After years of waiting, Zora finally released its native token, ZORA. This composable platform looks to redefine on-chain social experiences and tokenized stories. Zora’s airdrop surprised the market with 1 billion ZORA tokens airdropped to over 2,415,024 addresses. In the meantime, critics immediately began expressing alarm over the token issuance. They strongly criticize its highly centralized and opaque distribution to backers, which they believe doesn’t respect fairness nor the platform’s initial promise to their community. Critics say that the distribution puts a disproportionate focus on top addresses, making a huge number of early adopters feel “backstabbed” by the project.
The launch comes at a time of speculation around Zora’s purportedly high valuation and growing ecological stagnation. The platform proudly posts these astonishing figures on their website, including the creation of more than 3.51 million smart contracts and over 87.4 million transactions processed. A closer look reveals that daily engagement is down. Considering the effort that went into the airdrop, the average $37 per user added insult to injury for a community that was already disillusioned. This combination of factors poses a threat to Zora’s future and its ability to deliver on all the big, exciting things that Zora ultimately aspires to.
Airdrop Disappointment and Distribution Disparity
Our first ZORA token airdrop was designed to give value back to early adopters and those actively participating in the Zora ecosystem. It’s the actual distribution that’s cause for outrage and scandal. At an average airdrop of just 1,571.1 ZORA that’s less than $37 given per user (based on ZORA’s first trading price of around $0.0235).
Even though this number is quite small, many users don’t feel valued. Deservedly so, considering how much time and effort they poured into the platform. In comparison, the leading 50 addresses received over 190 million tokens, or an average of over 3.931 million tokens per address. Critics lambast the program for being extremely centralized in its distribution. They are absolutely right to say that this violates the spirit of decentralization and community self-determination.
Only a handful of people have the rest of the very high concentration of tokens. Of course, this begs key questions about the long-term governance and control of the Zora network itself. Broad, arbitrary distribution model is ripe for gaming. This distribution model could incentivize bad actors to game the system. It may further alienate smaller token holders, making the process even more inequitable and disenfranchising the community further.
Declining Ecological Activity and Revenue Concerns
Putting the airdrop kerfuffle aside, Zora has an uphill battle to fight when it comes to ecological activity and revenue generation. Though the platform’s cumulative totals look impressive at first glance, a deeper dive shows an alarming trend. Cumulative number of unique smart contracts created We have now crossed 3.51 million cumulative unique smart contracts created, which points to early adoption and use.
The daily contract creation rate has plummeted from a high of 144,000 to an average of just over 13,000 now. Such a drastic drop off demonstrates a troubling drop in developer interest and new projects being started on the platform. Likewise, the cumulative transaction volume has exceeded 87.4 million, a sign of historical participation. Meanwhile, daily transaction volume has nosedived from 3.338 million to just under 428,000. This steep drop off is a painful reminder of the decline in user engagement and overall usage of the platform.
Furthermore, despite its ambitious goals and substantial funding, Zora's cumulative revenue is only 5.4 million US dollars, with the Zora Network's profit being a mere 527.74 ETH. These figures raise concerns about the platform's ability to generate sustainable revenue and justify its valuation, especially considering the at least $52 million in financing it has received from prominent investors like Coinbase Ventures, Paradigm, and Haun Ventures.
Zora's Future and the Path Forward
Zora's current state presents a mixed picture. The platform has thus far been successful at drawing more than a half billion dollars in investment and creating the existing infrastructure for on-chain social interaction and tokenized narratives. It claims to have 470,000 daily active addresses, despite daily active users being a full order of magnitude lower at 50,900. Its problematic token launch, drop off in ecological activity, and revenue worries raise questions about its long-term viability.
To regain the trust of its community and achieve its long-term vision, Zora needs to address the issues surrounding token distribution and demonstrate a commitment to fairness and decentralization. Experiment with new distribution methods. Establish inclusive governance processes that give power to those with smaller token holdings, and meaningfully listen to and incorporate the community when they say something doesn’t feel right.
Zora needs to revitalize its ecosystem by attracting new developers, fostering innovation, and creating compelling use cases for its platform. This involves thoughtful user experience, robust developer support, and serious strategic partnerships that have the potential to fuel growth and engagement. Zora will need to meet these criticisms directly and surpass the prevailing wave of bad press. In doing so, it can further unlock its potential as a leading on-chain platform for social interactions and tokenized narratives.
