Ten Questions for LayerZero Cofounders How to Handle Volume Trading and Calculate Token Incentives

Original | Odaily Planet Daily
Author | Nan Zhi


The witch review work of LayerZero is still in full swing, according to LayerZero co-founder Bryan Pellegrino, it is expected that the final list of witch addresses will be announced by the end of June. Today, Bryan answered questions about the review and processing methods for witch attacks and low-value transactions on the X platform in a Q&A format organized by Odaily Planet Daily.
Review criteria and final goals
Before answering user questions, Bryan Pellegrino first defined what spam transactions (referred to as low-value transactions in this article) are, and how to handle and incentivize these transactions. The original text is as follows:
Here is how we currently consider eligibility from a broad perspective. The focus is clearly on real users and the most fair, widely distributed, highly consistent, and enduring users.
To a large extent, this is inspired by the results of the witch process, and any true final definition will come directly from LayerZero, not from me.
If there are 6 million initial wallets and 3 million wallets have less than 5 transactions, then these wallets should be seriously considered. All transactions below $1.00 are downweighted by 80%, but still calculated as 1/5 of a normal transaction, and the same goes for “worthless NFTs.”
Here, a worthless NFT is defined as having a “market value” or “total transaction volume” less than 0.00001 ETH. For example, gas drop type transactions are also considered valid transactions.
Transactions are then normalized based on specific protocol fees (not fees on the underlying blockchain where the transaction takes place). The minimum value of the processed data is the eligibility criteria, with an upper limit as well. Finally, a multiplier based on early usage will be obtained.
In summary: eliminate witches, eliminate spam transactions, provide capped semi-linear rewards, reward early users, reward enduring users, and reward all non-standard protocol interactions like LP through RFP.
(Q&A compilation
Bryan Pellegrino answered specific detail questions one by one, with key points summarized as follows:)
Liquidity provider incentives
Q: Liquidity pools are important, they should be rewarded. If someone adds LP for over a week, there is a 99% chance it is not a Sybil attack.
A: The incentives for liquidity providers will be handled by RFP.
Worthless NFT definition and handling
Q: Last May, I created an NFT on Holograph, it cost me 0.003 ETH, if it is considered a worthless NFT, it obviously has no value. But I like the NFT I created, I am one of the first to try using L0 cross-chain NFTs.
A: These transactions were initiated to use our cross-chain system, and I would be happy to differentiate these from the millions of “worthless NFT” transactions. I hope Holograph rewards creators through RFP. That is why we have established the RFP process.
(Gas Drop calculation
Q: Honestly, you have integrated over 50 chains, but 90% of Refuel fees are less than $1, each tx value decreasing by 80%, you are penalizing many users.
A: I think this is a completely valid criticism, and this is partly why I made public comments. The initial post discussed Stargate and OFT transfers, each witch cluster we review has countless txs, ranging from $0.001 to $0.25. I do not know much about Gas Drop data, but we must evaluate it.
(Discount calculation method
Q: If I have about 130 Layerzero transactions, including about 10 worthless NFT transactions, should the entire address be discounted by 80%, or only the 10 worthless transactions?
A: Only those 10 transactions, not all of them.
Worthless NFT definition
A: Market value or total traded value at the time of snapshot)
How to handle worthless NFT transfers with high protocol fees?
Q: If I spend fees on transferring worthless NFTs, is it discounted?
For example, if I transfer 5 worthless NFTs and pay $50 in protocol fees; is my fee now $10?
A: Worthless NFTs are 20% of a normal transaction, so you can consider that a $1 fee is now worth $0.20 in the entire model.
What does downweight calculation mean?
Q: What does downweight 80% mean?
A: A normal transaction costing $1 is valued at 1, if you send back and forth across chains for $0.01, then each transaction is calculated as 0.01 x 20%.
How are LayerZero contract deployers incentivized?
A: Nearly 60,000 contracts have been deployed, this is the purpose of RFP, and also the reason for dev separation in the RFP process.
(Meaning that incentives can only be obtained through RFP applications.)
Meaning of protocol fees
Q: If you bridge STG through Stargate, are there no protocol fees?
A: There are no Stargate protocol fees, but there are LayerZero protocol fees (for DVN and executors). This is the meaning of fees, not fees for Stargate or other applications.
How is transaction volume considered?
Q: Isn’t transaction volume an important part of all previous discussions? Why remove it?
A: Transaction volume is the standard for Stargate RFP or OFT, but from the perspective of LayerZero, all messages are more or less equal. That is why sending $100 or $100,000,000 of OFT costs the same.
Q: Just think, if we assign the same value to transfers of $100 and $100,000,000, then even transfers 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 would not be necessary, especially with a large number of low-value transactions in the range of $0.001 – $0.20 just going in circles, and many worthless NFT transactions just generating txs. I believe anything with a reasonable purpose should be considered a normal transaction, and anything “obviously” inorganic should have its weight reduced.
Conclusion
In short, transactions below $1 and NFT transactions valued less than 0.00001 ETH will be considered low-value transactions (spam), with a 20% reduction in weight when calculating incentives, but it does not affect the weight calculation of other normal transactions. Finally, incentives will be distributed semi-linearly with an upper bound cap based on the protocol fees paid. Additionally, early users will receive additional incentives, and non-standard LayerZero transactions such as providing liquidity will be handled separately through RFP.