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Earlier this week I came across this cast from Dan Romero, founder of Warpcast, on Farcaster:
Dan makes several insightful high-level points about the state of airdrops, issues surrounding airdrops when faced with their goals, and where they’re headed over time. As a recipient of various airdrops, it’s been interesting to observe the various approaches and tactics projects implement to bootstrap said usage pre-airdrop while quickly pivoting to retention post-airdrop.
Expanding on Dan’s points, what are we seeing with airdrops today?
IMO this is less about the targeting tools these days as they’re much improved but rather targeting methodologies. An example of this is PENGU by the Pudgy Penguins team last December, with millions of wallets eligible to receive at least a small amount of PENGU, many just being an ‘OG ETH’ or ‘OG SOL’ user.
This logic at that time made sense. Pudgy Penguins is one of the most popular consumer brands in crypto and has a strong fanbase outside of it. Yet in late January, the team made the decision to move the claim deadline up to early February instead of the original date in mid-March. Why?
The team had the hypothesis that an airdrop across millions of wallets would create a positive flywheel for awareness, acquisition, and retention. And it worked! Until it didn’t, partially due to reasons beyond their control (eg: market conditions). And as a result, the token price has gradually dropped and fallen inline with one of 6th Man Ventures’ main takeaways around token design and distribution. Widespread airdrops tend to perform poorly compared to those that focus on core users. Although PENGU had a shot, they were not the exception to the rule.
Although the team probably has some other tricks up their sleeve to prop up the token price in the future, attention has shifted to Abstract, the L2 blockchain from Pudgy Penguins’ parent company Igloo Inc.
Abstract was formerly known as Frame and when it initially launched in late 2023, hinted at an airdrop for users who traded NFTs. And the assumption was that if you qualified for the Frame airdrop back then, you qualify for the eventual Abstract airdrop.
Thanks to the lessons learned from the airdrop claimed by pretty much everyone, Luca bluntly shared his thoughts in this interview clip.
Interviewer: Many Degens, myself included, have been farming Frame back in the day. Will those users eventually get rewarded as well or get Abstract XP?
Luca: I said the Frame users would get something, but they're not going to get shit. That's the new thing. Because like, why? Because, let's just prevent FUD? Fuck it. They're all FUDing anyway, so fuck it. No one's getting shit. If you're not using Abstract or you're not a part of the Pudgy Penguin ecosystem, you're not getting anything.
Interviewer: Okay, okay…
The interviewer’s response to Luca’s answer, too good 😂
If you’ve heard Luca speak before, he’s quite articulate so it’s satisfying to hear his gloves-off type of response. He and the team have learned their lesson from the PENGU airdrop, and their methodology will significantly change for Abstract.
And the tools are out there to easily identify who is deserving of an airdrop, certainly much easier than in the past!
Do you like airdrops? If so, airdrop this to someone!
In Dan’s post, I’m assuming $ meaning the airdrop amount to the user for usage of the protocol/tool/ecosystem/project, and that’s a point everyone could agree with, even farmers hoping to get a payday for clicking buttons.
But the question is what is usage? Depends on what we’re talking about.
An example of this is Hyperlane, an interoperability framework that connects various ecosystems. One use case is their Nexus Bridge, which I actually used last week for the first time to move assets across different ecosystems.
So when they announced their airdrop registration period opened up today, I had to check to see if there was a minuscule chance I was included. Understandably, I wasn’t but for a more specific reason:
Hyperlane’s criteria wasn’t based on how many times you used the apps Hyperlane powered, it was based on the amount of fees generated.
Another example of this was Ooga Booga (I know, amazing name. You can just name things I guess) and their OOGA airdrop which occurred today.
Their airdrop methodology had several components, but the more notable part was how they filtered eligible addresses:
36,000 total addresses interacted with Ooga Booga
30,000 contributed fees
The 30k list was reduced to the top 3k fee contributors to create more meaningful airdrop allocations for the most valuable users
Both Hyperlane and Ooga Booga defined usage as actual fees paid with additional thresholds on top, not just pure usage.
