After the LayerZero and ZkSync Airdrops: Time to Pause, Reflect, and Rethink the Future of Airdrops

Authors: Noah Ho, YuppieZombie, Lumos Ngok

Abstract

In recent times, the blockchain community has witnessed significant controversy surrounding the airdrops of ZkSync and LayerZero. These events have sparked debates and led many to pause and reflect on the current state and future of airdrops in the crypto ecosystem. This article discuss the historical evolution of airdrops, highlights several milestone projects that have shaped the landscape, and provides a detailed analysis of the contentious airdrops of ZkSync and LayerZero. Finally, we offer some critical reflections and considerations for the future of airdrops.

Airdrops in Blockchain

An airdrop in the blockchain field refers to the practice of sending free tokens or cryptocurrencies to specific digital wallet addresses. In simple terms, an airdrop is that a project team gives away crypto assets to users. But why would a project team give away valuable cryptocurrency? Here are some reasons we have summarized:

1. Promotion: The project team aims to raise awareness about the project among potential investors and users by distributing free tokens.

2. Community Reward: The project team wants to reward community users and hope they will continue to support and promote the project.

3. User Data Acquisition: To attract VC, the project team needs to showcase good user data. Sometimes, they hint that using their product might result in receiving airdrop rewards. It has become a consensus in the industry that early product users might receive airdrops.

When you receive airdrop tokens, you can:

1. Participate in Governance: Take part in the project’s governance and vote on the future direction of the project.

2. Hold and Wait for Appreciation: Since the cost of early airdrop tokens is very low, it is worth waiting for the price to rise if the project is of high quality.

3. Cash Out: Sell the tokens directly on exchanges to accumulate your initial capital.

The Evolution of Airdrops

Origin of Airdrops

2014: The first crypto airdrop was initiated by a project called "Auroracoin," which distributed free tokens to all citizens of Iceland to promote the adoption of the new cryptocurrency. However, the project and its token ultimately failed. At that time, the airdrop required no interaction or other conditions, just confirming community membership was enough.

Development of Airdrops

In the early days of blockchain crowdfunding, Initial Coin Offerings (ICOs) were at the center stage. With the ICO boom, airdrops became increasingly popular, and many new web3 projects began using airdrops as a way to attract potential investors and users.

2017: Electroneum successfully used an airdrop strategy, distributing over 5000 tokens to users for free. This activity attracted over 120,000 users to download the app and create accounts within the first two weeks. During this gold rush, many startups emerged, the market became over-saturated, and investors grew tired. Additionally, countries and regions such as Japan, the United States, Canada, and Hong Kong introduced regulations on ICOs. In the same year, China's central bank and six other departments jointly announced that token issuance financing was suspected of being illegal and should be stopped immediately. The exit of ICOs accelerated the development of airdrops.

2018: Ontology airdropped its native cryptocurrency ONT to NEO investors and to users who subscribed to its newsletter, distributing 1000 ONT tokens to each. In the same year, the Enumivo (ENU) project announced it would imitate EOS by airdropping a large amount of ENU, further promoting airdrops as a means to increase community user numbers and engagement.

Prosperity of Airdrops

The rise of DeFi brought a new form of airdrop, where web3 projects distributed tokens to liquidity providers or users participating in liquidity mining activities.

September 2020: Uniswap launched its UNI token and conducted an airdrop, distributing 400 UNI tokens (worth about \$1400 at the closing price on the first day of trading) to anyone who had used Uniswap before September 1, 2020, regardless of the transaction’s success. This airdrop ignited the entire DeFi airdrop scene, becoming one of the most influential events in DeFi history. Similarly, projects like 1inch, DYDX, and Paraswap also conducted airdrops between 2020 and 2021. Projects in different sectors, such as Gitcoin (funding platform), Immutable X (NFT layer2), Ethereum Name Service (ENS) (domain sector), Terra Name Service (TNS) (domain sector), Dappradar (statistics website), etc., also conducted airdrops during the same period, with ordinary airdrop hunters earning from a few hundred to several thousand dollars.

