A Study of the History of Airdrops

Introduction: In fact, one of the greatest values ​​of blockchain that we have discovered so far is to observe the generation and distribution of funds/wealth in a highly transparent manner. Although this approach is still in its early stages with many flaws, the long-term vision of “transparent and decentralized asset creation and distribution” does bring enormous positive value to society.

Preface

Despite the bone-chilling bear market in 2023, many projects still distributed massive airdrop rewards to users. The FreeMoney in the bear market attracted users, with Coingecko data showing that in the past year alone, projects like Arbitrum, Celestia, and Blur distributed approximately $4.65 billion in airdrops based on ATH (all-time high) prices calculated with airdropped tokens.

Now, six months have passed since the publication of the Geeky Web3’s article about airdrop “A Brief History of Airdrops and Anti-Sybil Strategies: On the Tradition and Future of Free-Riding Culture”(《空投简史与反女巫策略：论撸毛文化的传统与未来》） in September 2023. During this time, the Web3 industry has undergone changes once again, and new characteristics and trends have emerged in the airdrop distribution mechanism. This article will analyze and popularize the changes in the airdrop mechanism during this period, further demonstrating the possible patterns and evolution of airdrop strategies in the future.

The points system has become the reference index for most projects’ airdrops.

The popularity of the airdrop points system can largely be attributed to the influential role played by Iron Shun, the founder of Blur. From Blur to Blast, the measure of user loyalty by project teams has shifted from initial trading volume to the amount and duration of user deposits.

Today, the points system is widely favored by major public chain ecosystem projects such as Magic Eden, Marginfi, and Kamino on Solana, as well as Bounce Bit and B²Network in the BTC ecosystem. The rise of the concept of re-staking has further propelled the popularity of the points system to its peak. With the core of points mining Eigenlayer, projects like Swell, KelpDao, and Ether.Fi have engaged in fierce battles of points mining, with the emergence of dual and even triple mining of LST and LRT points.

In fact, the current mainstream points system can be divided into two categories: those primarily based on trading volume and those primarily based on deposits.

The trading volume-based points model is commonly found in NFT trading markets, derivatives exchanges, and similar platforms, where users are incentivized to generate trading volume. This approach encourages users to rotate funds multiple times, which in turn encourages the use of multiple addresses per user, making it more challenging to identify instances of wash trading.

On the other hand, the deposit-based points system is another mainstream model. This measurement method is prevalent in lending platforms, public chain projects, and the popular re-staking concept projects. In this model, points are mainly determined by the amount of funds deposited and the duration of retention.

To maximize the attractiveness to funds/capital, projects adopting this measurement method typically do not restrict the types of funds they accept to a single category. Instead, they actively welcome the influx of various types of assets. For example, the second phase of Merlin Chain allows users to stake Bitcoin or partially Ethereum assets, as well as BRC-20, Bitamp, and BRC-420 token assets.

In today’s Web3 world, where TVL (Total Value Locked) data reigns supreme, the deposit-based points system crudely uses airdrop expectations to attract funds but may tie up users’ funds for a long time, imposing significant opportunity costs by setting withdrawal restrictions for several months. In an era where Sybils are rampant and real identities are difficult to discern, the deposit-based points system can significantly increase the cost of wash trading, just like Proof of Stake.

The expected airdrop of the deposit-based points system almost instantly boosts the growth of TVL data, becoming a breakthrough in the current Ethereum Layer2 landscape. Due to the bearish market at the launch of ZK-based Layer2 on the mainnet, the TVL performance of ZkSync and Starknet has been lukewarm, while Manta, ZKFair, and others have followed Blast’s example, surpassing the former ZK champions in TVL data in a relatively short time and maintaining good data performance even after the end of the airdrop.

Furthermore, projects utilizing the deposit-based points system generally employ some soft anti-wash strategies, such as requiring users to link their wallet addresses with social accounts like Discord and Twitter. However, even with these measures, it is still impossible to completely halt wash trading.

