Key Takeaways from 2024 Airdrops

After our analyses of over 15 different airdrops and recent case studies of token airdrop launches, this article shares our findings and explores different ways protocols can target the right users and maximise ROI and APR returns.

For unfamiliar readers, let’s briefly explain what airdrops are. Airdrops are free distributions of cryptocurrency tokens given by a project to people as a way to promote their platform, reward early supporters, or encourage adoption. Below is an example of an airdrop page;

It’s like a digital giveaway where you receive tokens just for participating in the project or meeting certain conditions.

How do Airdrops work?

Why They Happen:

• To create awareness about a new cryptocurrency or project.
• To reward early users or loyal supporters.
• To encourage users to use or hold the token.
• To increase the Total Value Locked (TVL) of a protocol

How You Get Them:

• By Holding Another Token: Some airdrops reward users who already own a specific cryptocurrency (like Ethereum).
• Through Activity: Projects may reward users for tasks like signing up, using their app, or sharing information on social media.
• For Being Early: If you were among the early adopters of a platform, you might get tokens when they launch.

Value:

• Tokens can have real value if they are listed on exchanges or pre-market or become part of a popular project.
• Points that are gotten from airdrops can be listed on platforms like Whales Market and sold

• Sometimes the value is speculative and depends on the project’s success.

Summary of Results

What we’ve done over the months is to analyse protocols that have distributed their airdrops and we calculate the returns (ROI) and the annual potential yield (APR) after they participate in these airdrops.

Most airdrops have different activities but we focused on just depositing/locking 1 ETH (or its dollar equivalent) for the duration of the airdrop. Below is the list of the airdrops;

Findings

Protocol Strategies Matter

• Engagement Models: Protocols offering activities beyond holding tokens, such as platform usage and social sharing, may experience greater adoption and TVL growth.
• Airdrop Distribution: Rewarding early users or task-specific participants often drives higher APR.

Shorter Seasons Yield Higher APRs

Protocols with shorter durations tend to deliver higher APRs due to the compounding effects. For instance:

• Eigenlayer (Season 1): 93.63% APR.
• Ethena (Season 1): 560.00% APR.

Performance Drops in Subsequent Seasons

Protocols with multiple seasons, such as Ethena and Kamino Finance, showed reduced ROI and APR in later seasons. This trend likely results from user base expansion and token dilution as more users would want a piece of the cake.

Correlation between Airdrop Duration and ROI/APR

There isn’t a clear, strong correlation between the duration of the airdrop and the resulting Return on Investment (ROI) or Annual Percentage Rate (APR). Some short airdrops had high ROI/APR,, while others with longer durations had lower ROI/APR (e.g., many projects with 100+ days duration).

High TVL Increase Percentage Doesn’t Always Translate to High ROI/APR

Projects like EtherFi and Renzo show incredibly high percentage increases in TVL after the airdrop, but their ROI and APR aren’t exceptionally high compared to other projects.

Airdrop Allocation Percentage and ROI/APR Are Not Directly Proportional

The percentage of tokens allocated in the airdrop doesn’t directly correlate with the resulting ROI or APR. This points to the importance of other factors like overall token supply, project popularity, and market sentiment in determining the token’s post-airdrop value.

Recommendations for Protocols

Diversify Airdrop Mechanisms

Encourage Platform Interaction: Design airdrops that reward users for active engagement, such as:

• Trading Activities: Incentivize trading on the platform to boost liquidity and activity.
• Governance Participation: Reward users for participating in voting or other decision-making processes, which fosters a sense of ownership and long-term commitment.
• Staking or Locking Tokens: Promote staking or locking tokens for defined periods, ensuring users contribute to the ecosystem’s stability.

Gamified Experiences: Introduce gamified tasks (e.g., completing specific milestones or quests) to make participation engaging and rewarding, driving higher retention rates. An example is utilizing Galxe quests (image below)

Optimise Season Duration

Short and Focused Campaigns: Limit the duration of airdrop campaigns to maximize impact and maintain user enthusiasm. For example:

• A campaign of 30–60 days often generates urgency, encouraging immediate participation and ensuring the APR is x3 or x4 of the ROI and since analysts post the APR of protocols, it’ll make subsequent seasons more attractive.
• Long campaigns can dilute excitement and lead to diminishing returns as user interest wanes.

Monitor and Mitigate Token Dilution

Dynamic Allocation Strategies: Reassess token allocation for each airdrop season to prevent over-distribution and maintain token value.

• Gradually reduce token allocations for subsequent seasons if user growth accelerates.
• Introduce caps or limits on individual allocations to prevent overconcentration among large participants.

Anti-Bot Measures: Deploy mechanisms to identify and exclude inauthentic users (e.g., bots) from the airdrop, ensuring genuine engagement.

Promote Long-Term Engagement

Transparent Communication: Keep the community informed about how airdrops are structured and the rationale behind changes, fostering trust and alignment with the protocol’s goals.

Bonus Rewards for Continued Participation: Offer additional rewards to users who stay active on the platform after the airdrop ends.

Referral Quality Metrics: Reward referrals not just for sign-ups but for meaningful activities, such as trading volume or staking behaviour, ensuring referrals contribute to ecosystem health.

Recommendations for Users

Check Airdrop Mechanics

• Prioritise airdrops that reward multiple activities, such as trading, governance participation, or completing tasks beyond simply token-holding or staking.

• Avoid projects with overly complex or opaque reward mechanisms that might favour bots or large participants.

Leverage Referral Bonuses with Caps

• Prioritise airdrops that offer referral bonuses with caps on total users or referral rewards. Caps help prevent overcrowding and reduce dilution of returns, ensuring a more equitable distribution of rewards.
• Look for projects that emphasize quality referrals by rewarding meaningful activities rather than just sign-ups.

Look for Transparent Mechanics

• Select projects that clearly explain their airdrop mechanics, including eligibility criteria, reward distribution, and timelines.

• Avoid protocols with unclear or hidden rules. From our research, we noticed they often lead to dissatisfaction and confusion on social media.

Be Early

• Early adopters often receive higher rewards. Follow new projects closely and participate in testnets or early alpha phases to position yourself for potential airdrops.

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.

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