By Stacy Muur

Compiled by: TechFlow

Key insights from @Delphi_Digital's report "Airdrops do more harm than good".

Crucial to users, a must-read for founders.

Even four years after the @Uniswap airdrop, this iconic event remains a major milestone for Web3 markets, and at $6.4B at its peak, remains the largest airdrop of all time.

Since then, the industry has grown significantly, spawning legions of witches and drop pimps.

The top 50 airdrops in the cryptocurrency space have distributed over $26.6 billion in value.

This opportunity for “free money” did not go unnoticed. Now, every exciting crypto protocol launch attracts Sybil attackers and bots eager to acquire a significant share of the initial airdrop tokens.

Therefore, the protocol must develop new airdrop standards and anti-sybil measures.

Initially, a unified reward system was used (like Uniswap). Later, tiered airdrops emerged (like Jito). The Optimism team popularized multi-standard airdrops. Now, we have a points system.

However, the main problem with airdrops for many dApps popular with airdrop hunters is the bubble effect: after the snapshot, usage metrics drop sharply.

Let's look at the @LayerZero_Fndn example.

Since April, @StargateFinance cross-chain volume has dropped from $1.67B to $406.7M — a 75% drop in volume. I personally have never participated in $ZRO scalping, my allocation was organic, about $400.

This pattern is very common.

Prior to the $ZK airdrop, @zksync generated daily fees comparable to Arbitrum.

However, this number has been declining since the snapshot announcement and token distribution. Recently, daily fees fell below $10,000 for the first time since the launch week of zkSync Era.

Research by @Delphi_Digital explores similar cases in detail: @KaminoFinance, @Parcl, @MantaNetwork and @jito_sol, all of which show a similar pattern: after the snapshot, activity drops significantly and further user stickiness reveals product-market fit ( PMF ) practical issues.

The biggest problem with this unorganic growth is how to fairly evaluate the protocol and make an informed investment decision. The following points may help:

Track daily active users (DAU) and monthly active users (MAU) metrics over time to see if there is a drop after the airdrop snapshot is announced and subsequent user stickiness.

  • Measure how many users continue to use the platform after a predetermined period of time (e.g. 1 week or 1 month) following the airdrop.

  • Count the ratio of new to returning users in DAU or Weekly Active Users (WAU).

  • Monitor the number of transactions per user.

  • Observe which features are used and how often. Continued or increased usage of core features after the airdrop indicates continued user interest or product-market fit.

  • Track wallet engagement metrics.

  • Monitor community discussions and activity on governance forums.

Another problem with airdrops in 2024 is the widespread adoption of a “low float, high fully diluted valuation (FDV)” token model by many new protocols. This model makes it difficult for new buyers to assess growth potential and offset the selling pressure from airdrops. But that’s another topic for another time.

Personal note: Airdrops can attract new users, and some may stay. But it's like doing a giveaway on X: some users will come and check it out, a few may become active users, but most will disappear. As an investor, distinguish between organic and inorganic growth.

As a party to the agreement, we must ensure that we can retain users and build a long-term successful product.

PS: Thanks to @Delphi_Digital for this report.

 

Original link: https://x.com/stacy_muur/status/1811080011103035571