Essentially, the deposit-based points system merely significantly raises the cost of conducting wash attacks. Some projects have come up with innovative approaches, using whether users have made deposits for other projects as a reference data for airdrop distribution. For instance, when distributing airdrops, Altlayer considers “whether the user has staked for Eigenlayer and Celestia” as a powerful restriction.

Altlayer uses a tiered approach during airdrops, where the points distribution is based on the amount of TIA deposited by users in Celestia’s mainnet, with clear hierarchical divisions. The amount of airdrop you can receive is determined by the amount of deposits you have made in networks like Celestia in the past, rather than the number of accounts you hold. However, the airdrop allocation per account is limited, and rewards are only granted after meeting the minimum deposit amount, with clear lower and upper limits specified. Essentially, this stratifies the incentive system of proof of stake.

While such airdrop distribution methods resist airdrop hunters, whales with large amounts of assets can still split their deposits into multiple portions. This is akin to individuals running Ethereum validators who often divide their ETH holdings into multiple parts, each satisfying the minimum staking threshold for each validator, enabling them to run multiple validators.

In order to meet the airdrop’s eligibility conditions, which typically require each receiving address to have deposited at least a certain amount in the past, small-scale participants in airdrops often consolidate funds from multiple addresses into a single recipient account. However, for project teams, wealth equates to righteousness, and the “bourgeoisie” sybils are deemed valuable.

In reality, “everything can be scored.” Besides the two mainstream points calculation methods mentioned above, there are also comprehensive scoring schemes in the market such as LineaDeFiVoyageXP, B²Buzz, and bsquaredOdyssey from B²Network, and tasks released on Galxe, which base scoring on user trading volume, fund retention time, as well as activities like check-ins, social media interactions, and inviting others to join teams, capturing more comprehensively the contribution of users to their ecosystems.

Points, essentially, are a promise of airdrops, similar to a type of option where you pay a certain cost today to receive an expected return of XX in the future.

Unlike DeFi mining with clearly stated APY, users guided by the points system base their actions on conditions such as “unreleased token economic models, undisclosed airdrop distribution plans, and unpredictable market future.” Mining points actually represent a game between users and project teams concerning information asymmetry, testing users’ research capabilities.

At the same time, airdrop points are essentially subject to infinite inflation. For users with limited funds, the participation of whales dilutes the airdrop shares. Of course, this is similar to staking in Ethereum validators, where individuals with large amounts of staked funds receive more dividends (this principle remains unchanged over the years).

Whether based on trading volume or fund retention time, points systems purely measured in terms of funds undoubtedly direct the bulk of rewards to large holders. Some projects may add lottery-style mechanisms like blind boxes or random point draws to redistribute rewards to small fund users, seeking to achieve a balance between whales and regular users.

However, the criticism of the points system lies in its increasing resemblance to many existing playbooks on Web2 platforms. Obtaining points often requires completing various complex tasks, prompting the community to question whether users are experiencing the ecosystem or becoming slaves to project labor.

Airdrop targeting is increasingly focusing on core players, with “inclusive sunshine” benefiting multi-chain users.

However, widespread airdrops based on multiple criteria and screenings can cover as many users as possible, pleasing different groups and winning the community’s favor for project teams. But as internal competition among airdrop hunters intensifies, project teams can only hope to select users meticulously to precisely distribute incentives to genuine users, gradually leading to the demise of EVM-chain-wide blanket airdrops.

However, non-EVM ecosystem projects like Sei, Celestia, and Dymension have opened up new avenues for widespread airdrops, adopting a “inclusive sunshine “ approach to airdrops for multi-chain user bases, with core distribution targets being high-quality players on the chain.

In general, airdrop projects consider these high-quality users from multiple angles. They typically take into account users who have collaborations with themselves on EVM and Solana, among other multi-chain platforms, and are top-tier active users on protocols with ample funds. They assess user activity on the chain based on multiple dimensions such as transaction amounts, frequency, and gas consumption during certain time intervals to identify genuinely high-quality active players.

