ZKsync DAO’s DeFi Steering Committee announced on Thursday that it has decided not to renew its token reward program for a second season and will be sunsetting it early.
The termination process begins on March 17, with rewards for the last phase of season 1 rewards being turned off. This marks an early end to the rewards initiative, which was initially planned to run for nine months with three seasons, starting with season 1 from January to March.
Originally, Ignite planned to allocate 300 million ZK tokens over nine months for liquidity incentives. Season 1 was planned from Jan. 6 to Mar. 31 and set out to distribute up to 100 million ZK tokens ($20 million at the time), now worth $7 million due to the price drop in ZK tokens over a few months. Subsequent seasons had planned to distribute the remaining 200 million tokens, but that’s deprecated now.
The incentive program appeared to have helped ZKsync’s total value locked surge from about $100 million to $400 million, according to DeFiLlama data. The TVL has now come back down to $200 million.
The ZKsync Ignite team noted that the decision came after careful consideration to align with a strategic shift towards prioritizing the development of the multichain Elastic Network, ZKsync’s ecosystem of Layer 2 chains. In this setup, ZKsync’s flagship chain, Era, is envisioned to serve as a DeFi liquidity hub with native interoperability.
Current bearish market conditions were also cited as one of the reasons for the move, as noted in a governance post on ZKSync's DAO forum ZK Nation. Karthik Senthil, a member of the Ignite DeFi Steering Committee, said that the decision resulted from being “more conservative with spending in the short to medium term in response to these evolving conditions.”
Delays also influenced Ignite’s discontinuation in attaining the necessary technology for seamless interoperability in the ZKsync Elastic ecosystem of Layer 2 chains.
“Seamless native interoperability across the Elastic Network is a top priority, but the tech needed to implement this is taking longer than expected. Adding more TVL now, before it’s ready, will likely deliver diminishing returns on spend — and we want every effort put towards this goal to count,” stated Senthil.
ZKsync is a Layer 2 scaling solution that scales Ethereum-based dapps by increasing transaction throughput and reducing associated costs. It utilizes ZK rollups, a technology that bundles multiple transactions and processes them off-chain.
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