The current state of airdrops in 2024: Users are frustrated and protocol fundamentals are declining.

Delphi Digital has published a report titled “Do Airdrops Do More Harm Than Good?“ highlighting key insights. This report is essential for users and a must-read for founders.The Uniswap airdrop marked a pivotal moment in the Web3 market. Even though it has been four years, it remains the largest airdrop in history, reaching an astonishing value of $6.4 billion at its peak.

Since then, the industry has undergone significant changes, leading to the rise of speculators and airdrop farmers.

The top 50 airdrops in the cryptocurrency space have allocated over $26.6 billion in value. This “free money” opportunity has not been overlooked. Now, every exciting new cryptocurrency protocol release attracts a large number of speculators and bots eager to obtain initial airdrop tokens. As a result, protocols have developed new airdrop standards and anti-bot measures. Initially, fixed reward systems were used (e.g., Uniswap). Later, layered airdrops emerged (e.g., Jito). The Optimism team promoted various standard-based airdrops. Now, we have point-based systems.

However, for many dApps favored by airdrop hunters, the main issue with airdrops is the bubble effect: once the snapshot is taken, usage metrics plummet sharply.

Let’s take LayerZero as an example. Since April, Stargate bridge transaction volume has dropped from $1.67 billion to $406.7 million, a decrease of 75%. Personally, I’ve never farmed $ZRO, and my allocation was quite average—around $400. This pattern is quite common.

Before the $ZK airdrop, zkSync generated daily fees comparable to Arbitrum. However, since the snapshot announcement and token distribution, this figure has been declining. Recently, with the launch of zkSync Era, daily fees have fallen below $10,000 for the first time.

Delphi Digital’s research details similar cases, including Kamino, Parcl, Jito, and Manta Network. All of these show a similar pattern: activity experiences a significant decline after the snapshot, and subsequent incentives reveal the reality of product-market fit (PMF).

The biggest issue with this inorganic growth is the fair evaluation of protocols and making informed investment decisions. Here are a few things that might help:

• Track DAU (Daily Active Users) and MAU (Monthly Active Users) metrics over time to see if there is a decline following the announcement of the airdrop snapshot and subsequent incentives.

• Measure how many users continue to use the platform after a set period (e.g., 1 week, 1 month) following the airdrop.

• Assess the ratio of DAU (Daily Active Users) or WAU (Weekly Active Users) between new and existing users.

• Monitor the number of transactions per user.

Monitor which features are being used and their frequency. Continued or increased use of core features after the airdrop indicates sustained interest or product-market fit.

• Track wallet engagement metrics.

•Monitor activity on community discussions and governance forums.

Another issue with airdrops in 2024 is that many new protocols widely adopt the “low liquidity, high FDV” token model. This model makes it difficult for new buyers to assess growth potential and counteracts the selling pressure from airdrops.

But that’s a topic for another discussion.

Personal Note: Airdrops can attract new users, some of whom may stick around. However, this is similar to giveaways on X (formerly Twitter): some users will visit, some may become active readers, but most will disappear.

As an investor, it’s important to distinguish between organic and inorganic growth. For protocols, ensure you can retain users to build a product with long-term success.

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