On the other hand, airdrops are often distributed to long-term staking users, especially large stakers, represented by Cosmos ecosystem-related stakers of ATOM, TIA, and INJ. Strictly speaking, staking airdrops are not a new practice; during the previous cycle, ATOM stakers received airdrops of multiple high-quality assets from the Cosmos ecosystem. However, the advantages of this chain airdrop are often overlooked due to the inability of airdrop profits during the bear market to cover the losses caused by the decline in ATOM prices.

(The profits of Celestia’s early stakers made the community FOMO. Source: @jaga1117)

Thanks to the popularity of modular blockchain narratives, projects promoting the slogan “staking yields airdrop” have emerged successively. Coupled with the popularity of the re-staking concept, staking has once again become a popular narrative. Under the narrative of staking airdrops, different communities are filled with severe FOMO sentiments, with people mostly searching for the next “golden shovel.” For example, despite the lack of actual APY and airdrop income from PythNetwork, it received over 100,000 user deposits. However, as the number of staking addresses and the amount of staked funds increase, the minimum threshold for airdrops is expected to gradually rise.

The popularity of staking has allowed project teams to form a staking nesting system. When project A distributes airdrops to token stakers on partner platform B, A also introduces staking functionality for its own token, leading stakers to believe that staking and locking their assets on A’s platform will enable them to receive airdrops from other projects like C and D again. This airdrop expectation (actually PUA) effectively absorbs funds from A’s airdrop recipients.

Under this chain of conditions, an A-B-C-D endless nesting staking can be formed, where individuals are ultimately ensnared by the expectations of staking tokens, with the opportunity cost of funds paid and airdrop returns received. Considering that tokens received from airdrops are often different from assets bought on the secondary market, with lower holding costs and psychological pressures, people are more willing to lock their funds long-term on platforms with staking airdrop expectations.

In addition to large stakers of tokens, some project teams may give airdrops to blue-chip NFT holders within the community, such as PudgyPenguins, BoredApeYachtClub, CryptoPunks, BadKids from Comomos, and MadLads from Solana on the Ethereum mainnet. These NFT holders generally represent OG users within their communities.

In summary, while sunshine airdrops bring joy to everyone, the core distribution targets for airdrops today are high-quality active users and large stakers. On another level, multi-chain “inclusive sunshine” airdrops are generally used as “barren marketing strategies” within non-EVM chain ecosystems or new ecosystems, with the main purpose being to garner reputation and capture players from other ecosystems. Project teams still aim to help ecosystem data growth and increase user on-chain activity and fund retention by distributing these airdrops to users who contribute as much as possible.

Future Airdrop Rule Reference Criteria

In addition to the above points, we have identified some trends that may become reference criteria for airdrops in the future:

1. Airdrop allocation tied to official background NFTs: NFTs with official backgrounds are gradually becoming a new standard for project airdrops. Although these “equity-class” NFTs do not explicitly state their airdrop allocations, through frequent mentions by project teams on social media or indirect endorsements, they have unwittingly become an unwritten rule for project airdrops today.

Following the significant airdrops received by holders of Altlayer’s AltlayerOGBadge and OhOttie!NFT series, fueled by community FOMO sentiment, official NFTs of projects like EigenLayer, zkSync, Berachain, which have not conducted airdrops yet, are perceived as important chips that must be seized next by people.

However, whether these NFTs are collectibles or serve as airdrop vouchers requires users to possess strong predictive abilities and a long-term assessment of their attitude towards the project team. At the same time, these “equity” NFTs have also become potential channels for project teams to cash out before issuing tokens due to PUA speculation, with no shortage of insider trading behavior.

1. Project teams prioritize airdrops for developers: Blast split the airdrop allocation in half between regular users and developers, Celestia allocated one-third of the total airdrop to GitHub developers, Staknet openly rewarded a large number of developers with airdrop allocations. More and more star projects are starting to tilt their airdrop distributions towards developers, making “contributing code to projects” or “pretending to be legitimate developers” a new way of airdrop clipping. A large number of low-quality projects are emerging on the chain in hopes of receiving ecosystem rewards. This phenomenon may intensify in the future, and new countermeasures are expected to emerge (likely involving AI intervention).

