Airdrops are events that give away billions of dollars in free money to users. However, they never cease to be controversial as users always complain about the fairness of the token distribution process.
What is the cause? Most people believe it is due to the presence of Sybils – airdrop farmers who create large clusters of wallet addresses and use them to create large transaction traces across crypto projects.
Now, even in a booming quarter of airdrop activity, these concerns are threatening to alienate organic crypto platform users.
Bow to pressure
Projects like Ethena have bowed to pressure and tried to appease users who felt cheated during the project’s airdrop.
But more recent airdrops from the ZKsync blockchain network and the LayerZero interoperability protocol have failed to publicly respond to complaints from legitimate users who claim they were left out.
Farea – an airdrop hunter said:
“Farmers have received millions of tokens from ZKsync, but the people who have actually been working on this for two years have only received a mere 1,200 tokens.”
Fake Sybil airdrop farmers operate legitimately and claim larger stakes than the average airdrop, causing regular users to receive little to nothing for their efforts.
Attacks occur when projects like companies staking liquidity SwellDeFi lending company Marginfi and liquidity staking protocols Sanctum have hinted at holding airdrops in the future.
A serious problem
There is a big problem with the airdrop mechanism, not only for users but also for projects promising these free tokens.
Cryptocurrency projects want natural user activity to achieve “network effects” – when the value of a project increases as its patronage increases.
Project development teams will offer airdrops as an incentive to attract real users. The promise of a future airdrop could be enough to attract people to deposit crypto.
Liquidity inflow is an indicator that measures the increase in total value locked – a DeFi metric used to gauge interest in blockchain projects.
Crypto projects need to increase TVL to secure large valuations backed by venture capital interest.
“If you are a builder, you have to launch point campaigns, because VCs require adoption metrics to justify high valuations,” shared anonymous DeFi researcher Ignas.
But the problem is that most of this TVL comes from Sybil farmers – people who are less likely to leave their coins in place after they receive the airdrop. They tend to move to other projects that have not yet allocated tokens.
Several projects, including Wormhole and LayerZero, have seen a significant drop in user activity post-airdrop.
Meanwhile, actual users who are more likely to stick with these projects say they receive very little reward for their on-chain activity.
“Whales spend a lot of money to write scripts and earn hundreds of wallets. Retail users do one or two wallets so they don’t receive the actual rewards they should have received,” Farea said.
A new era
Despite the growing frustration, DeFi experts agree that project teams must develop new strategies for token distribution.
“Airdrops are an evolution in the way new tokens are released to the market,” said Ignas. Every cycle, we find a new way to print tokens.”
The current point period in DeFi projects has obvious limitations in terms of poor user retention and sound capture.
“The golden age of airdrops is over,” crypto analyst known as Wazz said. post on X earlier this week.
There are growing calls for project teams to rethink airdrops and come up with a reward system that does not ignore early adopters and maintains interest after the token distribution event while also attracting new ones join.
This is easier said than done, especially when the syllables are so ingrained in the system that it can be difficult to get rid of them.
For experts like Ignas, some possible solutions include timing airdrops to reduce subsequent mass dumping.
Additionally, projects can plan multiple airdrops, a method that has been adopted by companies like Etherfi.
Still, experts say no airdrop strategy is perfect and complaints are bound to arise.
“My advice is to use protocols that you find really interesting. The best airdrops I’ve gotten have come from genuine curiosity that made me click the buttons.”
Itadori
According to DLNews
