ZKsync removed the DeFi ecosystem's "Ignite" token rewards, referenced market conditions, and focused on resilient networks

Report from The Block: ZKsync DAO’s DeFi steering committee has announced its decision not to renew its token rewards program and will end the program early.

The Committee said that the current bear market conditions have prompted it to adopt a more conservative spending strategy in the short and medium term. This decision also aligns with a renewed focus on the development priorities of the multi-chain Elastic Network.

ZKsync DAO’s DeFi Steering Committee announced on Thursday that it will end its token rewards program early. The termination process will begin on March 17, and rewards for the final phase of Season 1 will cease to be distributed. This marks the early end of this rewards program, which was originally scheduled to last nine months with a total of three seasons, with the first season running from January to March.

Initially, Ignite planned to allocate 300 million ZK tokens for liquidity incentives over a nine-month period. The plan for the first quarter was to distribute up to 100 million ZK tokens (worth $20 million at the time) from January 6 to March 31, which has now dropped to $7 million due to the falling price of ZK tokens. The remaining 200,000,000,000 tokens were planned for subsequent seasons, but this has now been cancelled.

According to DeFiLlama, the incentive program appears to have helped ZKsync’s total value locked (TVL) surge from around $100 million to $400 million, but it has now fallen back to $200 million.

The ZKsync Ignite team noted that the decision was made after careful consideration to refocus on the development of the multi-chain Elastic Network, ZKsync’s Layer 2 ecosystem. In this setup, ZKsync’s flagship chain, Era, is expected to serve as a DeFi liquidity hub with native interoperability.

The committee also mentioned that the current bear market conditions were also one of the reasons for the decision to make the change, with Karthik Senthil, a member of the Ignite DeFi Steering Committee, saying that the decision was made to “take a more conservative approach to spending in the short and medium term in response to these changed conditions”.

Technical delays have also impacted Ignite’s access to the technology necessary for seamless interoperability in the ZKsync Elastic ecosystem.

“Achieving seamless native interoperability on the Elastic Network was our top priority, but the technology implementation time required was longer than expected. Adding more TVL now, before the technology is ready, can lead to diminishing returns on spend – and we want to focus every effort on that goal,” says Senthil.

ZKsync is a Layer 2 scaling solution that scales Ethereum-based dapps by increasing transaction throughput and reducing associated costs. It leverages ZK rollups technology to package multiple transactions and process them off-chain.