• Why Were Some Users Excluded From ParaSwap’s Token Launch?

  • Exchange that is decentralized ParaSwap has joined the ranks of DeFi platforms that use an airdrop to launch their native governance token, PSP. In most cases, these events generate a lot of buzz in the community because users are rewarded for their support of the platform.

    The ParaSwap airdrop was no exception, with many users flocking to the platform in order to qualify for and receive the funds in PSP. The platform, on the other hand, used a new logic to distribute its native token.

    Unlike Uniswap, a decentralized exchange that sends a portion of their governance token, UNI, to every user who has ever interacted with their smart contract, ParaSwap took a different approach. According to an official post, the platform chose to “reward active users” as a tradeoff between more decentralization and allowing malicious actors to disrupt the airdrop.

    As a result, some users were barred from participating in the PSP airdrop. These users primarily expressed their dissatisfaction with the event on social media. Some even accused the platform of being incompetent or malicious. Davis (@basedkarbon) commented:

    Never seen a company execute an airdrop in more bad faith than the Paraswap one. Heavily hyped only to exclude 99% of their community.

    The platform’s team explained the logic behind the airdrop in a Medium post. In it, they claimed that the event was intended to “target, to the best of our ability, genuine ParaSwap users who were not simply attempting to game a potential token drop.”

    According to data provided by the DEX team, only 20,000 of the 1 million unique addresses that have ever used the platform were eligible to receive PSP. In that regard, they added the following about the possibility of “authentic” users being excluded from 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.

    ParaSwap defends PSP distribution at the expense of its users?

    Furthermore, the ParaSwap team claims that due to the token’s importance and role in the creation of private market makers, it was necessary to be extra cautious about the airdrop. As a result, they claimed to have studied similar events from other platforms and rejected a volume-based airdrop in favor of “an engagement-based airdrop.”

    In theory, this would prevent malicious actors and deep-pocketed investors from exploiting the snapshot that determined which addresses were eligible for PSP. As a result, the ParaSwap team considered additional 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 would receive approximately 7% of total PSP supply were divided into three tiers. As previously stated, these levels were determined by each user’s level of activity on the platform.

    Many criticized the new airdrop logic, but others praised its ability to exclude malicious actors and prevent Sybil attacks. Other platforms may follow suit in the future if they determine that the tradeoff is worthwhile.

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