Airdrops, The Bad, and The Pointless?

Airdrops have become a staple in the crypto market, especially during bullish periods. However, they are challenging and potentially controversial, often presenting as many risks as opportunities. This year, several notable airdrops have sparked significant controversies.

High-profile airdrops have ignited communities, but not always positively. EigenLayer’s EIGEN airdrop faced backlash due to unpopular participation conditions, including bans on users from the US and several other countries and making tokens non-transferable.

In February, Starknet’s airdrop disappointed users with lower-than-expected allocations and news that team and investor allocations would unlock within two months, drawing criticism.

LayerZero’s airdrop faced complaints about small allocations, while zkSync was criticized for poor Sybil controls, allowing a few users with multiple accounts to dominate the airdrop.

These controversies highlight the difficulties of successful airdrops. Despite these issues, avoiding controversy isn't always beneficial if it means gaining no support. Reports suggest that participation is often dominated by short-term scalpers seeking quick gains. So why launch airdrops?

Airdrops done right can generate substantial value for a project. They can inject token liquidity, foster community engagement, and incentivize future participation. Successful examples include Uniswap’s 2020 “fair drop,” which exclusively rewarded past users, and similar successful airdrops by Apecoin and Arbitrum.

Given the continued high interest, how can projects successfully capture the magic of airdrops? Learning from successful examples and understanding effective strategies is crucial. Node Capital’s research arm recently published a comprehensive airdrop guide for founders. One of the first steps is clearly understanding the airdrop’s purpose. Without measurable metrics, it’s easy to lose sight of the goals. The guide advises:

“By articulating these targets, which are intended as realistic yet aspirational benchmarks, every initiative within the airdrop is purposefully crafted to propel your project towards its broader strategic ambitions. This approach ensures that each action taken is impactful and aligned with your community’s growth and prosperity, aiming to inspire and mobilize the entire community to action.”

Andre Cronje, considered the godfather of DeFi, offers valuable advice for DeFi dApp founders. TapiocaDAO recently used one of his ideas to prevent Sybil attacks by using call options on airdropped tokens during its launch.

Transparency is crucial. If participants know what to expect upfront, it can help avoid complaints later. Regulations prohibiting participation by US users are well-known, so clearly stating that the airdrop will follow regulatory requirements sets expectations from the start. Providing a full white paper in advance can be even better.

There are no strict rules for launching crypto airdrops, but adhering to principles like transparency and learning from successful examples can help. Airdrops, when executed correctly, can be highly beneficial, fostering engagement and adding value to a project. Following the advice of experienced figures and being clear about the airdrop’s goals are solid foundations for success.