Today, airdrops have become an important part of the crypto market, with the number of projects and airdrops experiencing significant growth. For example, Arbitrum's airdrop saw over 42 million ARB claimed in the first hour, making it the most sensational airdrop of 2023. In the early days of airdrops, using a large number of addresses for batch interactions by airdrop hunters was seen as speculative and disruptive, providing no long-term value to project teams. However, the demise of ICOs and the monopolization of early project tokens by VCs have given airdrop hunters a sense of "justice". Early user airdrops have become a moral and politically correct expectation for many projects.

Essentially, airdrop hunters are investing in the initial shares of blockchain star startups, making airdrop hunting akin to a quasi-primary market investment. From an ecosystem perspective, airdrop hunters have become an important part of the web3 ecosystem development. Novice users enter the web3 field through airdrop expectations and achieve significant gains, while project teams educate users through testnet interaction tasks. Moreover, project teams need a large number of airdrop hunters during the testnet stage for stress testing to improve network performance. Additionally, project teams can ensure decentralized token distribution through airdrops, avoiding high concentration among teams and VCs, thus being better positioned to handle regulations and listings. Today, the airdrop ecosystem has become a "collusion" between project teams, users, and VC institutions, with each party extracting benefits from the secondary token market.

Evolution of Airdrop Rules

As crypto airdrops continuously evolve, the rules have become increasingly complex, with the development process roughly as follows:

1. Confirming Community Membership: For example, Ripple (XRP) in 2013 and Stellar (XLM) in 2014 required binding Facebook or verifying phone numbers to confirm community membership, engaging fans and attracting public attention.

2. Simple Registration or Zero Transfer: In 2017, avocado (ENU) required only sending 0 ETH to the contract address to receive an airdrop. The same year, Ontology airdropped to NEO holders at a 5:1 ratio.

3. Simple Interaction and Universal Distribution: Projects like Uni, 1inch, dYdX, and ENS in 2020-2021 airdropped tokens to users who had used their platforms or held relevant tokens.

4. Anti-Sybil and Multi-Dimensional Screening: In 2022, Optimism (OP) used active users, DAO governance participation, multi-signature participation, Gitcoin donations, and cross-chain bridge users as multi-dimensional factors to evaluate airdrop quantities and excluded 17,000 Sybil addresses. Similarly, Arbitrum (ARB) in 2023 had complex rules involving cross-chain bridges, transaction frequency and interaction, transaction value screening, and liquidity proof.

From the several historical stages and classic cases of airdrops, it is evident that the barbaric growth period of airdrops has ended. The existence of airdrop studios means that the promotional effectiveness of airdrops for project teams is limited. From 2020 to 2021, the stories of getting rich through airdrops attracted a large number of outsiders to experience new products and many dedicated airdrop studios. However, while these studios are heavy users within the circle, they cause some loss to the promotional goals of the project teams. Therefore, the evolution of airdrops is almost synonymous with anti-Sybil history.

Airdrop Project Overview: Milestones in the Cryptocurrency Field

In this section, we present some airdrops that are representative of key strategies and innovations in the blockchain space. Uniswap set the precedent as the first widespread airdrop, ensuring all users received tokens. ApeCoin tailored its distribution based on NFT ownership. Arbitrum, ENS, and Blur employed tiered distributions based on loyalty and contribution. IO rewarded hardware support for its platform, while Blast and Merlin distributed tokens through staking. These varied approaches illustrate the evolving mechanisms and considerations in the airdrop landscape.

Uniswap: Pioneer of the DeFi Revolution

Uniswap, as a cornerstone of decentralized finance (DeFi), is built around its Automated Market Maker (AMM) model, pioneering a trustless and permissionless way of trading cryptocurrencies. This innovation significantly promoted financial liberalization, creating an open trading environment for users.

