- Linea's newly-launched token is crashing.
- The project has a plan to turn things around.
Linea’s new token is off to a shaky start.
On Wednesday, the Ethereum layer 2 dished out over nine billion tokens through an airdrop to early users. Many of those users now appear to be cashing out, with the token declining 49% since its debut, per CoinGecko data. Its total market value has fallen to $358 million.
But the project has a plan to turn things around. It will use 80% of the blockchain’s surplus fees to buy back Linea tokens on the market and burn them — effectively removing them from circulation.
“We are building for the long term, always Ethereum aligned,” Declan Fox, product lead of Linea, said in a statement shared with DL News, adding that the airdrop reflects the project’s dedication to sustainable growth.
Virtuous cycle
Linea’s token launch comes as interest in Ethereum layer 2 tokens wanes.
Rival networks such as ZKsync, Scroll, and Manta all launched their tokens months ago. Many performed poorly, contributing to a lack of appetite for similar tokens.
Arbitrum, the biggest layer 2 network to issue a token, has seen its token fall 61% from its January 2024 all-time high.
Linea is taking a different approach for its token compared to other layer 2s.
It won’t give holders the power to vote on governance decisions. It will instead be used to help grow and support the blockchain by being distributed to users as a reward for using apps and protocols.
In addition to the 80% of fees going to Linea token burning, the remaining 20% will be used to burn Ether, the Ethereum network token.
The hope is that Linea can incentivise users by giving out tokens, then use the revenue those users generate to shore up the token’s value, creating a virtuous cycle.
But that only works if the Linea token maintains a high enough value to make earning it by using the Linea network worthwhile for DeFi users.
Airdrop drops
It’s not uncommon for newly-launched tokens to fall in value.
In July, memecoin launchpad pump.fun launched a token through an initial coin offering. It fell more than 64% before rebounding.
In April, crypto social network Zora launched its token through an airdrop, only for it to drop some 75% in the weeks that followed. It has since surged some 220%.
Despite the slump, Linea has strong connections to some of the crypto industry’s most influential people and companies.
The blockchain was created by Consensys, the company behind popular crypto wallet MetaMask and headed by Ethereum co-founder Joe Lubin.
Lubin’s other ventures include Sharplink Gaming, a $3.2 billion Ethereum treasury firm where he acts as chairman of its board of directors.
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.
