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We need to rethink Airdrops next cycle…

Crypto projects often use airdrops to distribute free tokens to community members, but how effective have they been?

But how effective have these airdrops been to the project’s native token?

  • Token went live the same time as genesis airdrop (i.e. the airdrop was not conducted after TGE)
  • The project had some form of roadmap based on Gitbook / Public Docs
  • The project indicated intention for the airdrop to reward existing users / further market its product / decentralise token supply ownership
  • Token has been around for a sufficient period to provide meaningful data points

So why allocate such a big % for airdrops?

  • If a product is about to go live, founders may want to scale marketing and awareness. A successful airdrop would be an efficient way to get a larger following in a short period of time, while at the same time giving users time to research on the project’s legitimacy. (e.g. APE, EVMOS, LOOKS)
  • If a project has been live for a while, airdrops are a good way to reward early adopters and dedicated community members, while incorporating the token mechanics in day-to-day protocol operations. (e.g. COW, DYDX, ORCA)

Post-airdrop price performance (100 days)

The chart below proceeds to elaborate that over time: (i) average price performance deteriorates, and (ii) an increasing number of projects in the sample trades below their day 1 prices.

  • At day 5, the average airdrop has a median price of 0.99 (a -1% deviation from day 1) and 55% are already trading below launch price
  • At day 50, the average airdrop has a median price of 0.87 (a -13% deviation from day 1) and 70% are trading below launch price
  • By 100 days, the average airdrop has a median price of 0.64 (a -36% depreciation in value from day 1) and 74% are trading below launch price

Post-airdrop price performance (200 days)

  • Token holders could participate in governance proposals and macro conditions were helpful tailwind catalysts for post-airdrop price performance
  • While not shown in the chart, $UNI continues to stay above its airdrop price today (almost 2 years after launch), trading at just over 1.5x its original airdrop price
  • By Q1 2022 (day 200), they had developed a strong community and broad base of active players, which helped to secure a $6m funding round co-led by Delphi, DeFiance, 3AC and Polygon
  • This explains the strong price performance of >6.5x post-airdrop launch price
  • However, unfriendly macro conditions have hit the crypto gaming sector the hardest, resulting in dwindling user metrics and poor token price performance to date — 0.44x its original airdrop price

As founders, you want tokens to fall in the hands of community members that support your project, participate in governance, stake it or use it.

Conclusion

  • Vesting airdrops based on time (claimable over a period of 3 months, over a weekly basis)
  • Vesting airdrops based on milestones (claimable after certain actions are completed)
  • Vesting airdrops based on a combination of time & milestones (claimable over certain periods based on how well users retain engagement with the protocol)
  • Will I need the token to interact with this protocol? If yes, HODL.
  • Will monetising it now make a big difference to me? If no, HODL.

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cpt n3mo

VC | Investment | Research @ Hashed; Articles are my personal views and not financial advice. @cptn3mox on Twitter