DeFi
Linea Blockchain from Consensys sees first success with DeFi campaign
A recent campaign to improve decentralized finance (DeFi) activity on Consensys’ Linea blockchain has seen notable success, attracting more than $430 million in crypto since its launch nearly a month ago. Ethereum research site L2BEAT reported that more than $1.2 billion worth of cryptocurrencies were transferred to Linea, representing a significant increase from $792 million on May 14.
Growing importance in layer 2 blockchains
The campaign quickly positioned Linea as one of the largest layer 2 blockchains on Ethereum. These layer 2 solutions are crucial to the future of Ethereum, providing users with a faster and more cost-effective method to interact with the original smart contract platform. Linea’s recent campaign highlights the effectiveness of “points” systems, similar to airline rewards programs, in a highly competitive market where many competitors have emerged over the past year.
Development and management by Consensys
Linea, developed and managed by Consensys, the creator of the widely used Ethereum wallet MetaMask, has seen a surge in activity. Consensys founder Joseph Lubin, also co-founder of Ethereum, plays a central role in this initiative.
Use stitch programs
Layer 2 blockchains have traditionally used subsidy programs to attract users and application developers. Recently, they have adopted a strategy of awarding “points” to users who complete specific tasks, such as depositing crypto. Many users anticipate that these points will translate into tokens in future airdrops. Various layer 2 blockchains, including Blast, Manta, and Scroll, have introduced their own points programs, sometimes facing significant backlash from users.
Criticisms and Challenges of Points Programs
There is a growing sentiment that points programs are exploitative because they often involve a promise of substantial future rewards without a defined timeline. Additionally, some crypto lawyers have expressed concerns about the legal risks and regulatory scrutiny associated with these programs.
Examples of other points programs
Manta Pacific launched a points campaign in February, rewarding users who transferred assets to the blockchain. However, the disappointing rewards have led many users to withdraw their deposits as soon as possible. Scroll was initially criticized for its points campaign, but then reintroduced it in April with “Scroll Sessions,” offering “Scroll Marks” to users transferring cryptocurrencies from Ethereum.
Linea’s Surge Campaign
Linea’s second points program, dubbed “surge,” was announced in March in an effort to attract liquidity to its DeFi ecosystem. The company explained that the overall user experience is heavily influenced by liquidity. The points, called LXP-L, are awarded to liquidity providers on a decreasing basis, with early depositors earning more points than those who join later. The ramp-up is expected to last six months, or until $3 billion worth of cryptocurrency has been transferred to Linea.
Positive results despite criticism
Despite some complaints, the reinforcement campaign appears to be successful. Since its inception on May 16, Linea’s DeFi ecosystem has grown 138%, reaching over $665 million, according to data from DefiLlama. As of June 1, Linea accounted for more than 9% of all transactions on Ethereum and its largest layer 2 blockchains, up from 3.5% on May 1, as reported by pseudonymous Netherlands-based analyst Marcov.
Retention challenges and centralization issues
Linea now faces the challenge of retaining these users, as incentive programs in the crypto sector often yield mixed results. Additionally, Linea recently came under fire for suspending transactions to protect users of Velocore, a decentralized exchange that suffered a $7 million hack. This incident highlighted ongoing concerns about the centralization of many crypto projects, despite commitments to decentralize control.
Future roadmap
Linea said it is currently in phase 1 of a four-phase decentralization roadmap. This progression aims to gradually cede control to its users and strengthen the overall decentralization of the platform.
Conclusion
The early success of Consensys’ Linea blockchain campaign indicates a bright future for its DeFi ecosystem. By leveraging points programs and meeting liquidity needs, Linea has managed to generate significant user interest and activity. However, the platform will need to address retention challenges and resolve centralization issues to maintain growth and user trust in the long term.