Airdrops are a common practice among new crypto projects, but up to 88% of airdropped tokens lose value within three months, according to data collected over the past seven years.
On September 18 Dappradar analyst Sara Gherghelas reported Found Since 2017, projects have been distributed Over $20 billion in airdrops.
Speaking to Cointelegraph, Dappradar’s head of content, Robert Hoogendoorn, said token distribution is key to success in an airdrop; The project wants to put their token in hands of diamond holders.
“Some of the more successful airdrops used phased distribution, for example, optimism, or very targeted distribution, because they are ways to limit the sale of the community. However, there is no one recipe for success, and it all comes down to distribution, product-market fit, and utility of the token,” he said.
“Furthermore, general market trends have a high impact on airdrop valuations.
The first recorded crypto airdrop occurred in 2014, when the Auroracoin Project airdropped its native coin, AUR, as an Icelandic alternative to Bitcoin.
Crypto projects need to be hand-picked
In the decade since Auroracoin’s launch, Hoogendoorn said airdrops are more common in a bull market, and evolve with measures such as onchain engagement, social media campaigns and liquidity provision.
However, Hoogendoorn argued that projects need to be careful in analyzing a user’s onchain activity, trading behavior and even social media “reputation” to avoid opportunities of airdrop hunting and farming.
“We are already seeing a trend where airdrop distribution taps into reputation, for example, by integrating social media activity. Moreover, various projects use interaction and reward platforms to distribute at least a part of their airdrop allocation,” he said.
Airdrops from bad projects are doomed to fail
Jackson Denka, CEO of Azura, a defi platform Backed by the Winklevoss Twins.
“No amount of financial engineering, incentivization, or bribing users can change the fact that some assets are better investments than others,” he said.
“Airdrops, no matter how flawed their structure, if associated with a good/growing product will cost in price over a long time horizon.”
Hyperliquid is Hailed as delivering the best airdrop launch Ever since November 2024 by excluding venture capitalists and strongly encouraging community involvement.
In the long run, Denka expects airdrops Initial coin offerings Emerging and investors pay to acquire tokens before they are released to the open market, effectively serving as an initial public offering but using crypto tokens.
“There is no other financial market in the world that gives free equity to their users. Uber didn’t do it, Robinhood didn’t do it, and Facebook didn’t do it,” he said.
“We will view the popularity of airdrops as a temporary blip in the broader history of crypto markets, although they have always existed.”
Liquidity also needs to be addressed
Another major problem airdrops face is liquidity. Kanny Lee, the CEO of Secondswap, a marketplace for locked trading tokens, told Cointelegraph that airdrops lose value because the projects behind them release excess liquidity too quickly, flooding the market with tokens.
Two recent successful examples of airdrops rewarded users for continued activity, which helped maintain liquidity even after initial volatility, and used a gradual unlocking schedule so that supply entered the market in stages, according to Lee.
Related: Binance AirDrops $45m in BNB to Memecoin Traders hit by market crash
“Both strategies point to the same principle: value lasts longer when users stay engaged and liquidity builds gradually,” he added.
In the future, Lee believes that trends around user rewards for holding tokens will become a standard practice.
“Sustainable liquidity should be the main goal of any airdrop design. It’s not about how many wallets accept tokens, but how long those tokens stay active in the market,” he said.
“Programs that reward continued participation or release supply in stages help avoid the sharp corrections that follow mass distributions.”
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