Airdrops in 2025: the end or the renewal?

Foreword: This article is partly based on our 2024 year-end report on the cryptocurrency market. We encourage you to read it for free or get a physical copy to support our work.

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Introduction

As anticipated, 2024 was a record-breaking year for the cryptocurrency sector, marked by milestones in market capitalization, technological innovation, and investor adoption. This dynamic growth led to an explosion of projects within the ecosystem, further facilitated by the emergence of platforms allowing the launch of rollups or tokens in just a few clicks.

However, this proliferation of projects heightened the competition for users’ attention. In this context, airdrops emerged as a powerful marketing tool. In 2024, the airdrop trend gained further momentum, with more content creators adopting “airdrop farming” strategies, which significantly contributed to the phenomenon’s growing popularity.

Currently, airdrops can be categorized into three main types:

• Liquidity-based airdrops: The allocation is proportional to the liquidity provided, either linearly or through tiers, with or without a minimum threshold. This system generally benefits larger wallets unless minimum allocations or caps are set.
• Activity-based airdrops: The allocation depends on user activity (e.g., number and volume of transactions, frequency, chains used, transaction diversity). This model often favors "farmers" (users deliberately increasing activity to maximize their allocations) depending on the complexity and predictability of the allocation criteria.
• Burn-to-earn airdrops: The allocation is proportional to the amount spent, such as gas fees or trading costs.

In some cases, eligibility criteria may combine several of these components, along with additional specific requirements like holding certain NFTs, engaging in social contributions (e.g., on X or Discord), and more.

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The Performance of Tokens Received via Airdrops in 2024

2024 witnessed the rise of multiple trends in decentralized finance, including:

• Interoperability protocols: Layer Zero, Wormhole, Orbiter, etc.
• Layer 1 & Layer 2 solutions: Starknet, ZKsync, Mode, Hyperliquid, Movement.
• Liquid staking/restaking: Eigenlayer, EtherFi, Swell.
• Infrastructure projects: Conduit, Caldera, Astria.
• NFT marketplaces and token launch tools: Tensor, Magic Eden, pump.fun.

Historically, airdrops primarily took the form of spontaneous token distributions directly to users’ wallets as a “thank you” for their contributions. However, in 2024, protocols introduced more sophisticated campaigns, often incorporating points-based systems designed to stimulate competition and enhance user engagement.

The critical question remains: are these airdrops genuinely effective in the long run? To answer this, we compiled an analysis of 30 of the largest airdrops in 2024, evaluating their price and market capitalization performance since launch.

The post-airdrop token performance data reveals significant variability: 15 tokens posted gains, while 15 experienced losses. Some tokens have achieved remarkable gains since their launch (e.g., JUP, KMNO, PURR, HYPE, DRIFT), whereas others have suffered substantial losses, with some declining by more than -50% (e.g., DYM, STRK, W, TNSR).

Does this necessarily reflect a broader trend? Possibly, the protocol's strategy, its ecosystem, or the narrative it aligns with has a significant impact on token performance. However, it’s important to note that in 2024, most altcoins underperformed compared to Bitcoin, at least until November.

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The Low Float, High FDV Problem

The analysis of market capitalization trends highlights that some struggling tokens are heavily impacted by dilution—a typical issue with tokens distributed through airdrops. This phenomenon is often referred to as the “Low Float, High FDV” problem:

• Low Float: The circulating supply at launch is limited, resulting in significant dilution as additional tokens are released over time.
• High FDV: The fully diluted valuation (FDV) is excessively high, making initial prices unsustainable.

Here are some examples illustrating this issue:

• The Starknet token has declined by -64% since its launch, despite a +15% increase in market capitalization.
• Similarly, the ALT token from Altlayer shows a +4% rise in market capitalization compared to its TGE, but the token itself is down -46%.
• The Wormhole token has dropped -73% from its ATH, even though its market capitalization has only decreased by -59%.

These cases can largely be explained by the sharp increases in circulating supply seen in 2024:

• Starknet: Circulating supply rose from 720M at launch to 1.3B and is expected to reach 4B by the end of 2025.
• Wormhole: Supply grew from 1.8B to 2.9B, with projections of 5B tokens in circulation by late 2025.

This constant dilution creates downward pressure on token prices, as the influx of tokens onto the market outpaces buying demand. This relatively recent phenomenon has shifted investor perspectives. Today, they prioritize Fully Diluted Valuation (FDV) over market capitalization when assessing token potential.

Future token unlocks are now a key factor in investment calculations, leading projects to launch their tokens at far lower valuations compared to similar initiatives just months earlier:

• The Starknet token launched in May 2024 with a $1.4 billion market cap, while ZKSync, its primary competitor, launched a few months later at just $788 million.
• Similarly, Mode launched at $74 million in February 2024, whereas Kroma launched a few months later with an initial market cap of just $4 million.

