Current airdrops have a strong marketing element and may not adequately reach people who will contribute to the project long-term after the TGE (Token Generation Event). This article explains these issues and future hopes. Please read to the end.

• Sudden price drops and market crashes: Airdrop hunters selling large quantities of tokens can create a temporary oversupply in the market, risking a sharp drop in the token's price. This can prevent the project from achieving its target valuation and significantly reduce its market value.
• Short-term engagement: Airdrop hunters seek short-term profits and cannot be expected to engage with the project long-term. This can hinder the sustainable growth of the project and the formation of a community.
• Waste of resources: Conducting airdrops requires resources for token distribution and marketing, but if airdrop hunters immediately sell the tokens, these resources are wasted on short-term goals and do not contribute to the project's development.
• Destabilization of the ecosystem: The presence of airdrop hunters can destabilize the token ecosystem, increasing market volatility and reducing trust.

Uniswap's TGE issued $UNI tokens to decentralize the protocol, which are still used for governance proposals and voting. This system has been successful, and Uniswap's governance is working well. On the other hand, many other projects have followed suit, distributing tokens to superficial "contributors." This is because DeFi protocols are measured by their liquidity and TVL (Total Value Locked), requiring them to attract users at all costs. Also, since existing product revenue cannot offer high APY, the goal has become to add value to the token to attract users. As a result, projects have adopted the method of adding value to tokens and distributing them to users to provide apparent income, as the project's own revenue cannot cover high APY.

This approach seems reasonable for both projects seeking users and users seeking high APY income, but since the distributed tokens lack substantial utility, many users tend to sell them immediately. As a result, receiving the airdrop becomes the primary goal, and the meaning of "contribution" remains ambiguous. For example, some people create multiple wallets and pretend to contribute to the project in a short period, while others create Memes to make the community appear lively.

Specifically, Uniswap distributed $UNI tokens to 251,534 wallets that had used the protocol at least once, Arbitrum targeted 245,000 wallets, and 1inch targeted 55,000 wallets. However, recent airdrops by LayerZero targeted about 1.28 million wallets, Starknet about 1.3 million wallets, and zkSync 695,232 wallets, highlighting the increase in users aiming for airdrops.

This situation raises questions about the sustainable development of projects. In many cases, users immediately cash in the tokens they receive from airdrops and move on to the next project. Therefore, users often leave after a temporary surge of activity, and if the token price at TGE does not match the "contribution," users quickly lose interest. Also, those who have invested a lot of money may be allocated many tokens, while those who have no money but contributed to the development and growth of the project may be disappointed.

Project Perspective

From the project's perspective, the airdrop hunter problem is becoming apparent. The total supply and circulating supply at TGE, and the number of tokens held by airdrop hunters, are contributing factors to the problem. Specifically, there is concern that by the time the project's management and development team get their hands on the tokens, the airdrop hunters will have already sold them, the market will have crashed, and the expected valuation will not be achieved. Especially during a bull market, valuations are often overestimated, and the fundamental incentive design derived from the product is insufficient, so maximizing market expectations is prioritized. Thus, tokens flow from seed investors to Series A investors and then to the secondary market, and the focus is on how to buy cheap and sell high at TGE.

Considering the future of airdrops as a marketing tool and the airdrop hunter problem, the following directions are conceivable:

1. Segmentation and evolution of airdrops
   ・ Segmentation: Since the purpose and method of airdrops differ across various fields like DeFi, GameFi, and SocialFi, appropriate airdrop strategies are required for each field. DeFi will emphasize rewards for contributors, while GameFi and SocialFi will prioritize expanding the user base.
   ・ Evolution: Efforts to distinguish between users seeking short-term profits and long-term contributors will progress through continuous airdrops and the introduction of pseudo-vesting.
2. Strengthening contribution rewards:
   ・ It is important to strengthen contributor rewards and increase incentives for early and continuous contributors. This reduces the need for contributors to share rewards with others and promotes high-quality contributions.
   
3. Improving the evaluation system:
   ・ Like Gitcoin, it is necessary to introduce a system that evaluates users' activity history and skills to accurately assess the potential value of contributors. This allows for the proper evaluation of users who are expected to contribute in the future while preventing bots and Sybil attacks.
   
4. Emphasis on unique user numbers:
   ・ Especially in GameFi and SocialFi, the number of unique users significantly influences the platform's value, making referral rewards increasingly important. Competition to capture users' disposable time is intensifying in this area, making user acquisition through referral rewards key.
   
5. Long-term perspective:
   ・ When designing airdrops, it's crucial to focus not only on short-term user acquisition but also on long-term user retention and community growth. This promotes the sustainable growth of the entire platform.
   

By evolving airdrop strategies in this way, it will be possible to address the airdrop hunter problem, cultivate high-quality contributors, and support platform growth.

In conclusion, airdrops can be a powerful tool when properly designed and utilized. However, designs that are biased toward short-term profits can hinder the sustainable growth of a project. In particular, it is necessary to fully consider the risk that the setting of the total supply and circulating supply at TGE, and the holding and selling of large quantities of tokens by airdrop hunters, may cause a market crash. Therefore, it is important for projects to carefully plan from the design stage of the airdrop and to manage token distribution and circulation appropriately.

Furthermore, when considering the sustainable development of a project, it is essential not only to aim for selling tokens at a high price but also to enhance the fundamental incentive design. This will allow for market valuation based on substantial value rather than short-term expectations.

By clarifying the purpose of airdrops and approaching them with a long-term perspective, they can play a crucial role in the evolution of Web3. Let's enjoy this fast-moving Web3 industry with a multifaceted perspective, considering the quality of airdrops, the quality of the product, and the market environment!