The Death of Airdrops: Discount Tickets as a New Paradigm
During late 2023 and early 2024, we witnessed the rise of airdrops as a way to incentivize early contributors. As some airdrops resulted in huge profits thanks to being under-farmed, this new trend attracted huge interest among CT. As a result, several protocols adopted this trend quickly.
For protocols, it is a good solution because it empowers protocols against users. It creates hype and speculation which surely attracts attention. In the end, founders can show VCs that they have traction and found PMF.
For sybils/mercenary capital, they can easily extract value and leave the protocol at the end.
For retail, it was good hopium because it offered hype and speculation, and the chance to get rich quickly. However, in the end, most farmers were farmed even though they took the risk of being early.
With the latest EigenLayer and LayerZero dramas, we saw that we are coming to the end of airdrops as there are several flaws in the existing models.
Why is the airdrop model unsustainable?
To understand why the expectations are not met with the airdrops that are dependent on the points system, there are things we should consider:
Total fundraising is a major factor in determining the total allocation for the airdrop.
Founders may not be willing to allocate a big portion of the token supply to the community.
Most airdrops are overfarmed because they invite sybils and mercenary capital.
There is no deadline and the airdrop amount is not clear.
The protocols are keen to farm the farmers without launching the tokens as the fees are juicy and they do not need to distribute them.
Airdrops are financially negative for the protocols as they bear significant costs by distributing their tokens for free.
So, the basic answer to your question: There are limited resources while the demand is infinite, and the airdrop game is arbitrarily rugged by teams and VCs.
As a result of this status quo, while the mercenary capitals/sybils and protocols benefit from airdrops, retail users who took the risk of being early are not rewarded properly.
However, we find it necessary to highlight that the issues with airdrops are not caused by the points system, but rather by uncertainties and a lack of clarity in terms of the timeline and reward allocation of airdrops. Any solution that does not aim to solve these issues is going to fail in our opinion.
