At this point, I've probably studied more airdrops than most people in space. As a result, I began to make generalized observations about what differentiates an airdrop from a good one or a bad one. EigenLayer was the most recent example of not executing an airdrop that I think we can all learn from, but there are countless other examples that we can continue to list.
Zooming out, I think the attitude of the team is first and foremost key in assessing how to achieve this. If there are underlying motivations for greed, they will show it very explicitly. Therefore, as cheesy as it may sound, ground yourself. Your users are not stupid. The broader crypto community is not stupid. Investors are not stupid. Every action you take will be analyzed and tested to see whether your intentions were positive or not. I'm writing this because I have a feeling teams think it's 2021 where you can run a deceptive playbook and no one will know what you're doing. The market is much smarter and we have seen most variations of most scams/ponzis.
You want to go into an airdrop with the mindset of “crypto tokens are innovative new ways to increase value in ways that have never been possible and for everyone to win.” If you can stick to this mindset as much as possible, your actions should be guided in a pretty healthy way.
The gap between reality and expectations is probably what causes a lot of anger during these airdrops. The less a team says, the more risk it runs of being misaligned with its users and community. Let's look at some common ways teams misalign expectations and the ways they lead to a poor outcome.
This is the very first thing that needs to be clear to people: how much of the supply is actually allocated for airdrop. By not disclosing this early, you run the risk of people pressuring themselves on how much you actually value their contributions. In EigenLayer's case, they promoted the moondrop only to reveal that they were giving their early supporters a measly 5% of the supply. While they managed to accumulate $15 billion in TVL, they betrayed the trust of their users and opened themselves up to competition. The drop in TVL will be an interesting metric to see and one that I will follow closely. If you are unsure of the appropriate amount, discussions with as many stakeholders as possible will give you a good guide. I don't think 5% is a wrong number, it's just that expectations were ahead of reality.
Which countries are eligible for airdrop and which are not. This was probably EigenLayer's biggest mistake. They wanted TVL from people all over the world, but didn't want to take the legal risk associated with those same countries. Classic case of wanting the best of both worlds in an unfair way. Either they had to draw a line in the sand and be upfront with American and Asian users that they wouldn't be eligible, or accept the legal risk that comes with it. Many teams fear the legal risk of crypto to the point of crippling their own chances of success. No matter what you do, you'll eventually have to fight Gary if you're successful enough.
Now we get to the heart of the matter: how to actually distribute tokens. This is where the challenge increases exponentially. The common dilemma that arises during this stage is:
However, these two goals are in direct conflict with each other. If you decide that small users should get something anyway, there is now a strong incentive to split your wallet and meet the minimum eligibility criteria to get the airdrop. By taking a stand against the whales (your biggest customers), you also encourage them to split their wallets. I have a thesis on how to solve this problem, but I'll leave it for another time. The best approach that seems to be the industry standard at present is to:
While this leaves a lot of room for improvement, it's the best thing teams can do right now with the resources they have. While there is no right way to do this, the worst way is to remain opaque about this structure and how it was determined.
The problem with token distribution systems that have tiers and aren't perfectly linear is how do you differentiate small users from sybils? Many projects have difficulty distinguishing them. Each team seems to handle this in different ways. Some of these include, but are not limited to:
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Create “self-reporting” systems like LayerZero or Hop where users report each other or the project gets help from the community
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Using on-chain clustering (targets only very large scale industrial farmers that wash from Binance)
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Select attributes based on reputation that most sybils would not be qualified for
These choices are ranked from easiest to hardest. Unfortunately, all of these problems are really just data segmentation problems, and not just any data: Big Data. I will write more about this later.
This is another choice that impacts how your airdrop goes. To clarify, claim patterns are those where the user has to get the airdrop for themselves, while it's straight to the wallet where they magically end up with you. The convenience of the latter is great, but it can basically lead users to instant dumping much higher, as people who didn't know they were eligible or were even paying close attention would sell to get their money. The argument can also go the other way, that it is more difficult to raise awareness among non-token holders.
A summary of this dilemma would be to split the airdrop into a claim and a direct transfer to the wallet, but I haven't seen that play out yet – just an idea!
If there is one thing that matters the most, it is the price and subsequent valuation of the token! One thing teams need to be aware of is what clauses allow other holder classes to receive liquidity and whether or not locked tokens can be staked. The more favorable the conditions are to insiders, the more the airdrop will be considered a liquidity event and will encourage everyone else to move towards the short term. A few years ago, teams could get away with a lot of tricks and the market has since gotten smarter. If you need to restructure things with investors, do it. A bad airdrop is never worth it.
Anyway, that concludes this article. I wanted to write this article as a way to synthesize many different approaches I've seen in the market and present them to anyone else who might be considering airdropping. The one thing that is true in all cases is that the tools needed to execute good airdrops are sorely lacking and that is something I am very happy to share, as our data stack at 0xArc allows us to perform a High-quality, large-scale analysis of millions of portfolios. across many channels. Until then, I'll continue to give little hints on the best way to solve this problem.