ZKsync Ignite Update and Period 5 Allocations - March 2, 2025

Token Mechanics Ignite Program
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Hey ZKNation! We’re excited to share the latest update on the ZKSync Ignite program. Below, you’ll find key insights from Period 4, as well as the allocations and strategy for Period 5.

Period 4 Key Insights

  • Total ZK Budget: 12,368,759.81 ZK
  • Number of Incentivized Pools: 58
  • TVL Growth of Incentivized Protocols: -$19.95M
  • TVL Growth per $1 of Incentive (since beginning of the program):
    • Most Efficient: Aave (43.47)
    • Least Efficient: Vest Exchange (5.11)
    • Lending: 42.51
    • DEXs: 19.22
    • Perps: 6.83

In addition to absolute efficiency in TVL growth per $1 of incentives, we analyzed how resilient protocol TVL was despite market downtrend:

  • SyncSwap: Saw an 18% decrease in TVL while their incentives decreased almost 25% in Period 4 relative to Period 3
  • PancakeSwap: Also saw an 18% decrease in TVL while incentives decreased 18% period over period

Additionally, WETH-ZK price execution has remained stable despite the market conditions.

For more insights, you can explore OpenBlock’s live ZKSync Ignite dashboard here.

Period 5 High-Level Strategy

Overall, for Period 5, given the market volatility and changing priorities for the Ignite program (focus on slippage, less consideration for maximizing TVL growth) we have decided to significantly pare back incentives especially across Lending and Perps. The overarching strategy for Period 5 will be driven by:

  • Moving focus from improvement to maintenance of price execution
  • Maintain slippage while reducing spend across key pairs in response to little improvement in Period 4 when incentives were ramped up to these pools
    • Decrease of USDC-ETH and ZK-ETH pairs to Period 3 level
  • Cut Lending while maintaining most of USDC incentives
  • Remove most of the incentives for ZK on Lending
  • Continue identifying low performing pools and protocols for future removal

Period 5 Allocation Summary

  • Total Budget: 5,446,958.45 ZK
    • Decrease: -55.96% from Period 4
  • DEX Budget: 3,435,855.77 ZK (63.08%)
    • Decrease: -48.50% from Period 4
  • Lending Budget: 1,759,128.72 ZK (32.30%)
    • Decrease: -65.29% from Period 4
  • Perps Budget: 251,973.97 ZK (4.63%)
    • Decrease: -60.00% from Period 4
  • Number of Incentivized Pools: 40

Newly Incentivized Pools

  • RFX: USN

Defunded Pools

  • iZUMi.finance: USDC.e-WETH 0.2%
  • iZUMi.finance: WETH-ZK 1%
  • iZUMi.finance: WETH-WBTC
  • Maverick: WETH-zkETH
  • Maverick: WETH-wstETH
  • PancakeSwap: WETH-wstETH 0.05%
  • SyncSwap: USDC-wUSDM
  • SyncSwap: USN-USDC.e CL
  • zkSwap Finance: WETH-WBTC
  • ReactorFusion: ZK
  • ReactorFusion: USDC
  • ReactorFusion: WBTC
  • ReactorFusion: WETH
  • Venus Protocol: wUSDM
  • Venus Protocol: WBTC
  • ZeroLend: WBTC
  • RFX: ZK-USD
  • RFX: ETH-USD
  • RFX: BTC-USD

Full details on Period 5 allocations can be found here.

As we move into Period 5, your feedback and insights remain invaluable in refining our approach and maximizing the impact of the ZKSync Ignite program.

Thank you for your continued support!

Please note b/c of the recent Safe incident, ZKsync support on Safe is currently down. The DSC is looking for alternatives to sign the multisig and release funds for Period 5, but incentives may be delayed from starting on Monday (03/03/2025). We appreciate your patience and will keep you updated.

Update: As of this morning (03/04/2025), incentives have been distributed and campaigns for Period 5 allocations have started.

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That’s a remarkably dramatic cut in incentives. How is it justified? It appears antagonistic towards users, which are desperately needed.

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So…about that footnote…

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ZKgm everyone!

With the updated pools having gone into effect for period 5 we’ve received a lot of feedback from users asking for further clarification/justification for why things were done this way.

“Why were the allocations dropped so drastically for period 5?”

After careful consideration between the renewed focus on Era serving primarily as a liquidity hub (vs. its own ecosystem of builders + users), the analytics data from OBL, and market conditions, the DSC made a tough decision to switch from offense to defense and opt for a much more conservative approach to spend across the board for all categories + protocols for the near future. Notably until native-interop is live on ZKsync and our protocols have a plan for how they plan to allow users across the Elastic Network to tap into the liquidity from Era.

Remember that the Main reason for ZKsync Ignite is to establish a DeFi liquidity hub on ZKsync Era in service of the Elastic Chain. For there to be a liquidity hub, native interop needs to be live.

With interop v1 not being live until sometime in Q2, I would imagine that the DSC will choose to remain conservative in spend except for very specific experiments/campaigns that have a high potential of success for the network. Whether that is a targeted approach towards slippage, including new assets into the protocol, etc. This plan will also give Ignite more dry powder for when interop is live + market conditions improve.

“What happened to the 300m ZK that was allocated to the program, why aren’t you spending 100m ZK per season? What happens to unused ZK?”

  1. Nothing has happened to the 300m ZK that was allocated towards Ignite, it is still sitting in capped minter contracts waiting to be utilized for the program

  2. There was never a plan in place to spend a specific amount of ZK per season, just 300m ZK was allocated for the 9-month long program. If you think about it logically, it would make sense that Season 1 has the lowest spend, with the subsequent seasons increasing spend as it takes more ZK per season to keep rates competitive as TVL increases.

  3. (Per the delegates request) In the program outline any unused ZK at the end of Ignite that is leftover will be re-absorbed back into the ZKsync Association, so that it may be used for future programs in service of ZKsync & the Elastic Network. This is of course, if the DSC deems it not necessary for all of the 300m ZK to be spent. Not saying it will or won’t happen, only that it can.

“If assets/protocols are de-incentivized are they gone forever?”

No, that is not the case. Ignite has operated as an iterative program since it began and it will continue to do so. Every 2 weeks, the DSC alongside OBL test out new campaigns, assets, and strategies in service of ZKsync & the Elastic Network. Assets & allocations can come and go in 2 week intervals in service of these plans. Protocols may also be added/removed on a monthly basis if it is found that protocols either are not performing as well as expected or will have a beneficial impact on the ecosystem, respectively.

“What is going on with looping?”

Starting this period (Period 5 ), looping will be disincentivized to prevent aggressive farming of rewards. Previously, rewards were based purely on the supplied balance in the markets, with no restrictions on borrowing from the same market and supplying again (looping).

For example: Lend 1000 USDC → Borrow 800 USDC Lend 800 USDC → Borrow 600 USDC Lend 600 USDC → Borrow more, and so on… Users engaging in this type of looping will now be ineligible for rewards . This change aims to prevent aggressive reward farming , ensuring fairer yields for regular users.

  • Aave, Venus and zerolend users may experience a delay in updating their rewards as our team works on implementing these changes. However, all rewards will be calculated retroactively once the update is complete.

“Are these effects permanent?”

No. As stated before and inline with how Ignite has been run since the beginning, this is an iterative process. Users can/should expect things to change on a bi-weekly basis as the DSC receives new information and changes strategies.

I hope this was helpful for you all, if you have any other questions, please feel free to ask here or in telegram.

Thanks & happy farming!

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