Starkware’s $2B Airdrop & The Rise of Initial Points Offerings

Airdrop controversies and the evolution of token generation events

Lucas Outumuro
IntoTheBlock
4 min readFeb 23, 2024

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This week, we look at Starkware’s airdrop, analyzing the controversy surrounding it despite being the largest airdrop of all time. We then step back to evaluate other airdrop tokens and their performance. Finally, we analyze how the token-generation meta has been shifting away from airdrops and into initial points offerings.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin fees dropped by 32.2% as ordinals-related activity continues to decay
  • Ethereum fees declined by 14.6%, but remain near their yearly highs as gas prices surpassed 100 gwei multiple times this week

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • $540M worth of Bitcoin was withdrawn from CEXs, the largest weekly net outflows since June 2023
  • $370M of Ether left CEXs, making it seven consecutive weeks of net outflows for the second largest crypto-asset

Starkware’s $2B+ Airdrop

This week Starknet, an Ethereum layer 2 network, launched its STRK token following a community airdrop. Despite distributing over $2B worth of tokens, the STRK has been one of the most controversial.

Source: ITB’s Upcoming Airdrops Perspectives

$2.4B+ to Users — The value of STRK airdropped to users surpassed this value based on its average price in the first hour of trading

  • STRK traded at a fully diluted valuation as high as $50B but quickly dropped below $20B
  • Based on 7.3% of supply distributed in the airdrop, the STRK airdrop has been the largest in crypto’s history in terms of the initial value rewarded
  • Despite its magnitude, many complained that Starkware over-indexed on developers over users in its airdrop
  • Some users reportedly earned 1,800 STRK (~$3,6000) for fixing a typo in Starknet’s GitHub
  • On the other hand, many users of Starknet’s largest protocols, and of dYdX v3 (built on Starkware) did not receive a token allocation, leading to complaints from the crypto community
  • Additionally, Starkware’s team decided to extend its investor lock-up following criticism from the community

The STRK token is the latest in a streak of strong performance of airdrop tokens.

Source: ITB’s Upcoming Airdrops Perspectives

Strength in Crypto Markets — Previous airdropped tokens have been rallying strongly along with newly minted ones

  • Layer 2 tokens like ARB and OP have led the market higher over the last year
  • Like these two, Starkware is also expected to benefit from Ethereum’s upcoming Dencun upgrade as transaction fees are projected to drop by 90%
  • Newly minted tokens in general have been performing strongly as also witnessed with Celestia’s 10x in three months post-launch

Despite the strength of recent airdropped tokens, the market appears to have its eyes on the latest token bootstrapping mechanism.

The Rise of Initial Points Offerings

Previous crypto bull markets have been facilitated by new funding mechanisms. Following the launch of Ethereum, initial coin offerings (ICOs) allowed anyone globally to invest directly into tokens. Then in 2017, NFT mints offered a similar way for projects to raise funds while providing investors with JPEGs in exchange.

Yield farming, though not a direct funding mechanism, helped protocols bootstrap their liquidity and generate revenues in exchange for token rewards. Airdrops served more as a retroactive reward for “OG” users while promoting broader ownership of a crypto-asset.

In the last year, points have emerged as the latest way to bootstrap a project and create liquidity for crypto teams.

Points Mania — The number of protocols with active points programs has exploded in the last six months

  • Initially pioneered by Blur, points systems are a more dynamic and forward-looking approach to airdrops
  • These programs assign points to users performing key actions such as providing liquidity, referring users and more
  • Currently the main active points program is EigenLayer’s, which has allowed the protocol to reach over $7.8B prior to its Mainnet launch
  • Following a period of points accruing to users’ balances, protocols such as EigenLayer launch tokens through an equivalent to initial points offerings
  • This meta of points as system for projects to launch tokens continues to gather steam, with projects such as Ethena incorporating them since the beginning

Overall, points systems are not perfect but do have several improvements in comparison to previous bootstrapping mechanisms. By not requiring direct investments, users get to keep their funds while also minimizing chances that tokens distributed are securities. Being dynamic and not retroactive also points system gain an advantage over airdrops. It is unclear how long the current points rush will last, but if the past cycles are a sign, it is likely that this bootstrapping mechanism enables a new wave of flows and capital formation for the space.

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Lucas Outumuro
IntoTheBlock

Head of Research @IntoTheBlock. Actively researching token economics, DeFi and technology broadly. Twitter: https://twitter.com/LucasOutumuro