On September 1, 2020, Uniswap showcased its deep gratitude to early participants through its airdrop event. This event not only made a significant contribution to DeFi airdrop culture but also acknowledged the loyalty and contributions of the platform's early users. All users who interacted with the Uniswap DEX before this date, regardless of the transaction scale, received at least 400 UNI tokens as an airdrop reward. Liquidity providers (LPs) received even more generous rewards.

Uniswap’s airdrop rules were highly praised by the community for their simplicity and fairness, reflecting the platform's respect and appreciation for early participants while setting a benchmark for other projects in the DeFi field.

ApeCoin: The Heart of the BAYC Ecosystem

ApeCoin (APE), as the native token of the Bored Ape Yacht Club (BAYC) ecosystem, carries the responsibility of governance and serves as the governance token for ApeCoin DAO. On March 17, 2022, ApeCoin held an airdrop event for holders of BAYC and Mutant Ape Yacht Club (MAYC) NFTs. This event was a significant reward for community members and a key step in the development of the ApeCoin ecosystem.

The airdrop event strictly allocated the number of APE tokens based on the unique attributes of each NFT and its combinations. For example, a single Bored Ape NFT holder received 10,094 tokens as a reward, while a Bored Ape NFT combined with a Kennel Club NFT received 10,950 tokens. This policy highlighted the project team’s respect for individual community members and acknowledged their contributions to the ecosystem.

Arbitrum: A New Chapter in Ethereum Expansion

Arbitrum, as a leading Layer 2 solution for Ethereum, uses innovative Rollup technology to offer users efficient and cost-effective transactions, significantly alleviating Ethereum network congestion while ensuring transaction security and decentralization.

On March 16, 2023, Arbitrum launched its grand airdrop event, meticulously designed to reward users who actively participated in the Arbitrum ecosystem:

• Points System: Arbitrum implemented a comprehensive points system, distributing token rewards based on user activity in Arbitrum One and Arbitrum Nova, such as cross-chain transactions, transaction frequency, transaction value, smart contract interactions, and liquidity provision.

• Anti-Sybil Rules: To prevent Sybil attacks, the Arbitrum team established a series of quantitative rules ensuring that airdrop recipients were qualified real users. For instance, wallets with very low balances and limited interactions or those conducting all transactions in a very short time were assigned fewer points.

• Data Cleaning and Clustering Analysis: Arbitrum used on-chain data to identify addresses controlled by the same user, collaborating with partners like Nansen, Hop, and OffChain Labs for data cleaning. They employed clustering technologies such as the Louvain community detection algorithm to accurately identify and exclude Sybil addresses.

The combination of these mechanisms ensured the fairness and effectiveness of the airdrop, demonstrating Arbitrum’s deep commitment to community building and decentralized governance, setting a new benchmark for airdrop practices in the blockchain industry.

ENS: Innovator of Ethereum Name Services

Ethereum Name Service (ENS), as a critical cornerstone of the Ethereum ecosystem, created a human-readable domain name system within the decentralized network. ENS allows users to convert complex Ethereum addresses into simple, memorable domain names, greatly enhancing user experience and the adoption of blockchain technology.

On November 9, 2021, ENS launched its highly anticipated airdrop event, ingeniously designed to reward long-term supporters. The airdrop rewards were proportional to the length of time users held ENS domains, effectively increasing the rewards for long-term supporters rather than simply based on the number of domain registrations. Additionally, users who set up reverse resolution, meaning those who integrated ENS into their daily blockchain operations, received double rewards, emphasizing the importance of actual usage and rewarding deeply engaged users.

Blur: Leading Platform for Professional NFT Trading

Blur, a platform tailored for professional NFT traders, features a Bloomberg-style professional interface, precisely meeting the needs of professional traders. Blur introduced advanced trading features such as batch bidding and NFT protection mechanisms, successfully attracting a large number of professional traders and flash traders in the NFT market.