The airdrop effect fails, what else should the protocol do?

Original author: Stacy Muur (@stacy_muur)

Original translation: Peisen, BlockBeats

Editor's note:
Delphi Digital studied the entire airdrop situation. From the initial Uniswap to the recent large-scale agreements that have caused countless disputes due to the points system, airdrops are becoming more and more bubble-like, and the agreement cannot retain customers has become the most significant trend. Crypto researcher Stacy Muur summarized the content of the report, and BlockBeats translated the original text as follows:

The status of airdrops in 2024: users are frustrated and the fundamentals of the agreement are declining.

Delphi Digital wrote a report titled "Do airdrops hurt more than they help?" Here are the main insights. This report is essential for users and a must-read for founders.

The Uniswap airdrop marked a pivotal moment for the Web3 market, and even four years later, it remains the largest airdrop ever, worth a staggering $6.4 billion at its peak.

Since then, the industry has undergone significant changes, giving rise to Sybils and airdrop farmers.

The 50 largest airdrops in the crypto space have distributed over $26.6 billion in value.

This opportunity for “free money” has not gone unnoticed. Now, every exciting crypto protocol launch attracts Sybils and bots eager to get a large portion of the initial airdrop tokens. As a result, protocols have developed new airdrop standards and anti-sybil measures.

Initially, a fixed reward system was used (Uniswap). Then, there were tiered airdrops (Jito). The Optimism team promoted multiple criteria-based airdrops. Now, we have a points system.

However, for many dApps popular with airdrop hunters, the main problem with airdrops is the bubble effect: once a snapshot is taken, usage metrics drop dramatically.

Let’s take LayerZero as an example. Since April, Stargate bridge volume has dropped from $1.67 billion to $406.7 million, a 75% drop in volume. I personally have never farmed $ZRO, and my allocation is pretty modest — around $400. This pattern is very mainstream.

Before the $ZK airdrop, zkSync generated daily fees comparable to Arbitrum. However, since the snapshot announcement and token distribution, this number has been declining. Recently, daily fees fell below $10,000 for the first time since the launch of zkSync Era.

Delphi Digital’s research explores similar cases in detail, including Kamino, Parcl, Jito, and Manta Network. All of them show a similar pattern: after the snapshot, activity experienced a significant drop, and subsequent incentives revealed the reality of PMF.

The biggest issue with this inorganic growth is fair protocol evaluation and making informed investment decisions. Here, a few things may help:

• Track DAU and MAU metrics over time to see if there is a drop after the announcement of the airdrop snapshot and subsequent incentives.

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

• Measure the ratio of DAU or WAU of new users compared to existing users.

• Monitor the number of transactions per user.

Monitor which features are being used and how often. Continued or increased usage of core features after an airdrop indicates continued interest or product-market fit.

• Track wallet engagement metrics.

• Monitor activity on community discussions and governance forums.

Another problem with airdrops in 2024 is the widespread adoption of a "low float, high FDV" token model by many new protocols. This model makes it difficult for new buyers to assess growth potential and offset airdrop selling pressure.

But that's another story.

Personal note: airdrops can attract new users, some of whom may stay. However, this is similar to giveaways on X: some users will visit, some may become active readers, but most will disappear.

As an investor, distinguish between organic and inorganic growth. As a protocol, make sure you can retain users to build a long-term successful product.

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