AL #46: Why Airdrops don't work
We've been optimizing for the wrong thing.
The Starknet airdrop once again reminded that no action will please everyone on CT.
In short, they launched an airdrop that had a high financial floor for inclusion and resulted in a lot of sybil airdrop farmers not getting an allocation and then taking their fury to Twitter.
I think what Moody highlights here summarizes the state of art in airdrops.
Airdrop mechanism designers seem to be obsessed with sybil resistance and often in turn make airdrops highly vulnerable to sybil attacks and fairly ineffective.
I think sybil resistance is the wrong problem to focus on in airdrops.
While there is appeal in putting tokens in the hands of aligned community members, I think early usage of crypto networks has been so warped by airdrop anticipation that it’s not clear that airdrops create alignment at all. In fact, post-airdrop communities are often least aligned than ever, with non-recipients effectively backing out in anger over recipients.
Airdrop anticipation has turned into a science
Participation in networks to receive a retroactive airdrop is now well understood. There is even a small paper written that models them as exotic options from Tarun Chitra dating back to 2022:
Combine that with the well known adage of you get what you measure and you get an airdrop farming community that almost certainly will do as little work as possible to mine as much airdrop as possible.
This can manifest in other ways such as “users” claiming they have tested your product and found “no issues” and then submitting a screenshot of their wallet address.
The Bankless Airdrop Hunter quests illustrate this pretty succinctly; they are often narrowly focused on taking a single deposit-like action as opposed to more meaningful engagement with the application.
Every airdrop has to invent new criteria
As a corollary of the above, airdrops can't repeat individual criteria lest they be prone to a sybil attack (an attack where a single human creates multiple accounts in order to receive an airdrop allocation a multiple times).
Since airdrops started looking at GitHub data, airdrop farmers have begun to create small typo like contributions to GitHub repos, creating a social media-level moderation problem for what previously was an innocent developer-focused open source hosting and project management tool.
Airdrops are most effective when they are hinted
As another corollary of the above, because airdrops represent a one-off event, they are not able to create behavior changes for anything but the next airdrop.
An airdrop for network A most impacts behavior for an upcoming pre-airdrop network B. Incentivizing adoption of a competitor that is yet to launch a token is likely an anti-goal but that's exactly what airdrops achieve.
So airdrops work best when combined with point systems (that “hint” at an airdrop) or even legally murky promises of an airdrop to specific community members.
It's not clear what airdrops are optimizing for
Ultimately, I think airdrops have become a templating exercise that has forgotten its goals.
While they started as a mix of a bootstrapping and alignment vehicle (when dropped on unsuspecting individuals), more modern iterations airdrops conflate many concerns that are in soft conflict with each other:
Regulatory compliance
Network bootstrapping
Community alignment
Ethereum (or other base layer) alignment
Appeasing CT (Crypto Twitter)
The way back is simple
The key to use airdrops effectively is to realize that airdrops are for.
They are not just an idealistic network bootstrapping mechanism anymore (and couldn't be in the current meta).
They are, however, a growth hack, just like cash prizes or discounts are in web 2.0 companies.
This suggests a radically different playbook.
Using airdrops as a growth hack means that they are susceptible to a rational analysis of cost vs. behavior change.
In the next post I’ll explore what these alternative designs could look like.