AL #47: What Blast Can Teach Us About Incentives
Optimize for TVL/intent flow & code flow without insider information.
Last week in a provocatively titled piece I talked about the airdrop identity crisis – airdrops often feel like they are optimizing for too many things at once.
It's also becoming clear that the stated objectives of airdrops are very different from the inherent practice of insider interest alignment.
What if there was a simple metric-driven framework of how to think about airdrop/incentive effectiveness.
My goal is to convince you that future airdrops will draw lessons from the Blast L2 launch, a launch that was hotly debated due to its speculative sequencing (token before tech) and with Paradigm being an investor.
0/ Web2 incentives
It all started with web2 incentives (such as the original PayPal referral rewards that still exist to this day) which are usually aimed at network effect acceleration.
The PayPal network gave users free money to offset the friction of signing up in an age where people weren't comfortable with giving their card/bank account details to a website.
1/ Network bootstrapping airdrops
In 2014, residents of Iceland received the first airdrop (Auroracoin):
While the valuation of this currency replacement network didn't last for very long, the airdrop idea stuck and resurfaced during 2017's ICO boom.
These first generation airdrops were focused on identifying the most active users in crypto and in drawing their attention to try out a new network/token and bootstrap an active community.
Airdrops designed this way naturally made networks more decentralized and therefore helped mitigate governance attacks or regulatory attention.
Eventually these type of airdrops led to the emergence of crypto “credit scoring” entities like Degen Score that attempted to highlight your eligibility for these kinds of airdrops and also ended up being used directly by them:
2/ Retroactive Airdrops
At some point airdrops started to look inward and become more retroactive. Their focus became on rewarding the early users of networks in a hope to retain them as the best aligned parties to participate in governance.
The UNI airdrop was a perfect example of that.
The unfortunate side effect is that this led to retroactive games and the airdrop hunting industry.
The average airdrop recipient right now is much less likely to be an organic user of the network and is likely someone in a third-world country with a spreadsheet of wallets and airdrops and a farm of phones.
It still surprises me why networks choose to target these people at all.
Aside: Iterated Retroactivity
While not strictly applicable, an important offshoot of retroactive airdrops was retroactive public goods funding which still had a retroactive element but were primarily targeted at developers and other contributors rather than users.
By carefully engineering voting systems that help fund deserving recipients (not something that can be applied to end-user rewards), they are able to incentivize sophisticated long-term actors to be aligned with a network.
3/ Points
To apply this idea to users, points systems emerged.
While not directly promising to be linked to a future airdrop, the implication was very clear.
The “points meta” allows airdrops to be used as liquidity incentives by directly encoding what users need to optimize for to maximize their airdrop.
The line between airdrops and liquidity mining has blurred.
If we want to drive certain behaviors with an airdrop, we no longer need to “hint” these behaviors at insiders, we can simply declare points systems and make them transparent.
Now we are one step away from designing the perfect airdrop, lets look at Blast.
4/ The convergence of Airdrop and Liquidity Incentive, enter Blast
In my essay on future sequencer revenue streams, I hinted that the Blast team is a lot more clever than what people give them credit for having pioneered a “rollup-as-a-current-account” model.
Blast launched the airdrop sooner than most and explained the mechanics very clearly.
You get $BLAST tokens by depositing ETH and referring other users.
(Arguably they launched a liquidity incentive but as we hinted above the lines have blurred already. Our thesis is that the whole point of effective airdrops is making them more and more like liquidity incentives.)
What's unique about Blast is that they were able to achieve a threshold point in TVL and intent flow that qualitatively changed the types of developers and applications choosing to build an partner with Blast.
For example, they have already announced partnerships with Opyn and Spearbit among others - these brands couldn't be further from the speculative branding associated with Blast at launch.
And sure, by far the majority of dapps on Blast are a mixture of DeFi casino and speculative NFT projects. That's a feature of the chain. But these projects while targeting more speculative users are being built by serious developers.
I know a few of them myself.
With Blast, we’re pretty close to the right idea of surgical precision and ROI for airdrops.
In the next post we will synthesize this thinking into a framework and key metrics to assess and compare the effectiveness of any airdrop.