The crypto sphere needs to address the issue of airdrops, a new report has concluded – in order to prevent theft, ensure that early adopters are not cut out of the picture at a later stage and avoid “unsavory” side effects.
The claims were made in the latest “State of the Network” report from crypto intelligence firm Coin Metrics, authored by Kyle Waters and Nate Maddrey, who noted that airdrops have become “a regular event in crypto and a standard for token distribution.” But, they warned, airdrops, in the course of “facilitating experiments with new models of protocol ownership,” face a range of challenges and have left “room for design improvements.”
Waters and Maddrey noted that so-called Sybil attacks – whereby individuals or small groups pretend to be larger groups of individuals “by creating multiple addresses” in order to “farm” airdrop events.
However, they noted that some operators have trialed ways to “snuff” the practice out, including an airdrop for a token named paraswap (PSP). During this event, Waters and Maddrey noted, the Paraswap team “designed an airdrop that attempted to distribute tokens to only the most active users” it could detect, even going so far as to create a three-tiered system for their drop.
They added that protocol operators needed to change the perspective of many token recipients, noting that “many addresses will tend to offload their tokens immediately after the airdrop.”
This, the authors claimed, has created a need to “incentivize users” to “hold” their tokens and go on to become involved in “protocol governance.”
Recipients “might also be incentivized to send the tokens to a [decentralized exchange] pool to provide liquidity early on,” they suggested, but conceded that “undeniably” many simply “choose to sell” – meaning a rethink may be required in some cases.
They also questioned the longevity of airdrops as a long-term strategy, claiming that “once an airdrop occurs it is generally hard to do it again.” Although some operators have executed “multiple airdrops,” once a “certain amount of tokens have been distributed,” Waters and Maddrey opined that “it is unsavory to issue more” – as such a move simply “dilutes” existing holders’ governance power.
Rewarding users “early in the adoption curve” means that “later users are necessarily left out” – which is not necessarily a bad thing if early adoption is the key goal.
Gas fees were another concern, the duo explained, remarking that in a September 2020 uniswap (UNI) airdrop, “while there were 250,000 [ethereum (ETH)] addresses that were eligible for the airdrop, not every address claimed their tokens.
In the case of gas costs “associated with transferring tokens,” the authors wrote, “the onus is usually on the recipient to actively claim the tokens” – a prohibitive factor when networks are busy and gas fees are high.
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Learn more:
– BitMEX to Launch BMEX Token in 2022, Announces Airdrop
– IOTA Rises as New ‘Feeless’ Smart Contract Network & Airdrop Announced
– Ethereum Name Service to Pass Governance Over to Community, Details ENS Airdrop
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