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Consensys Blockchain Line Sees First Successes with DeFi Campaign
A recent campaign to enhance decentralized finance (DeFi) activity on Consensys’ Linea blockchain has achieved notable success, raising over $430 million in cryptocurrencies since its launch nearly a month ago. Ethereum research site L2BEAT reported that over $1.2 billion in cryptocurrencies were transferred to Linea, marking 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, offering users a faster and cheaper way 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 numerous competitors have emerged in the past year.
Development and management by Consensys
Linea, developed and operated by Consensys, the creator of the widely used Ethereum wallet MetaMask, has seen a surge in activity. Consensys founder Joseph Lubin, also a co-founder of Ethereum, plays a key role in this initiative.
Using point programs
Layer 2 blockchains have traditionally used grant programs to attract users and application developers. Recently, they have adopted a strategy that awards “points” to users who complete specific tasks, such as depositing cryptocurrencies. Many users predict 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 to points programs
There is a growing sense that points programs are exploitative, as they often involve the promise of substantial future rewards without a defined timeline. Additionally, some cryptocurrency lawyers have raised 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 onto the blockchain. However, the disappointing rewards have led many users to withdraw their deposits at the first opportunity. Scroll was initially criticized for its points campaign, but later reintroduced it in April with “Scroll Sessions,” offering “Scroll Marks” to users transferring cryptocurrencies from Ethereum.
The Surge di Linea campaign
Linea’s second points program, dubbed “the surge,” was announced in March with the aim of attracting liquidity into its DeFi ecosystem. The company explained that the overall user experience is significantly affected by liquidity. The points, called LXP-L, are awarded to liquidity providers on a sliding scale, with early depositors earning more points than those who sign up later. The increase is expected to last for periods of six months, or until $3 billion in cryptocurrencies have been transferred to Linea.
Positive results despite criticism
Despite some complaints, the surge campaign appears to be successful. Since its launch 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 larger Layer 2 blockchains, up from 3.5% on May 1, as reported by pseudonymous Dutch analyst Marcov.
Conservation challenges and centralization concerns
Linea now faces the challenge of retaining these users, as incentive-based programs in the cryptocurrency industry often produce mixed results. Additionally, Linea was recently criticized for suspending transactions to protect users of Velocore, a decentralized exchange that suffered a $7 million cyberattack. This incident highlighted ongoing concerns about centralization in 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 hand over control to its users and improve the overall decentralization of the platform.
Conclusion
The initial success of Consensys’ Linea blockchain campaign points to a promising future for its DeFi ecosystem. By leveraging points programs and addressing liquidity needs, Linea has managed to attract significant interest and activity from users. However, the platform will need to address retention challenges and address centralization issues to maintain its growth and user trust in the long term.