IMO airdrops are already advertisements, and more specifically they are advertisements in the form of an event (one with financial implications to boot!). How so? One way to think about airdrops is through the TGE acronym: Token Generation Event, the genesis airdrop for a token. I want to hone in on the E for TGE.
Airdrops are highly anticipated onchain events, not unlike attending an IRL event like a sports game, concert, or industry conference. And just like their IRL counterparts airdrops are an advertisement for something bigger than the individual airdrop or event itself.
We don’t really think about these events as advertisements themselves, so it gets even more meta when we realize that these events themselves have advertisements. This is so apparent at events it’s almost something you forget about:
Sporting matches: Sponsors! I find it funny that in US sports there’s an ‘official X’ of a team or sport like the ‘official water bottle of the NBA’ or ‘the official phone case of the New York Knicks’ or the ‘official snack eaten 3 hours before home games for bench players but not if they’re injured’. Ok I’m exaggerating but you get the point 😂
Concert: Merch, indirectly promoting a new album by performing unreleased music
Conference: Sponsors, booths, side events
Why do I bring that up?
Yesterday I saw my first instance of an ‘advertisement’ occur during the TGE for StakeStone, a liquidity platform. The experience was pretty standard, except for one button…
Users who claim STONE with the OKX wallet receive a 5% bonus, up to 100 additional tokens. This type of incentive by itself isn’t unique as it’s common for TGE events to have promotions with CEXs, and STONE has multiple running with OKX, Binance, Hashkey, and Bitget.
It’s the fact that there is now an ad in the ‘event’ itself, in this case on the claim website and experience, an area that has historically been untouched.
A parallel example of this would be NBA jersey sponsors. Historically, jerseys were clean: Team, team logo, number, and the player’s last name. And then starting in the 2017-18 season, jersey real estate was for sale. Nike became the official uniform and apparel maker for the NBA and the Nike Swoosh showed up on the front right shoulder of all player uniforms.
And the left shoulder was available for brands to sponsor on a team-by-team basis.
Why does OKX get this hallowed real estate? Because they’re an investor 😉
It will be interesting to see how this evolves. In the case of StakeStone, OKX is the ‘official wallet partner’ for their TGE. Will others follow suit, and if there could be such a thing as a TGE wallet partner, what other types of partners could they be at such an event when tens or even hundreds of thousands of users show up?
When we think about where airdrops are headed, I can’t help but think about the cash back, rebates, and promos concepts everyone is familiar with in web2. That’s ultimately where airdrops will be headed
The ‘free lunch’ era of airdrops is coming to an end.
Airdrops will go to users who have shown high-value to the ecosystem or app through their previous actions. Oftentimes this is financial, but doesn’t have to be. And if they aren’t existing users, there are additional higher probability ways to identify these users, especially with transparency from the blockchain (eg: even very parameters such as wallet value).
Digital marketing has perfected targeting to a tee, and blockchain will too.
When it comes to rebates, promos, and rewards in web2, it’s fairly straightforward. You only get it when you make a transaction, aka when you pay for something. That has increasingly become the case in crypto as well. And if you aren’t paying for something you’re still trading something for it, like a significant amount of time or even social capital (eg: Kaito Rewards Station, which is a variation of an affiliate program).
Farmers and degens of course would complain, but do you get earn the value of your discount for window shopping? Do you get cash back for just putting items in your Amazon shopping cart. LMAO of course not!
As seen in the StakeStone x OKX example, it seems that these events have become new real estate for partnerships that serve as acquisition/reengagement opportunities. The first clear example of this is for wallet providers at the connect wallet step. What will the next example of this be?
Ultimately, the direction that airdrops are headed is a positive one.
It will become harder for the farmers to run around harvesting whatever they can lay their hands on. But the farm itself will become a more sustainable one that feeds more mouths over time 🚜
See you next week!
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