdrop Controversy

Airdrop Meta (zkSync & LayerZero)

Haseeb discussed the recent trend of airdrops, noting that many major airdrops have been accompanied by controversies and dramatic events. He mentioned the airdrops of ZKSync and LayerZero.

ZKSync is a zero-knowledge rollup, and they announced an airdrop of 17.5% of the total supply to users. Despite the large scale of the airdrop, only about 11% of users are eligible, which has sparked a lot of anger, especially from farming-type users.

LayerZero’s airdrop strategy allows users to self-report. If the self-report is identified as a bot, they can receive 15% of the original airdrop. If successfully reporting others, the reporter can receive 10% of the reported person’s airdrop. This method has also triggered different reactions.

Haseeb mentioned that recent airdrops have received little to no positive feedback, considering it a common issue.

Tarun believes that the expected value of the airdrop keeps increasing over time, making it increasingly difficult to satisfy everyone. He believes that the expected value of the airdrop is set by the first project that adopts a novel mechanism, and subsequent projects need to pay more ‘premium’ to meet these expectations.

Tom agrees with the view that the expected value of airdrops keeps increasing, which he believes is a common issue.

The Challenge of Fair Airdrops

Haseeb mentioned that in the past six months, there has been almost no major airdrop that can satisfy everyone.

Tom believes that the fairness and transparency of airdrops are important issues when facing a large number of users and potential bots. He mentioned that the airdrop of GMV is one of the few recent examples that have not caused a lot of negative reactions.

Tarun mentioned that Celestia’s airdrop is an exception, and they distribute airdrops to developers and researchers, a method that other projects have imitated.

Tarun mentioned a phenomenon in behavioral economics: once an expectation is set, subsequent expectations will be even higher.

He explained the specific manifestations of this phenomenon, such as some people expecting to receive similar rewards in other projects because they received large rewards in the Airdrop of Celestia.

Tarun believes that the continuous increase in this expected value is similar to the rise in salary expectations, once the expectations are set, it is difficult to drop.

Airdrop Industrialization

Haseeb mentioned the issue of industrialization of airdrops, which may be one of the reasons for the increase in controversies surrounding airdrops.

Six months ago, the scale of industrialization of airdrops was far from what it is today. At that time, although there were airdrop hunters, the quantity and tools were far less than they are now.

He pointed out that now many users in emerging markets can easily participate in airdrops through various guides and tools, making the industrialization of airdrops more common.

Haseeb believes that for some projects, such as decentralized exchanges (Dex) or projects that require liquidity, measuring user behavior is relatively simple, so there is less controversy.

For some ambiguous projects, such as Layer 1 protocol or Celestia, users are unsure what to do to receive the airdrop, which adds to the uncertainty and controversy.

Tarun agrees with Haseeb’s point and mentions that Celestia’s airdrop is also being utilized by industrialized famers. Some memes reflect users’ dissatisfaction with the airdrop.

Tom believes that some airdrops require users to have more ‘skin in the game’, such as providing capital or paying transaction fees, which reduces the controversy surrounding such airdrops.

He mentioned a meme in ZKSync’s Discord that reflected the strong dissatisfaction of Indian users.

Tarun believes that the entire ecosystem is somewhat out of control, and users manipulate metrics in various ways to obtain airdrop rewards.

He believes the current airdrop system is too complex and vulnerable to attacks, and is not an effective way of token distribution.

Tarun predicts that the trend of future airdrops may completely change, as the current system is not ideal.

Future Airdrop Strategy

Haseeb pointed out that the current airdrop mechanism lacks adversarial capability, making it difficult to effectively distinguish between real users and fake accounts (Sibyl attacks). With the improvement of airdrop hunting techniques, the effectiveness of anti-Sibyl techniques declines, increasing the probability of mistakenly targeting real users and the error rate also rises.

He believes that the project party tacitly approves the existence of airdrop hunters to some extent because it helps improve the project’s metrics.

There is a “Faustian deal” between the airdrop hunters and the projects, where projects allow airdrop hunters to exist to boost short-term metrics, but in the long run, this will lead to more dissatisfied users.

Haseeb pointed out that there may be changes in future trends. He believes that project parties may make things clearer and more visible earlier. For example, project parties may inform users in advance what rewards they will receive and select some indicators that are difficult to manipulate, such as liquidity. This can avoid dissatisfaction and manipulation issues caused by surprises. Another possibility is that the ‘cat-and-mouse game’ between airdrop hunters and project parties will continue indefinitely, with both sides constantly trying to defeat each other’s Sibyl attacks and anti-Sibyl measures.

Robert believes that the success of Proof of Work in Bitcoin lies in its close connection to the project’s core goals. However, the current airdrop mechanism is more like ‘fake work’ that does not provide real value to the project but is more for optical effects. Future airdrop mechanisms need to better connect work with token distribution to improve the success rate of the project.

Tarun discussed the differences between Proof of Work (PoW) and Proof of Stake (PoS), stating that PoS is inferior to PoW in some aspects. The airdrop mechanism requires more randomness and persistence to reduce the problem of expected value management. He also mentioned that fraud issues in other areas such as gaming and Spotify have not been completely resolved, and airdrops are no exception.

The Role of KYC in Airdrops

Haseeb proposed that comprehensive KYC may be required for airdrops in the future, as some regions (such as Luhansk, Crimea, the United States, India, etc.) are already excluded. If these restrictions are already in place, comprehensive KYC may be the next step.

Tarun opposes this view, arguing that KYC cannot scale and will result in assets being more concentrated in the hands of those who can pass KYC, rather than being widely distributed. He also points out that many airdrop hunters may not be able to pass KYC.

Haseeb further explains that the current anti-Sibyl attack (i.e., preventing one person from creating multiple fake accounts) measures are actually a “lame KYC version,” trying to verify whether users are real people through various signals.

Tom believes that returning to linear airdrops (i.e. distributing based on certain unmanipulable indicators) may be a more practical solution.

Haseeb mentioned that in the future, there may be some Zero-Knowledge Proof (ZK) technology that can verify without revealing user KYC information.

Tarun believes that this technology may be realized in the future, but it is not mature enough at present. Moreover, even with this technology, many people will still be excluded.

Tarun is concerned that if KYC is adopted, the government may be more likely to consider it as a security, which will increase complexity and compliance costs.