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Vast Majority of Airdrops Lose Value in Three Months: DappRadar Vast Majority of Airdrops Lose Value in Three Months: DappRadar

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Vast Majority of Airdrops Lose Value in Three Months: DappRadar – Crypto News

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10 months ago

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Despite billions in tokens airdropped since 2017, data shows that activity drops back to pre-airdrop levels within weeks, as long-term value rarely sticks.

Airdrops are Web3’s go-to growth hack, flooding wallets with billions of dollars in tokens to onboard new users, but the data shows most of that hype fades in just 90 days.

According to a report from DappRadar, projects across DeFi, NFTs, and blockchain gaming have handed out more than $20 billion in tokens since 2017, including $4.5 billion in 2023 alone.

The effect was immediate as Layer-2 chain Arbitrum, for instance, processed 2.5 million daily transactions at launch, while NFT marketplace Blur grabbed over 70% of NFT trading volume overnight.

But the hype doesn’t seem to stick. On average, activity drops back to 20-40% above pre-airdrop levels within weeks, and about 88% of airdropped tokens lose value within three months, showing that while airdrops succeed as marketing events, they “rarely secure long-term token strength,” DappRadar’s analyst Sara Gherghelas wrote in a Sept. 18 research report.

“Airdrops are unmatched in their ability to accelerate user acquisition, but long-term retention depends on product-market fit,” Gherghelas added.

‘Holder Scores’

Haseeb Qureshi, managing partner of crypto VC firm Dragonfly Capital, calls airdrops “dumb,” arguing in a Sept. 15 post on X that projects “spend months attracting farmers who generate artificial activity, only to watch those same farmers dump tokens immediately after TGE.”

Instead of handing out free tokens, Qureshi says projects should adopt “meta-incentives,” somewhat like a traditional credit score, where airdrops “incorporate how users behaved in previous airdrops.”

“If users know future protocols will see this Holder Score and incorporate it into their own airdrops, those users will adjust their behavior today,” Qureshi explains.

But big projects still favor airdrops to reward long-term supporters. For example, Jesse Pollak, founder of Coinbase’s Base network, recently hinted at a potential native token launch, sparking speculation about an airdrop for the network’s active users.

Consensys-backed Layer 1 Linea also launched its token via airdrop, even though a lot of recipients sold immediately, partly because the token didn’t have much use at launch, which pushed the price down more than 50%.

In response, Consensys CEO Joseph Lubin promised extra rewards for users who hold their tokens, seemingly hoping to encourage long-term participation and help stabilize the token’s value.

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