Is Airdrop Season Over?

Nearly “free” money? Too good to be true? Well, in crypto, the old adage did not always hold true, until very recently. Let’s dive in.

What is an airdrop? 

A cryptocurrency airdrop is where community participants of a specific project receive tokens for completing certain tasks. Tasks may include the following:

  • interacting with the project or applications in the projects ecosystem, such as bridging, swapping or borrowing/lending tokens
  • social engagement such as following and interacting on platforms like X, Discord and Telegram
  • completing “quests” on Web3 platforms such as Galxe where users connect their wallets and complete education modules, refer friends and contribute to community growth
  • staking a token that is in the projects ecosystem (i.e. staking Solana to receive an airdrop of a project that is built on Solana)

Collectively these tasks are called “farming” an airdrop. Generally, the more engagement and/or tasks completed, the higher the potential airdrop reward. 

The thesis behind airdrops is to democratically reward those that are most likely to become longer-term community members, expediting network effect and token utility. Further, it has historically allowed teams to minimize dilution via larger treasury balances (see more on Jito below).

Well-known projects such as Uniswap ($UNI), Arbitrum ($ARB) and Celestia ($TIA) were all distributed via airdrop. 

There have also been several successful airdrops since crypto’s re-emergence in late October 2023. These include Jito ($JTO), Ethena ($ETA) and Dymension ($DYM).

Take Jito for example. Jito is a liquid staking protocol built on Solana that rewarded $SOL stakers with “points”. Higher the points, the larger the airdrop. On December 7, 2023, the team dropped 90m tokens to the community. Dan Smith from the Blockworks research team noted that moving $40 of JitoSOL (the token one received for staking $SOL) around could have netted users nearly $10,000 in $JTO (Figure 1).


Figure 1 – Jito Airdrop: $40 into $10k

Source: @smyyguy

Given the token has held up very well and Jito now has nearly $940m in their treasury, it is one of the airdrop success stories of this cycle. 

But as 2024 has progressed, the airdrop shine has worn off. The obvious explanation is that there are more people farming, hence rewards have fallen significantly. That is true. But there are also project specific issues such as misleading communications regarding potential rewards, disclosures on eligibility criteria, anti-Sybil measures (necessary if implemented correctly), to tokenomics (where certain members of the community received the significant majority of rewards).  

Take Manta Network ($MANTA). They were widely criticized for misleading the community on potential rewards, with the majority of rewards given to “influencers” who were able to onboard the most users. In turn, many who staked $ETH as part of the airdrop, have left the community, as evidenced by the total value locked (TVL) in the Manta ecosystem dropping from nearly $700m in March to $170m today. Accordingly, the token price has suffered, hitting a post January 19 listing low at the time of this note on May 9.

Other major campaigns that have been widely criticized include StarkNet,, Wormhole and EtherFi. All have seen their token prices suffer post airdrop.

Additionally, three high profile upcoming airdrops have run into issues without even issuing tokens yet. These include: EigenLayer, LayerZero and MarginFi.

  • EigenLayer: concerns regarding lack of transferability of the token for “months’ post launch; small allocation to stakers of 5% versus 55% to the team and investors; airdrop will be blocked in many countries, including the United States and Canada, including VPN users (something that should have been communicated long ago). This led to a significant drop in TVL as investors removed staked tokens from the protocol.

  • LayerZero: shortly after the initial snapshot, news that 5.8m users would qualify for the airdrop, sent airdrop farmers mad, given many had been farming for two years. Since then, CEO Bryan Pellegrino said that less than 15% of wallets that interacted with the protocol would be eligible for the upcoming airdrop scheduled for the coming months, estimating that about 400,000 to 800,000 addresses were real users rather than Sybil participants. Will be interesting to see how it unfolds.

  • MarginFi: one of the earlier, high-profile projects to use “points” to rank farmers, with the implicit promise that points would equate to an airdrop. The more money staked and/or borrowed, the more points you received. You also received lower value points for referring new users to the platform. In mid-April, tensions boiled over with one of the founders, Edgar Pavlovsky, announcing he was leaving the project amongst disagreements on future token distributions, amongst other issues. He took it one step further, saying he was going to “brick” any attempts to issue a token (Figure 2). Investors immediately withdrew crypto worth $300 million from the platform, or approximately 1/3 of the protocol’s deposits.

Figure 2 – MarginFi Founder Not Happy

Source: @edgarpavlovsky

Should community members be complaining about receiving basically “free” tokens?

It’s a hard one when much of the long-term value from a token project comes in the form of network effect. And network effects can work the opposite way if your community members believe that they were misled, slighted or cheated, even if free. Further, rewarding the masses versus those that are actually using the product and/or regularly participating in community initiatives seems like a recipe for disaster. 

We’ll leave it with advice on what can make a successful airdrop from one of the best builders in crypto, who has taken decentralized exchange Uniswap from zero to $2 trillion in volume in 5 years and who’s project is arguably the most successful airdrops of all-time (Figure 3).

Figure 3 – Uniswap Founder Airdrop Advice

Source: @haydenzadams

Given crypto projects largely rely on positive network effects to both grow their communities while keeping their community members engaged, which in turn should lead to higher token prices, we believe a successful airdrop initiative, as outlined in Hayden Adam’s advice above, can be a great way to democratically reward those that helped the most. Let’s hope crypto builders listen.


Mark Riccio, CFA
Vikara Capital


Vikara is an open-ended fund, with investors able to add or redeem monthly. Please contact usif you would like to discuss anything further.

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