The failure recorded by Ethereum L2 Optimism is owed to inadequate preparation for the huge flow of demand.
Optimism, a popular layer-2 blockchain on Ethereum, saw the price of its governance token OP plummet by more than 60% in its market debut.
Late Tuesday, the blockchain began airdropping the OP token. The airdrop was primarily distributed to early adopters of the project, which provides scaling solutions for Ethereum.
OP debuted at $4.479 before plummeting to as low as $0.7973. According to Coinmarketcap.com, the token is now trading at around $1.56, nearly 66 percent lower than when it debuted.
The airdrop was announced in April, along with plans to launch a decentralized autonomous organization (DAO) to govern the OP token.
The project is a Layer-2 Ethereum rollup that allows users to access the majority of ETH’s features with faster transaction speeds and lower gas fees. It claims an on-chain value of more than $800 million.
The token’s steep losses appeared to be the result of several factors. Optimism stated that it had failed to prepare for an outpouring of demand and was unable to halt the airdrop once it went live.
The high volume of airdrop claims clogged the network, prompting the development team to rush to add more bandwidth. Several users experienced significant delays in receiving their tokens.
This most likely resulted in increased dumping of OP due to uncertainty about the status of the airdrop. Major exchanges such as Coinbase, FTX, and Binance have also listed the token.
Optimism stated that it will apply the lessons learned from this launch to its next airdrop. Members of the community have suggested that the chain exclude users who had dumped its first airdrop.
Airdrops Tend To Be Dumped
OP is not the only company that has been dumped in its market debut. Most airdrop recipients cash in their newly issued tokens, resulting in high volatility during early trade.
Terra’s recently relaunched LUNA token experienced extreme volatility in its early days. At launch, the token fell by more than 60% before rising by as much as 100%.
Apecoin (APE) experienced wild price swings during its March launch before finally settling into a consistent price pattern.