Cooperation with professional sybil-hunting agencies to screen qualified users: Recently, Celestia and Manta have collaborated with TrsutaLabs to screen users who meet the standards. Linea provides options for anti-sybil projects such as Nomis, GitcoinPassport, and Clique in the real-person verification (POH) process. Collaborating with sybil-hunting agencies to screen users seems to be a new trend.

Professional agencies integrate multi-chain data and the depth of user participation in airdrop projects to comprehensively analyze the sybil risk of addresses. However, they have also been criticized for being overly strict or not intelligent enough, resulting in the accidental exclusion of genuine users. For example, there is still a problem of identifying innocent addresses that have been “poisoned” by malicious transfers and mistakenly labeled as sybil addresses.

Alternative “Innovation and Diffusion” of Airdrop Clippers

1. Expansion from EVM Chains to Other Chains

With increasing transparency and maturity of the EVM chain ecosystem, airdrop allocations on EVM chains, especially on overcrowded Ethereum Layer 2 solutions, have become increasingly scarce. Regular users find themselves at a disadvantage in terms of both volume and activity, leading to a low return on investment ratio. Consequently, airdrop clippers are now exploring opportunities on other chains such as Sui, Aptos, Solana, which have a decent Total Value Locked (TVL) or capital background.

The overflow effect of EVM chain users is evident in the recent surge in user activity and TVL data on chains like Sui and Solana. In these ecosystems, users can participate in simple interactions akin to UNI-style swaps on Jupiter, for instance, to gain airdrop opportunities, a trend that is becoming common even within the BTC ecosystem.

(The wealth creation effect has allowed many new users to become active on the Solana chain again)

2. Shifting Focus from High-Financed Projects to Small but Refined Ones

Projects with large financing rounds often have ample cash flow, resulting in longer airdrop distribution cycles. Consequently, the airdrop hunting landscape has extended, with prolonged investment periods yielding little to no returns becoming the norm. Moreover, large financing implies project stability, which, for users, may attract a large influx of participants once certainty is established, thereby diluting airdrop allocations.

In response, some airdrop hunters are redirecting their attention to small but refined projects. While these projects may not disclose substantial financing amounts, their limited user participation makes airdrop hunting cost-effective. Projects such as Starknet, Layerzero, and ZkSync, often jokingly referred to as the “Three Stooges” by long-term PUA community members, have experienced varying degrees of decline in their active data.

Another airdrop strategy involves identifying projects associated with major exchanges. Given that the value of airdrop tokens depends on the expectations set by major exchanges, many airdrop activities revolve around projects with relationships with prominent exchanges like Binance, OKX, Coinbase, etc. These include projects backed by Binance Labs Fund, Coinbase Ventures, or those operating within the ecosystems of major exchanges. Another category involves scouting for projects that, despite having top-tier VCs like Paradigm, a16z involved in financing, have relatively smaller allocations and appear less popular.

In addition, relatively obscure airdrop rules, such as continuous sign-ups for NFP or registration for Arkham, may result in a satisfying average airdrop allocation per user. However, once a cold-start rule with a wealth effect emerges, it becomes a market-consensus rule, making it impractical to replicate for sustained path dependency. The market, and perhaps the world, is rife with uncertainty, and past historical experiences may not necessarily apply to the broad future. All so-called “rules” and “conventions” are subject to being rewritten in the near future.

Perhaps leading projects in each field are attempting to invent new airdrop rules. While these rules may introduce different innovations, the fundamental principle remains unchanged: the recipients of rewards distributed by project teams always revolve around loyal users who embody “early adoption + deep engagement + significant capital contribution.”