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From a Trend to Disappointment

The growing popularity of airdrops has raised expectations among users but has also led to widespread disillusionment. Initially viewed as a lucrative opportunity, airdrops quickly became overexploited, resulting in declining satisfaction for several reasons:

• Overly high expectations: Success stories from early airdrops (e.g., Uniswap, Arbitrum) set an unrealistic bar for subsequent projects, creating a gap between aspirations and reality.
• Frustrating allocations: The token amounts distributed often felt insufficient, especially due to the dominance of industrial farming operations.
• Complex eligibility criteria: Projects increasingly tightened requirements to combat Sybil attacks, excluding a significant portion of potential users.
• Technical issues: Bugs, blockchain congestion, and poor communication exacerbated frustrations.
• Disappointing token performance: Many tokens experienced sharp price declines after their launches, demoralizing users.

Simultaneously, the rise of “airdrop hunters,” combined with fierce competition among projects, has amplified these challenges. Campaigns based on points systems and affiliate models heightened user engagement but also fueled dissatisfaction. Industrial farmers, leveraging hundreds of automated wallets, captured disproportionate shares of allocations, further frustrating retail participants.

For projects, the end of an airdrop campaign often reveals a stark reality: user activity on their platforms frequently plummets post-distribution. This drop is particularly pronounced in DeFi protocols, where industrial farmers’ artificial engagement temporarily masks the lack of organic user adoption.

The Two Types of Farmers:

1. Classic farmers: Retail users who optimize their gains by hopping from one project to the next. Once a token is distributed, they move on.
2. Industrial farmers: Large-scale operations using bots and hundreds of wallets to generate massive but temporary activity. They abandon the project as soon as the airdrop ends.

As a result, projects are left with a drastically reduced user base, limited to those who genuinely benefit from the platform. This often exposes metrics that are far lower than the peaks achieved during the airdrop campaign.

Despite its drawbacks, this model has some advantages. Temporarily inflated metrics can attract investors, facilitate fundraising, and secure strategic partnerships. However, over time, the lack of organic adoption becomes evident, jeopardizing the project’s long-term viability.

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The Importance of Product-Market Fit: Hyperliquid’s Example

The success of an airdrop often relies on much more than the mere distribution of tokens. A project can attract an initial wave of users through an airdrop campaign, but without a solid product addressing real user needs, this momentum quickly fades.

One prime example of this is Hyperliquid. On November 29, 2024, Hyperliquid launched one of the largest airdrops in cryptocurrency history. By distributing 31% of its supply to users, the project not only captured attention but also demonstrated that a well-executed airdrop could foster significant user retention. Within just a few days, Hyperliquid's market capitalization surpassed $10 billion, with minimal corrections promptly absorbed.

The success of HYPE’s launch lies in several factors: the execution of the airdrop (with 31% of the supply allocated to the community), the financing model (absence of venture capital funding), and above all, the platform's strong product-market fit.

Hyperliquid showed the market that airdrops are not necessarily detrimental to a project. On the contrary, when done right, an airdrop can significantly enhance user onboarding and boost platform activity. However, unlike many projects in recent months, Hyperliquid demonstrated that an airdrop alone isn’t enough for long-term success. The quality and relevance of the product must take over to ensure user retention.

Hyperliquid has "simply" created a product that perfectly meets user needs and delivers on its promises.

Product-market fit remains the most critical factor for sustaining user engagement, as evidenced by several excellent crypto projects without tokens (e.g., Jumper, Phantom, Rabby, Pump.fun, Polymarket). These platforms have established themselves as major players in decentralized finance and will likely continue to do so, with or without airdrops.

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Airdrops in 2025

Continuing the trend from 2024, airdrops are expected to remain a central focus for many users in 2025. However, the rules of the game are evolving, making it more challenging for farmers while offering greater rewards to genuinely engaged communities.

The case of Hyperliquid reignited enthusiasm for airdrops by showing that a well-designed campaign can still serve as a powerful marketing tool. The example of HYPE will likely inspire many projects to adopt similar strategies, balancing community distribution with delivering high-value products.

Projects are increasingly looking to reward the real contributors to their ecosystems. For instance, EigenLayer, Sanctum, Monad, Mitosis, and Movement now incorporate (or plan to incorporate) criteria based on social contributions, such as creating content on X, obtaining Discord roles, or participating in campaigns. Others, like Abstract, Berachain, Monad, Eclipse, and Celestia, have added specific criteria related to NFTs and special collections.

This shift towards prioritizing engaged users over industrial farming operations reflects a broader desire to build strong, loyal communities. By emphasizing the community aspect, airdrops evolve into tools not just for attracting users but for retaining them by fostering an emotional connection to the project.

Finally, it would be remiss not to discuss the speculation surrounding Base, Coinbase’s Layer 2 blockchain, in the context of 2025. Despite a challenging regulatory landscape, the potential launch of a BASE token could become one of the most significant airdrops in cryptocurrency history. If this event materializes, eligibility criteria might include:

• Overall activity on the Base blockchain (volume, transactions, bridging activity).
• Community engagement (Base Learn, Discord roles, event badges).
• Participation in campaigns like On-Chain Summer.

As a marketing tool, the airdrop remains a cornerstone of the crypto ecosystem. However, projects must innovate and refine their strategies to stand out in a market where users have become increasingly discerning. The key will lie in balancing speculative appeal, community retention, and genuine utility.