Airdropping: Some Truths

Every crypto cycle develops its own meta-narratives. This cycle's defining user acquisition strategy is the airdrop. After observing dozens of distributions across our portfolio and the broader ecosystem, some uncomfortable truths have emerged.

Truth #1: Most Airdrop Farmers Aren't Your Users

The data is unambiguous: wallets that claim airdrops typically exhibit entirely different behavior patterns than organic users. They interact with protocols only during airdrop farming periods, maintain minimal balances, and show no loyalty across multiple protocols.

This isn't criticism — it's rational economic behavior. But protocols must stop confusing airdrop farming with product-market fit. High activity metrics driven by speculation are not validation of your thesis.

Truth #2: Token Price ≠ Success

The weeks following an airdrop create perverse incentives. Teams optimize for launch-day price performance rather than sustainable tokenomics. Recipients optimize for immediate exit rather than long-term participation. The result: impressive charts followed by steady decline as the divergence between short-term incentives and long-term health plays out.

A "successful" airdrop shouldn't be measured by day-one price or TVL retained. The metric that matters is: how many airdrop recipients are still actively using the protocol six months later? By this standard, most airdrops fail dramatically.

Truth #3: The Games Theory Is Broken

Airdrops were supposed to cold-start networks by rewarding early believers. Instead, they've created an ecosystem where the optimal strategy is to minimize genuine engagement while maximizing the appearance of it.

Users hire bots to simulate activity. Protocols hire analytics firms to detect bots. Users evolve more sophisticated bots. Protocols implement more complex detection. This arms race benefits nobody except the infrastructure providers selling tools to both sides.

Truth #4: There Are Better Ways

Despite this cynicism, token distributions can work when thoughtfully designed. The key is aligning the distribution mechanism with actual protocol objectives:

• If you need liquidity, reward liquidity provision over time
• If you need network effects, reward referrals from verified users
• If you need developers, reward actual application deployments
• If you need governance participants, reward quality governance contributions

The worst thing you can do is distribute tokens to anyone who touched your protocol, then wonder why they immediately sell.

Monarch Group's Approach

We counsel our portfolio companies to treat airdrops as one tool among many, not a cure-all for user acquisition. The best distributions we've seen share common elements: they target specific behaviors, require sustained engagement, and include vesting or lock-ups that align recipient incentives with protocol success.

Most importantly, they're part of a broader strategy, not a substitute for product-market fit. Build something people want to use. The token should amplify that utility, not create it out of thin air.