Ten questions for LayerZero co-founders: How to deal with wash trading and how to calculate token incentives?

Original title: "Ten Questions to LayerZero Co-founder: How to deal with wash trading and how to calculate token incentives?"

Original author: Nan Zhi, Odaily Planet Daily

LayerZero's Sybil review is still in full swing. According to LayerZero co-founder Bryan Pellegrino, the final list of Sybil addresses is expected to be announced by the end of June. Today, Bryan answered questions about the review and processing calculation methods of Sybil attacks and low-value transactions on the X platform one by one. Odaily Planet Daily compiled the full text in the form of QA as follows.

Review Criteria and Final Goals

Bryan Pellegrino first defined what spam transactions are (referred to as low-value transactions in this article) and how to handle and incentivize these transactions before answering user questions. The original text is as follows:

Here is how we currently consider qualifications from a broad perspective. The focus is obviously on real users, and the most fair, widely distributed, highly consistent, and most persistent users.

This is largely inspired by the results of the Sybil process, and any real final definition will come directly from LayerZero, not me.

The initial wallets are 6 million, and 3 million wallets have less than 5 transactions, so these wallets are to be seriously considered. All transactions below $1.00 are downweighted by 80%, but are still calculated at 1/5 of normal transactions, as are all "valueless NFTs".

Here, valueless NFTs are defined as "market value" or "total transaction volume" less than 0.00001 ETH. For example, Gas drop type transactions are also counted as valid transactions.

Then the transactions are normalized according to the specific protocol fees (not the fees of the underlying blockchain where the transaction is located). The lowest value of the processed data is the qualification standard, and there is also an upper limit. Finally, a multiplier will be obtained based on early usage.

In general: eliminate witches, eliminate junk transactions, capped semi-linear rewards, reward early users, reward persistent users, and reward all non-standard protocol interactions such as LP through RFP.

(Odaily Note: RFP is an allocation protocol launched by LayerZero that allows each project to establish its own allocation criteria based on its overall token allocation. All projects with OApp, OFT or ONFT contracts on the mainnet are eligible to apply for RFP.)

QA Collection

Bryan Pellegrino answered some of the details one by one, and the key points are summarized as follows:

Liquidity Provider Incentives

Q: Liquidity pools are important and they should be rewarded. If someone adds LP for more than a week, there is a 99% probability that it is not Sybil.

A: (Liquidity providers) incentives will be the responsibility of the RFP.

Definition and processing of valueless NFTs

Q: I created an NFT on Holograph last May, which cost me 0.003 ETH. If it is counted as a valueless NFT, it obviously has no price. But I like the NFT I created, and I was one of the first to try L0 cross-chain NFTs.

A: These transactions were initiated to use our cross-chain system, and if it is easy to distinguish this from millions of "valueless NFT" transactions, I am happy to do so.

I hope Holograph rewards creators in the RFP. That's why we have an RFP process.

(Odaily Note: This answer means that this category still belongs to "low-value NFT" and is not within the scope of LayerZero's official direct airdrop. At most, it will be incentivized through RFP.)

Gas Drop Calculation

Q: To be honest, you have integrated more than 50 chains, but 90% of the Refuel fees are less than $1, and the value of each tx is reduced by 80%. You have punished a lot of users.

A: I think this is a completely valid criticism, which is part of the reason why I made the comment publicly. The original post talked about Stargate and OFT transfers, and each witch cluster we reviewed had countless txs, ranging from $0.001 to $0.25. I don't know much about Gas Drop data, but we have to evaluate.

(Note: Gas Drop is Gas refuel, which is usually to replenish Gas fees to other accounts at a low cost. This section means that Gas Refuel operations will be included in the incentive range, but will usually be discounted.)

Discount calculation method

Q: If I have about 130 Layerzero transactions, of which I have about 10 worthless NFT transactions, is the entire address discounted by 80%, or are the 10 worthless transactions partially discounted?

A: Only those 10 transactions, not all.

Definition of worthless NFT

A: Market value or total transaction amount (lifetime traded value) at the time of snapshot

How to deal with worthless NFTs and high protocol fees?

Q: If I spent fees on a worthless NFT transfer, is it discounted?

For example, I transferred 5 worthless NFTs and I paid $50 in fees to the protocol; is my fee now $10?

A: Worthless NFTs are 20% of normal transactions, so you can think of the $1 fee as now worth $0.20 in the entire model.

What does deweighting mean?

Q: What does deweighting (dweight) 80% mean?

A: A normal transaction costs $1 in fees worth 1, and if you send $0.01 back and forth across chains, then each transaction is calculated as 0.01 × 20%.

How are LayerZero contract deployers incentivized?

A: Nearly 60,000 contracts are deployed, which is what the RFP is built for and why there is a dev stripping in the RFP process.

(Odaily Note: This means that you must apply through the RFP to get incentives.)

What does protocol fees mean?

Q: If you bridge STG through stargate, there will be no protocol fees?

A: There are no Stargate protocol fees, but there are LayerZero protocol fees (for DVN and Executors). That's what the fees are, not Stargate or other application fees.

How is volume considered?

Q: Isn't volume an important part of all the previous discussions? Why was it removed?

A: Volume is the criterion for Stargate RFPs or OFTs, but from a LayerZero perspective, all messages are more or less equal. That's why sending $100 or $100,000,000 in OFT costs exactly the same.

Q: Think about it, if we assign the same value to a transfer of $100 and $100,000,000, then even a transfer of $0.000001 should have the same weight, because "all messages are more or less equal."

A: Yes, in an ideal world of equal use, this is not needed, especially since there are a lot of low-value transactions of the $0.001-$0.20 type just going around in circles, and a lot of worthless NFT transactions just to generate tx. I think anything that has a reasonable use should be treated as a normal transaction, and anything that is "obviously" inorganic should be weighted less.

Conclusion

In a nutshell, NFT transactions with a transaction amount of less than $1 and a value less than 0.00001 ETH will be considered low-value transactions (Spam), and the weight will be reduced to 20% when calculating incentives, but it will not affect the weight calculation of other normal transactions. Finally, a semi-linear distribution (semi-linear with upper bound cap) will be made based on the protocol fees paid.

In addition, early users will receive additional incentives, and non-standard LayerZero transactions such as providing liquidity will be handled separately by RFP.

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