ParaSwap Launches Token Amid Controversy, Why Some Users Were Excluded

Reynaldo Marquez

Last Updated: November 15, 2021 9:10 pm

3 mins read

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Decentralized exchange ParaSwap has joined the ranks of DeFi platforms that launch their native governance token, PSP, via an airdrop. In most cases, these events cause a lot of hype in the community, as users are rewarded for supporting the platform.

The ParaSwap airdrop was not an exemption with many users jumping into the platform to qualify and receive the funds in PSP. However, the platform employed a new logic to distribute its native token.

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

This resulted in some users being excluded from the PSP airdrop. These users mainly expressed their nonconformity with the event via social media. Some went as far as accusing the platform of incompetence or malicious behavior. User Davis (@basedkarbon) said:

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

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

Data provided by the DEX’s team claims that of the 1 million unique addresses that have ever used the platform, only 20,000 were eligible to receive PSP. In that sense, they added the following on the possibility of “genuine” users being left out of 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 Protects PSP Distribution At Expense Of Its Community?

Furthermore, the team behind ParaSwap claims that due to the importance of the token and its role in the creation of private market makers, it was necessary to be extra cautious about the airdrop. For that reason, they claimed to have studied similar events from other platforms and ruled out a volume-based airdrop for “an engagement-based airdrop”.

In theory, this would prevent malicious actors and deep-pocket investors from taking advantage of the snapshot that determined the addresses eligible to receive PSP. For that reason, the ParaSwap team considered other 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 were to receive around 7% of PSP total supply were classified into three tiers. These levels were determined by each user’s level of activity with the platform, as explained above.

This new airdrop logic had many detractors, but others praise its ability to exclude malicious actors and prevent Sybil attacks. In the future, other platforms could imitate this approach, if they determined that the tradeoff is worth it.

As of press time ETH trades at $4,573 with a 1.24% loss in the daily chart.

ParaSwap PSP ETHUSD — ETH with minor losses in the 4-hour chart. Source: ETHUSD Tradingview

Reynaldo Marquez

A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.

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