Crypto airdrops are falling out of style

Airdrops have a branding problem.

They were pegged to help distribute token supplies equitably while inspiring a community to build around the issuing protocol, as LayerZero explained in its blog post.

But airdrop farming and automated Sybil campaigns are now so efficient at collecting free tokens that too much supply goes to parties with little interest in the long-term success of the projects.

So, blockchain connector LayerZero really wants you to know its token launch is not an airdrop. Its new token, ZRO, is a reward for donating $0.10 in crypto toward Ethereum layer-1 development. The LayerZero foundation says it will match all contributions up to $10 million.

Read more: Empire Newsletter: What CertiK-Kraken says about crypto exchange security

The team’s intentions may have been pure, but the market doesn’t seem to care for it. The not-airdropped ZRO has taken a beating, down 30% since yesterday’s launch.

Still, despite all their problems, token launches via airdrops are really common. Of the current top 200 or so cryptocurrencies by market cap, around 50 have been launched since January 2022.

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Half of those tokens were initially distributed via an airdrop, worth between 1.5% and 20% of the total supply. And if you remove memecoins, Runes and Ordinals, seven out of the remaining 13 airdrop tokens have risen in price since they launched.

Not a bad strike rate, although their median return to date is minus 30%.

It’s difficult to properly compare token airdrops as they’re usually apples to oranges, with all sorts of tokenomics quirks and utilities.

But comparing performance of airdropped tokens against other kinds of token generation events — generally launchpads and initial coin offerings — suggests it may just be difficult to launch a token that goes up at all.

Of the 15 tokens to launch in ways other than airdrops over the past two and a half years, seven have maintained value above their initial trade price, with a median return of minus 29%. That’s practically the same as the airdrops.

APE has really underperformed, shedding 90% of its value since the drop

Perhaps the market will fall back in love with exchange launchpads and launchpools.

Base token AERO for AMM Aerodrome Finance, and real-world asset platform Ondo’s native crypto ONDO were both clear outliers in this very quick analysis. AERO has gone 10x and ONDO 5x since they first hit the market through straightforward token launches, even after recent healthy corrections.

In Aero’s case, its token was issued amid the second big wave of Base fever in April, which included its own madcap memecoin markets. The timing surely didn’t hurt.

Coinbase-backed Ondo meanwhile has benefitted from the real-world asset boom, leading to positive price action for its governance token. One of its tokenized securities offerings, OUSG, began acquiring $95 million of BUIDL, BlackRock’s onchain money market fund, to help smooth redemption times earlier this year.

Bittensor and Echelon Prime are other standouts, with both rising nearly 200% since they launched without airdrops

For what it’s worth, the Worldcoin Orb actually presents a fix for many of the woes plaguing airdrops: Allow only WorldID holders to claim the tokens, relying on biometric-fueled “proof of humanity” to defeat the Sybil bots.

So far there seems to be little uptake. Perhaps next cycle.

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