Consumer airdrops, enterprise incentives

Don’t be confused — it’s Wednesday, not Friday. No regular newsletter this week because Sonya (that’s me) is going on vacation. I’m sure you will miss me 😇

Before heading out, I want to talk about airdrops, following up on last week’s topic of onchain advertising. The moment is apropos because Warpcast is leaning into airdrops; power users will be eligible for several more in the coming weeks.

First: What is the point of an airdrop, from the devs’ perspective? The public answer is usually “to reward our early supporters,” but these are the underlying reasons:

• Airdropping creates a constituency for the token — a group of people who will benefit if number go up. In theory, they will devote their efforts to making that happen. It is easier and faster to manufacture this group by giving the token away versus hoping enough people will buy it.
• Airdrops attract attention because people like free money, so airdrops can act as top-of-funnel marketing. “Project I’ve never heard of” becomes “project that generated buzz on the timeline,” potentially even “project that paid me for doing nothing.”

Well, about that part, the “doing nothing” of it all… Airdrops have predictable problems. Many recipients will dump your token immediately, because they don’t care about your ecosystem and would rather gamble on something else.

To mitigate this dynamic, many airdrop programs require measurable engagement with the product before handing over any assets. Devs dangle the carrot to incentivize user activity, thus guaranteeing some ROI from the airdrop process. This is, unfortunately, extremely gameable.

@jacopo.eth encapsulated the issue well:

Indiscriminate airdrops harm products by driving the ratio of good/bad users toward zero. 

They may give a short-term revenue boost but are ultimately long-term killer, as they drastically reduce quality feedback and skew the product’s focus.

He continued, “I know most projects try their best to design fair systems that reward actual participants, but the sheer number of people and bots trying to game them makes it hard to do it at scale.”

Plus this response from @dcposch.eth:

The problem is also that the mere hint of an airdrop completely drowns out [product-market fit] signal.

"Hey we have this cool new product. It does X, Y, and if you use it you might get $20,000 for free in the future." Good luck finding anyone who cares even slightly about X and Y

(This critique applies to any type of financially motivated engagement.)

Okay… then why bother airdropping? Clearly some projects still deem the short-term burst of hype to be worth the downsides. Admittedly, even the most naive airdrop can work; sometimes lightning is captured in a bottle.

However, a method with more predictable results relies on introducing user reputation. Warpcast has adjusted airdrop incentives so that recipients play an iterated game, poised to benefit from cooperating with project devs on a longer-term basis. “Goal is to make Airdrop Offers a great way for developers to get their first 1,000 aligned users.” Aligned users, not just any old users.

Warpcast’s broad approach was shared as guidance for eager users:

How to improve your chance of having a developer target you with an airdrop

1. Cast a lot
2. Use [mini apps]
3. Transact onchain

The more active you are, the better your chances are.

Additionally, we will share historical airdrop activity with developers.

So opting in to an airdrop and following the guidance from the developer will improve your reputation as a good user to airdrop to.

Bold added. There it is! If you sell immediately, or ignore the product associated with the airdrop, you’re less likely to receive future airdrops. Warpcast also provides developers with some sybil-resistance via layered account verifications.

These airdrops still require you to do something: add or use a mini app, cast in a channel, follow an account, and likely more options to come. “It's a claim flow, so only people who complete the flow receive the airdrop.” The upshot is that Warpcast airdrops have multiple levels of targeting.

Advertising is the natural way for a social network to monetize, and this is a crypto-native version: Warpcast has productized access to its best users. (Worth noting — Warpcast is a client for the Farcaster protocol, and this airdrop feature is specific to users of the Warpcast client.)

Warpcast is not the only player trying to improve airdrops. Brian Flynn, CEO of Boost (“marketplace for onchain actions”), summed up his take:

old playbook:

1. create tokens
2. tell users to buy tokens
3. users angry 

new playbook: 

1. create tokens
2. attach revenues
3. distribute tokens to users upon tx
4. users happy
5. earn even more

For example, “attach revenues” describes the Clanker model in which coin creators get a cut of trading fees. You could create a memecoin and then distribute the tokens to users who undertake action X, for many different values of X. Needless to say, this is what Boost does — to the company’s credit, they’ve been at it longer than most.

Flynn elaborated:

you want to think about token distribution as a marketing cost. so distribute as incentive to get users to buy. should be acquisition and retention lever. only pay out when users drive you revenue

A new product that facilitates this process is Infector, which makes it easy to airdrop tokens based on connections from onchain social networks (e.g. airdrop to anyone minted a given Rodeo post). “Holding coins shows what tribe you are part of, what moment you were there for, who you are,” says the launch thread on X. Call it vibe economics, perhaps.

In a similar vein, Quidli allows you to airdrop an ERC-20 to a specific group, based on factors like Farcaster channel membership and specific asset holdings. For example, you could airdrop to 1) your Farcaster followers 2) who hold $higher. Or there’s Rainbow’s new token launcher, with built-in airdrop functionality that integrates Farcaster.

What do you think, is it possible to design an airdrop that can’t be farmed? Have you tried any of these tools? I just gave Infector a whirl for my side project $petal and it worked like a charm. Composability is so cool!

Cheers,
Sonya

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