ZKSync discontinues its Ignite incentive program due to unfavorable market conditions

ZKSync, one of the high-profile L2 chains on Ethereum, will discontinue its Ignite incentive. As the price of the native ZK token continues to slide, the project’s team has decided to slow down treasury spending. 

ZKSync announced it would not renew its Ignite incentive program for another season, citing unfavorable market conditions. The program will be discontinued from March 17, as ZKSync reassesses its spending and incentives. 

ZKsync Ignite Program Update 📣

After careful consideration, the DeFi Steering Committee (DSC) has decided to not renew Ignite for Season 2 and will be sunsetting the program starting March 17th, 2025 by turning off rewards for period 6

Here’s why:

— ZKsync Ignite (@ZKsyncIgnite) March 13, 2025

The last incentives will be paid out by March 17. Season 1, which started on January 6, distributed 300M ZK tokens as incentives, but the program coincided with an even bigger drawdown on the market price. 

Previously, ZKSynk performed one of the most high-profile airdrops, which still left some of the users discontent with their rewards. Later, ZKSync continued with incentive programs to keep up its activity and boost its position among L2 chains. 

Despite the campaigns, the native ZK token crashed after the airdrop and continued the downward trend. ZK unraveled further as traders lost interest in altcoins and L2 tokens. The asset traded at $0.069, down from a December peak above $0.26. In addition to shedding from previous holders, ZK is being aggressively shorted, with over 37% in open short interest.

Previously, ZKSync claimed it was on the verge of launching true zero-knowledge rollups. The project has launched multiple chains, including ZKSync Era and ZKSync Lite, a rebranded ZKSync L2 chain. After the discontinued incentives, the project will switch its attention to the Elastic Network and its interoperability features. 

ZKSync Era lost its community after the airdrop

All statistics for ZKSync and its networks show a deep outflow of users when incentives are lost. Currently, ZKSync Era carries fewer than 20K active daily wallets, while prior to its airdrop, it competed with the activity of Base and Arbitrum. 

Since then, the chain could not draw in enough liquidity and apps. Currently, ZKSync Era only carries $139.3M in total liquidity, making its team pivot to new products. ZKSync appeared at a time of increased competition among L2 chains, where all new projects gained outsized attention. 

The Ignite incentive was the biggest driver of DeFi value locked, leading to a peak of $267M. The chain’s goal was to boost activity by adding liquidity to its DeFi sector. During the Ignite incentive, ZK also decreased its volatility and provided a deeper liquidity pool. 

The Ignite incentive was designed to be responsive to market conditions, and the DeFi Steering Committee of ZKSync decided the program was too expensive to support. The initial incentives for depositing liquidity into ZKSync offered extremely high yields of over 40%, though also posing risk to investors. 

ZKSync Foundation rebuilds governance for the months ahead

The ZKSync Foundation will have a more active role in charting the chain’s path during the current bearish conditions. ZKSync depends on the Ethereum ecosystem for its success, including for its liquidity. 

Unfortunately, in the past year, the ZKSync supply of stablecoins saw 40% outflows, down to only $74M, making it a relatively illiquid L2 chain. 

One of the main areas of focus for ZKSync will be better tokenomics for the native ZK token. The asset may expect to be used in various on-chain incentives again, in addition to governance experiments.

The slow performance of ZKSync, despite the initial hype, further questioned the narrative for multiple new L2 chains. After a year of active launches for nearly 150 new chains, almost all of the L2 showed limited activity. Liquidity and apps flocked to a handful of networks with the biggest stablecoin liquidity and legacy DeFi and DEXs.

While ZKSync managed to build an ecosystem of DEXs, lending pools and other DeFi apps, their activity was limited and offered comparatively small returns. Most of the inflows of value into ZKSync were incentivized and not organic. Currently, ZKSync is in the process of replacing some of the incentives to focus on its Elastic Network project.

Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now