We need to stop pretending that airdrops work

After more than a decade of running crypto startups, I’m ready to call a paradigm shift:

Airdrops are dead, and the same fate awaits developer grant programs.

It’s time for blockchain projects to pivot from short-term incentives and instead focus on building long-term, value-driven models that ensure both user and developer loyalty. Failure to do so will lead to developmental stagnation and decline across the industry.

Airdrops first went mainstream in 2020, when the Uniswap DEX distributed 400 UNI tokens to every wallet that had interacted with its platform. This strategy was designed to drive adoption by giving users a financial stake in the project, and it worked — other projects quickly adopted the model, and airdrops rapidly became an expectation within the DeFi community.

However, unintended consequences have emerged, such as “airdrop farming,” where users create multiple accounts or perform minimal activities solely to qualify for token distributions. These opportunistic users often abandon the project shortly after claiming their rewards, leading to rapid declines in user activity and token value. Instead of fostering long-term loyalty, airdrops have become synonymous with fleeting, speculative gains.

Newsletter

Subscribe to Blockworks Daily

Consider the layer-2 scaling solution Blast. In June, Blast distributed 17 billion newly-issued BLAST tokens to early adopters, hoping to attract users and capital. The results were less than ideal: Many recipients were frustrated by the small size of their rewards, and onchain data showed that a significant number left the platform shortly after claiming their tokens. The price of BLAST dropped by 20% within hours as recipients sold off. Even more striking, the protocol’s total value locked — the capital the airdrop was intended to attract — had already declined by more than 33% in the month leading up to the airdrop. Depositors had qualified for the windfall then quickly moved on.

Rather than retaining users after getting them in the door, airdrops have largely become targets for “hot money” that collects rewards before quickly exiting in search of the next opportunity. According to recent research by CoinMetrics, two-thirds of all airdropped tokens have lost value since their release. The median return on airdropped tokens held to the present day is -61%.

This isn’t just a problem for developers — it’s systemic. Networks relying heavily on short-term incentives often attract transient users and developers who leave as quickly as they arrive. This constant churn undermines the stability of these networks and erodes trust within the entire DeFi ecosystem.

Blockchain grant programs face similar challenges. Initially successful in bootstrapping new platforms, these grants are proving as ephemeral as airdrops. Developers often hop from one chain to the next, replicating their services across multiple environments in search of funding, but being unable to establish long-term projects on any single platform. This “builder’s dilemma” affects not just developers, but also networks, which struggle to maintain stable, loyal communities.

The instability of these incentive models creates a boom-bust cycle, making it difficult for developers to predict future activity and revenue. Developers frequently pour significant resources into projects, only to be left with a fraction of what they were promised due to an unpredictable and often politicized grant process. This strikes me as the opposite of the intended goal of grants and out of line with crypto’s technical and ethical goals of open access and composability.

In its recent report, CoinMetrics concluded that “airdrops may provide a small-term bump in the protocol’s usage, but it remains to be seen if [they] can create real, sustainable long-term growth.” Based on how most airdrops and grant programs work, there’s no reason to believe that short-term incentives will suddenly start creating long-term adoption, liquidity or positive token price movements.

Airdrops and grant incentives were amazing bootstrapping tools for a particular moment — but that moment lasted from roughly 2020 to 2022. They will continue to have some role in our broader ecosystem, but if they were ever enough on their own to actually foster adoption and growth, that moment has passed.

In the post-Blast era, airdrops will be viewed far more skeptically by would-be farmers. In turn, that means weaker projects will boom and bust that much faster, further turning “airdrop” from an enticing tease into a dirty word.

So, what’s the solution? Blockchain projects must move beyond these fleeting incentives and focus on creating long-term, value-driven models that align the interests of all participants. This means developing systems where both users and developers are rewarded not just for showing up, but for staying and contributing to an ecosystem’s growth over time.

Whether you’re a depositor or a coder, you’ll soon be able to choose. You can get paid once, in an unpredictable amount, in a token that’s probably losing 30% of its value by next week. Or you can get paid consistently, for as long as you want, based on the actual performance of the network and the positive contributions you make to it.

Nearly five years after Uniswap’s debut, airdrops and grants are no longer enough. It’s time to build protocols that actually last.

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.