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LayerZero faces backlash over monetising ‘no value’ Ethereum sandbox tokens

Ethereum developers are raising concerns over the creation of a marketplace for Ethereum tokens on the blockchain’s sandbox called Goerli.

LayerZero, a protocol that connects blockchains, has defended its new Goerli ETH marketplace as a solution for fixing a problem that has hobbled Ethereum development, but developers accuse it of choking access to a key tool and monetising a valueless token.

“It’s a bad idea because you are incentivising people to spend real money on something that has no value,” William Mitsuda, an Ethereum developer and founder of Ethereum block explorer Otterscan, told DL News.

Goerli is one of Ethereum’s most prominent “testnets,” a blockchain where developers test their code before launching applications on the so-called “mainnet,” Ethereum’s main blockchain.

“We made the market simply because the experience sucked for us and we asked ourselves ‘what can we build to make life for Ethereum devs easier.”

Goerli ETH, the native token of the testnet, is normally a valueless token, but it is needed to deploy and test applications in the sandbox. Many Ethereum developers rely on Goerli to ensure their applications work properly before deploying them for real on mainnet.

However, the Goerli testnet has been held back in recent months by a limited supply of tokens. While that scarcity has been created by design to better mirror the mainnet, it has meant that around 80% of the token is locked up in applications and cannot be used.

For testing most other applications, developers usually use the newer Sepolia testnet, where users can mint an infinite number of testnet tokens.

LayerZero launched a new Testnet Bridge on Tuesday, which lets users directly swap valuable mainnet ETH, the usual token for Ethereum, for Goerli ETH, the normally valueless testnet version.

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“We made the market simply because the experience sucked for us and we asked ourselves ‘what can we build to make life for Ethereum devs easier,’” Bryan Pellegrino, co-founder and CEO at LayerZero Labs, told DL News. “This was near the top of our list. Every single person in our company has felt this exact need so it got proposed and we said ‘yeah absolutely, let’s build that.’”

But many developers are outraged that the bridge places a monetary value on something that, in their eyes, should be free.

“It’s a short-term relief that’s not good in the long term,” Mudit Gupta, chief information security officer at Polygon, told DL News. “Access to educational material and testnets should ideally be free and not gated.”

Others suggest that putting a price on Goerli ETH may discourage developers from building on Ethereum.

Hudson Jameson, a former support lead at the Ethereum Foundation, told DL News that testnets have always been operated as public goods to welcome new developers and allow testing contracts for free.

“There were already instances of people making small paid deals to get Goerli ETH, they just formalised this.”

“Even if it looks like the issue is solved, [it] comes at the cost of new devs getting the impression they will be priced out of trying Ethereum development and instil a sense that testnet tokens have economic value similar to regular ETH tokens,” he said.

Some developers have rushed to defend LayerZero’s Goerli ETH market.

“I’ve seen the argument that making Goerli ETH tradable creates a barrier to entry for new devs but I don’t believe this is the case because it’s extremely cheap, hovering between two [and] 10 cents,” pseudonymous Ethereum developer Philogy told DL News.

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Others highlighted previous difficulty in getting enough Goerli ETH tokens for testing. Most faucets – bots that distribute tokens on request – require users to solve CAPTCHA puzzles to prove they’re humans and post their wallet address on Twitter – a problem for those trying to develop quietly. Even after jumping through these hoops, users only received small amounts of Goerli ETH.

Another alternative was using over-the-counter providers of Goerli ETH.

Andrey Shevchenko, co-founder at DeFi protocol Zircon Finance, told DL News that LayerZero’s move is good because “there were already instances of people making small paid deals to get Goerli ETH, they just formalised this.”

“You literally had to hunt for it, random discords, Twitter, etc. Basically play find-a-whale,” Pellegrino told DL News.

Goerli ETH traded for $0.10 at Testnet Bridge’s launch yesterday but has fluctuated downward since then.

“Overall I think it’ll dump to zero quite quickly,” Shevchenko said.