Only 0.015% of users qualify! ParaSwap token airdrop on aggregated exchange, stringent conditions spark community backlash

After two years of development, the liquidity aggregator exchange ParaSwap announced yesterday, on the 15th, the airdrop of its governance token PSP. However, the airdrop conditions are quite strict, with only 0.015% of users qualifying, leading to strong community backlash.

ParaSwap Governance Token Issuance

The liquidity aggregator exchange ParaSwap provides traders with the best rates and minimal slippage when swapping tokens by aggregating liquidity and price information from various DEXs on the chain. Since its launch on Ethereum at the end of 2019, ParaSwap has now introduced its governance token PSP, aiming to make ParaSwap a more efficient and decentralized organization.

The total supply of PSP is 2 billion tokens, with 7.5% distributed to active platform users, 16.4% to early investors, and the core team holding 17.6% of the tokens. Investor and team tokens will unlock after 4 months and 6 months, respectively.

Stringent Airdrop Conditions

Airdrops are usually welcomed news for most platform users, but ParaSwap's recent airdrop plan has sparked significant backlash in the community due to its stringent conditions. Over the past two years, approximately 1.3 million addresses have interacted with the protocol, but only 20,000 users have been identified as active users eligible for the airdrop rewards.

ParaSwap filters active users based on the following conditions:

1. Excludes wrap token trades such as ETH <> WETH, BNB <> WBNB, etc.
2. Excludes token trades on ParaSwap with a volume below $1 million.
3. Users' wallets must hold a certain amount of tokens: Ethereum >= 0.028 ETH, Binance Smart Chain >= 0.25 BNB, Polygon >= 20 Matic, Avalanche C-Chain >= 0.9 AVAX.
4. Must have used ParaSwap at least 5 times in the past 6 months.

In addition, the team filters out airdrop hunters who create multiple wallet addresses by tracking suspicious address fund flows. Ultimately, only around 0.015% of addresses qualify.

Airdrop Distribution

Among all eligible users for the airdrop, ParaSwap team assigns points based on each user's total number of trades, the largest amount traded in a single transaction, total trading volume, and multi-chain participation on ParaSwap. Users are then divided into three levels based on their total points, receiving 5,400, 7,800, and 10,400 PSP tokens, respectively.

Community Complaints

After ParaSwap publicly announced their active user conditions, Twitter was flooded with many negative comments, with most expressing discontent towards ParaSwap's stringent filtering conditions. Users who have used the platform for a long time feel frustrated as they did not qualify for any airdrop. Some argue that the filtering criteria are ineffective in screening out airdrop hunters and may unintentionally exclude many loyal users.

Clarifying PSP token distribution filtering logic

We're sorry if you weren't part of this, we had to make a tradeoff between maximizing on decentralization or letting too many Sybil attackers in, we choose the first.https://t.co/3hnqfF6uXU

— ParaSwap (@paraswap) November 15, 2021

These grievances have also reflected in ParaSwap's token price, which has dropped by over 20% since its issuance.

ParaSwap stated that their token distribution plan is inspired by the ENS Ethereum domain service, rewarding loyal and actively engaged users. Whether this approach is correct will only be proven with time.