Kaito issued a 120% refund and Base chain gas subsidies after its Boundless ZKC token distribution suffered delays, high Ethereum gas fees, and smart wallet failures, exacerbating concerns over network scalability.

Executive Summary

Kaito's Boundless ZKC token distribution encountered significant technical issues, including delays and high Ethereum gas fees, prompting the company to offer a 120% transaction fee refund and Base chain subsidies to affected users. This incident highlights persistent challenges in token launch mechanisms and network scalability.

The Event in Detail

The Boundless ZKC token distribution experienced a 1.5-hour delay during its initial public sale. Users reported facing excessively high Ethereum network gas fees, which averaged $12.75—a 40% increase from the previous week—and encountered smart wallet loading failures due to severe network congestion and traffic overload. During this period, Ethereum's network traffic spiked to 1.2 million transactions, and pending transactions reached a seven-day high of 180,000. The Ethereum Gas Fee Index also registered an 11-month high of 127.4.

Kaito founder Yu Hu acknowledged these technical difficulties. In response, Kaito committed to a 120% refund of all transaction fees for users who had successfully withdrawn or traded their ZKC tokens. Additionally, the platform announced it would provide further Base chain gas fee subsidies to users who had not yet completed their token withdrawals.

Separately, Kaito indicated that due to substantial oversubscription for Boundless, the fundraising round's size was marginally increased to 4.7% from an initial 3.4% to accommodate user demand. Users who opted out of this adjusted round are slated to receive a full refund.

Market Implications

This incident underscores the persistent challenges associated with Ethereum network congestion and elevated gas fees, which often deter small-scale traders and decentralized application (dApp) users. Kaito's proactive 120% refund policy may establish a new precedent for how projects manage and compensate users for significant operational failures during token distributions, potentially influencing future user expectations and industry standards.

The technical difficulties experienced on Ethereum during a high-demand token launch event are likely to prompt more projects to consider alternative blockchains or Layer 2 solutions, such as Base, for future token distributions. These alternatives aim to provide lower transaction fees and faster finality, directly addressing the scalability limitations observed on the Ethereum mainnet. The event could also intensify scrutiny on the technical robustness and preparedness of new token sale platforms to handle peak demand.

Expert Commentary

Prior to this event, blockchain investigator ZachXBT raised concerns regarding Kaito's operational practices. ZachXBT criticized Kaito for allegedly inflating user metrics and promoting what he termed "yap farming," a process where the platform incentivizes social media engagement with its Yap token, which some argue generates AI-generated spam rather than genuine community contributions. ZachXBT publicly stated that "Kaito partnerships are the number one counter signal for a project," implying a history of reputational challenges for the platform.

Broader Context

Ethereum's network congestion and variable transaction costs have been a recurring issue, impacting user experience despite ongoing Layer 2 developments and protocol upgrades like EIP-1559. While Ethereum average gas prices in 2025 typically hover between 20-40 Gwei, they can surge above 100 Gwei during periods of high demand. This reflects the network's security and demand but also its scalability limitations.

In response to these challenges, Layer 2 networks such as Base, BNB Chain, and Polygon are increasingly favored for token launches due to their ability to offer reduced fees and expedited transaction processing. The availability of gas fee reimbursements on Base for Coinbase One members further exemplifies the industry's push to mitigate high transaction costs for users on Layer 2 solutions. This incident reinforces the critical importance for token issuers to select blockchains that offer robust performance metrics, including high transactions per second (TPS) and fast transaction finality, to ensure a seamless user experience and project success.