Debate: The Game Between Airdrop Farmers and Project Teams

Recently, Starknet sparked controversy by referring to users focused on airdrops as “digital beggars” on social media and even creating a “digital beggars” channel on their official Discord, drawing community criticism. Similar conflicts between project teams and airdrop players have also occurred with Scroll. Subsequently, individuals associated with Scroll and Starknet personally engaged with the community and even blocked users on social media, causing community outrage. Despite subsequent apologies from the parties involved, the community’s grievances have not been completely resolved. This PR controversy has had a reverse marketing effect on the community and is worth analyzing as a case study.

This public relations incident has exposed the subtle relationship between airdrop farmers and project teams. The implicit understanding formed between airdrop hunters and project teams over time seems to have led to misunderstandings between the two parties. Many users believe that airdrops are their deserved “earnings” for their efforts in actively participating during the bear market, contributing transaction fees to generate income, and helping projects create the illusion of prosperity on-chain, thus deserving “compensation”. However, these users tend to have strong motives, which may not be fully acknowledged by project teams.

During the early days of airdrops when airdrop hunters were not yet prevalent and genuine users were predominant (likely before 2021), project teams did not exclude low-net-worth users’ participation due to their decent user retention rates. However, as mentioned above, due to the influx of a large number of airdrop hunters, this mutually recognized airdrop method between project teams and users is gradually diminishing.

Furthermore, airdrops should not be seen as the end goal for projects. Some cases indicate that successful airdrop campaigns can stimulate user activity in projects. Jupiter, for example, implemented an annual airdrop program, and after the first phase of airdrop distribution, Jupiter’s Daily Active Users (DAU) briefly surpassed that of Uniswap. Similarly, Arbitrum’s STIP funding program and Optimism Op Grants have both contributed to maintaining high levels of user activity over the long term.

(Arbitrum and Optimism Remain Active After Airdrops)

Some project teams, in order to lock in funds, may take unconventional approaches by first supporting ecosystem projects or developers. For instance, projects like Base, which do not issue tokens upfront, attract large holders to deposit funds in the protocol by leveraging applications like friend.tech and Bold, which offer money-making opportunities, thus fostering user stickiness. However, even excellent applications like Uniswap face the issue of TVL stagnation before token issuance. It can be said that airdrops are a trump card when the ecosystem exhibits weak community contributions, sluggish growth, or even regression during the prolonged bear market, but they should by no means be the last resort.

(In the long bear market, a large number of airdrop hunters contribute income to ZkSync through interactions.)

Conclusion

A common complaint among community members is that airdrop hunters sustain on-chain data and help projects survive during the bear market. On the other hand, many project teams seem indifferent to airdrop hunters but indirectly attract them through various hints or by collaborating with third parties to initiate tasks, thereby engaging a large number of airdrop hunters in on-chain interactions, yet delaying the announcement of airdrop plans. This inconsistency often triggers negative emotions within the community.

Deposit-based airdrops, which directly attract funds, involve leasing the liquidity of users’ funds and rewarding them with airdrops in the future. For users, they also need to consider the opportunity cost.

From interactive to deposit-based airdrop standards, focusing primarily on users’ deposited funds may become the norm in the future, reflecting the changing dynamics of the game and demands between users and project teams. However, this game between project teams and users may ease as the bull market approaches and the overall crypto market sentiment warms up. The prisoner’s dilemma of project airdrop distribution in the bear market may improve as market funds gradually become more abundant. There have been recent complaints about “re-staking protocols having more ETH than users have.” As the landscape shifts from fewer projects to more users, project attitudes may change from rejecting airdrop hunters to competing for them.

Project teams do not intend to antagonize the community, but after the influx of thousands of studios joining the airdrop army, they need to be more cautious in airdrop distribution. Nowadays, getting rich through airdrops is basically unrealistic and requires strong research skills or good luck. Identifying the future value of niche projects from small-scale airdrops has become history for airdrop hunters. The future narrative of airdrops needs to consider the classic adage, “One’s success depends not only on individual efforts but also on the course of history.”

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