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ZKsync Airdrop, Crypto Markets Tank, Paradigm Raises $850 Million (Future of Finance vs Web3)

ZKsync Airdrop, Crypto Markets Tank, Paradigm Raises $850 Million (Future of Finance vs Web3)

Internet Capital
June 16, 2024

Hi Friends —

Today we’re talking about free internet money, crypto markets tanking (why I’m still bullish), and Paradigm’s $850 million fund fueling Web3 growth (not crypto, I’ll explain).

Stay tuned for the full YouTube episode dropping later today, and thanks for reading!

Markets

Bitcoin

BTC lost ~4.4% this week and is trading around $66,614 at the time of writing. Analysts attributed the sell off to this week’s FOMC meeting, where the FED signaled that 2024 would only be seeing one interest rate cut, fewer than the market expected going into the meetings.

Inflation data came in cooler than expected, likely influencing the FED’s posture. While the market falls in the short term, I’m of the opinion that delayed rate cuts are positive for crypto markets over the long term. The longer we wait, the more time we have for endogenous catalysts to boost markets. By the time the FED cuts rates, we could be well into all time highs, without any previous price levels preventing explosive price discovery.

Ethereum

ETH followed BTC’s lead and was down for the week with a ~3.4% loss. The token is currently trading at ~$3,580, after reaching the $3,300s on the sell off. The strong recovery after the sell off was largely due to confirmation that the ETH ETF would be launching by the end of this summer.

ZKsync Airdrop

ZKsync finally announced their long-awaited token: ZK. Eligible users can claim the token starting Monday, June 17.

Before getting into the specifics, let’s talk about how much free money users are getting. That’s the best part about airdrops after all.

Allocations per wallet (users can have multiple wallets) are between 917 and 100,000 ZK tokens.

ZK is currently trading at ~$0.36 on pre-market venues (Aevo, Whales Market). At this valuation, the largest recipients are getting a $36,000 airdrop. Yeah, crazy.

Imo this valuation is probably low too. Giving ZKsync the same valuation as its closest competitor places ZK at $0.48 per token, implying a $48,000 airdrop for the largest recipients.

ZK was actually trading at ~$0.70 per token before the token was formally announced. Why did the price tank after the announcement? Controversy. Lot’s of it.

“People” were angry that they didn’t get free money or didn’t get enough of it (lol). People is in quotes because a majority of the complaints came from X accounts that appeared to be bots.

Bots are a huge problem for airdrops. People seed thousands of bots with small amounts of money and make transactions using projects poised to release a token. If not identified, they can receive tokens for each bot, amounting to tens or even hundreds of thousands of dollars.

These people are known as “sybils”, and airdrops have turned into a war between projects trying to reward actual users, and sybils trying to extract maximum value.

In ZKsync’s case, sybil bots were also active on X complaining that the allocations were unfair in an attempt to receive more tokens. This complicated the airdrop.

While sybils were the primary problem for ZKsync, multiple aspects of the airdrop drew criticism from legitimate users:

Multiple apps deployed on the ZKsync network did not receive any tokens, while other unrelated applications did
Legitimate users did not receive tokens despite meeting the criteria
Multiple wallets with no transactions on the network received tokens
Addresses on known bot / sybil lists receiving allocations

The ZKsync team first addressed the complaints on Tuesday, stating “Understandably, there are a lot of questions. We will answer them in full transparency and with great detail. This requires more time. Please bear with us.”

The team followed up with another statement on Thursday indicating that they “did not identify major issues” and would not be changing token allocations. For more information about the airdrop check out the ZKsync token website.

All in all, the airdrop will distribute over $1 billion to users on Monday. This makes ZKsync one of the best airdrops of all time. Let’s not allow the controversy to take away from this fact. Or the fact that regular people are receiving thousands of dollars for simply using a new technology. Gotta love crypto.

If you still have questions about ZKsync / airdrops generally (where we’re looking next for free money), let me know. I’d love to dive more into why and how crypto projects do airdrops, and what happens to the tokens once they’re released.

Paradigm Raises $850 Million (Web3 vs Future of Finance)

Prominent venture capital firm Paradigm announced a new $850 million fund to invest in early stage crypto projects. I think this is HUGE, for Web3. Why do I say Web3 (dirty word) instead of crypto? Let me explain.

Crypto’s Two Adoption Categories

Crypto adoption can be roughly divided into two categories:

Financial: cryptocurrencies are accepted as legitimate investments by Wall Street, Washington DC, and the General Public AND blockchains become core infrastructure for the global financial system.
Technological (Web3): cryptocurrencies and blockchain technology are integrated as key components of mainstream apps (social media, games, internet products / services). Tech investor Chris Dixon’s book “Read Write Own” is my favorite explanation of this category.

Perhaps surprisingly, we are further along in the Financial category. Crypto is becoming commonplace on Wall Street (thanks Blackrock) and politicians are jockeying for the crypto vote (and money, of course).

Understanding that crypto adoption has two vectors allows us to view industry events and investments through a new lens. I’ll dive more into this concept in a later newsletter, but for now, let’s move on to Paradigm’s fund.

Paradigm’s Fund

Let’s use our new lens.This is an injection of capital into the technological (Web3) category. Paradigm’s target portfolio companies include crypto games, social apps, prediction markets, gambling / betting sites, and other common applications that already exist. This $850 million will mostly go to teams developing applications for retail users - not financial institutions.

Imo, this is exactly what we need. We’re already making massive progress in the Financial category and the Technological / Web3 side is seriously lacking. Paradigm’s $850 Ms should help projects figure out how to integrate crypto technology (embed financial incentives), into existing internet products and services.

Telegram… TON… sale of nicknames and phone numbers… Where is the anonymity? | by Igor S. Bederov | Medium

To understand what this might look like, check out what Telegram is doing with TON - it’s the best existing example of a Web3 use case for crypto.

Overall it’s extremely useful to understand that crypto can be the backend of a new financial system for institutions all over the world AND also something that enables new forms of monetization for creators, different distribution models for artists, or new kinds of internet products and services.

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