Good vs. Bad Airdrops: A Guide

Airdrops have become a popular method for projects to distribute tokens to a wide audience, often for free or in exchange for simple tasks. However, not all airdrops are created equal. In this article, we’ll delve into the differences between good and bad airdrops, providing you with examples and guiding you on how to spot the red and green flags.

Airdrops as Extra Yield:

For users who hold particular tokens, unexpected airdrops can represent an increase in their holdings without additional effort. This can be seen as a form of passive income or yield, especially if the airdropped token gains value over time. As we discussed previously, some airdrops are specifically for users who stake tokens or provide liquidity in DeFi platforms, offering an additional yield on top of staking or liquidity mining rewards.

Now that we’ve established the right mindset for airdrops as an extra layer of yield, let’s explore Good vs. Bad Airdrops.

Good Airdrops

• Uniswap ($UNI): In September 2020, Uniswap distributed its UNI token to anyone who had interacted with its protocol before a specific date. This airdrop was not only a thank you to its users but also increased engagement by giving governance rights to token holders.
• Arbitrum ($ARB): Arbitrum, an Ethereum layer-2 scaling solution, launched its ARB token airdrop in March 2023. It rewarded users who had interacted with the Arbitrum network, especially those who helped with the testing phases or used dApps on the network. This airdrop was strategic in rewarding early adopters and those contributing to network activity, fostering a strong community around the project.

Green Flags:

• Clear Utility: The token has a clear use-case within the ecosystem, whether for governance, staking, or as a means of exchange.
• Transparent Distribution: Details about who qualifies, how much each person gets, and the total supply are openly shared.
• Legitimate Project: The project behind the airdrop should have a solid team, a working product, or at least a detailed roadmap with milestones.
• Community Engagement: Look for active community support on reddit, social media, and other platforms, indicating genuine interest and backing for the project.

Bad Airdrops

If we view Airdrops as an extra layer of yield, one could argue that there is no such thing as “bad airdrops” (outside of outright scams) as “free money is free money”, however, we could look at examples where airdrops were criticised for the project team’s poor execution, lack of transparency, or bad execution.

1. Hamster Kombat (HMSTR):

• Details: Hamster Kombat was a game-based project aiming to combine meme culture with blockchain gaming. They promised a significant airdrop but faced multiple delays, and when the tokens were finally distributed, they were much less valuable than anticipated.
• Why Bad: The airdrop was criticized for its poor execution, lack of transparency regarding delays, and the tokens’ low value at launch, leading to widespread disappointment among participants.

2. Scroll (SCR):

• Details: Scroll is a zkEVM (zero-knowledge Ethereum Virtual Machine) aimed at scaling Ethereum. However, their airdrop in 2024 was met with backlash from participants who felt the rewards were disproportionately small compared to the time and effort invested in the project’s testnet phases.
• Why Bad: The dissatisfaction stemmed from the perception that the airdrop did not adequately reflect the community’s contributions, leading to a sense of betrayal among early supporters.

Common Pitfalls of Bad Airdrops

Poor execution was just one reason why some airdrops failed the expectation from users in 2024. More specifically, several projects just became victims of wider economic and regulatory challenges that affected the whole cryptocurrency market.

1. Over-saturation of the Market: By 2024, this number of airdrops watered down the impact. There were too many projects giving out free tokens, and now it became hard to separate great offers from weaker projects. Too many airdrops do not attract enough interest, and their tokens cannot grow in value and currency; thus, unsuccessful crypto airdrops.
2. Lack of Utility: Among the biggest issues regarding airdrops in 2024 was that of a lack of token utility. Too many projects launched tokens without proper use cases, believing solely in hype to drive demand through the roof. But such kinds of tokens quickly become worthless without real value and purpose, thus leaving participants with empty wallets and a sense of disillusionment.
3. Regulatory Challenges: By 2024, things in cryptocurrency continued to get worse with regulators. Across different countries, regulators began clamping down on airdrops, considering them unregistered securities. This brought some projects to their knees, and canceled any airdrop before it could even take off. Participants in certain areas found themselves in legal gray areas, further muddling the success of this giveaway.
4. Scams and Exploits: As the popularity of airdrops began to grow, so did the number of bad actors exploiting the system. In 2024, crypto airdrop scams ran amok wherein scammers set up fake airdrops to steal users’ personal information or crypto assets. Several participants fell victims to phishing attacks and lost their wallets or private keys after signing up to fraudulent giveaways.

With crypto airdrops entering mature markets and many players joining the fray, the associated risks become more pronounced. While airdrops are still a valid tool for marketing and distribution, users must be very careful and scrutinize choices related to airdrop participation. users can defend themselves against failed crypto airdrops and, most likely, scams by watching for the warning signs illustrated above: a lack of transparency, blurred token use cases, bad exchange listings, and security vulnerabilities. Not every airdrop is an opportunity, and taking some time to reflect on the

Disclaimer: This article, including insights on airdrop farming and other DeFi strategies, is for informational purposes only and should not be considered as financial advice, investment recommendations, or an endorsement of any particular investment or strategy. The cryptocurrency and DeFi markets are highly volatile and unpredictable. Past performance is not indicative of future results. One Click makes no representations or warranties regarding the accuracy, completeness, or timeliness of the information provided. Readers should conduct their own research and consult with independent financial advisors before making any investment decisions. By using this information, you agree that One Click is not liable for any losses or damages arising from your investment choices.risks will spare you financial loss and disappointment.

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