Are We in the Golden Age of Cryptocurrency Airdrops?

There’s an age-old notion that if something sounds too good to be true, it probably is. However, over the last 18 months, a significant number of incredible returns have been available in the cryptocurrency industry via airdrops. While it’s not exactly free money out of thin air like some in the space would claim - the higher risk/reward potential has been one of the most significant in any field of investment. 

Some investors who identified airdrop potential early have been able to claim tens of thousands of dollars worth of free cryptocurrency, and some in a smaller bracket have qualified for six-figure sums. However, now that people are flocking to any airdrop en masse and there’s plenty of liquidity back in the market relative to 12 months ago, have we already witnessed the rise and fall of the crypto airdrop?

Has The Bull Market Helped Or Hindered Airdrops?

The return of a bull market can be a blessing and a curse, depending on the area of the industry you are in. On the face of it, this might sound like a puzzling statement - surely a bouncing market is good for everyone? If you’re working in the growing AI subsector of crypto, it’s a golden time. Likewise, if you’re part of the burgeoning cryptocurrency casino industry and Bitcoin gambling platforms - you’ll also consider this period to be positive. 

Given that the crypto industry is a multi-trillion dollar asset class - casino companies are keen to bring in new waves of people to promote the benefits and convenience of using the blockchain to play casino games rather than traditional platforms. Bitcoin casino games operate like digital platforms; you can play jackpot, poker, etc., but you can use your digital assets to place a bet instead of using traditional currencies. Often, these payments are secured and verified on the blockchain instantly, involve no fees, and provide bettors with an alternative, convenient way to play their chosen casino game. 

Casino companies have used Bitcoin to highlight the industry's potential, and it could be one of the key avenues that can help bridge the gap between retail and traditional, ardent crypto fans. So, on a broader scale, yes, the bull market is, of course, helping the industry - but for those who have made their money by farming lucrative airdrops that are now saturated to such an extent that their profit margins have decreased by 70% to 80% - they may harbor a slightly less favorable opinion.

How Do Airdrops Work?

Airdrops are also known as a TGE (Token Generation Event). Early and/or prolific users of chains and protocols are rewarded for their activity tied to the project. Some airdrops have come from decentralized exchanges that rank the value of an airdrop based on the level of volume traded by a user or how many points they have accumulated - such as DYDX. 

Other airdrops involving L2s like Arbitrum have netted five-figure sums for people for a minimal amount of activity—most notably swapping Ethereum and USDT on their network once or twice a week for a few months. Each of these transactions generates small fees for the user, which is where the risk lies. 

Weighing Up Risk & Reward

Some crypto whales could clock up hundreds, possibly thousands of dollars worth of fees in a bid to offset it against a colossal airdrop - as we have seen with DEX Hyperliquid - who recently generated huge noise with their points-based system, only for it to end at the end of April with little fanfare and no information about an airdrop. Nobody knows if a project will airdrop - it’s all speculative, which is another considerable risk. 

Over the last year, the Canadian-based project LayerZero has long been touted as one of the most significant and influential projects that could potentially airdrop tokens to users. Now that they’ve announced an aggressive scheme to disqualify users who are mass farming multiple wallets - many believe either LayerZero or ZKSync could mark the top of the curve for airdrops. Other optimists believe it could peter out with Linea, rumored to airdrop in Q4 of this year. 

Final Thoughts

While airdrop projects are more saturated than Arbitrum was back in March 2023 - there’s still value to be found. LayerZero’s welcome approach to disqualify those mass farmers who are greedy enough to farm multiple wallets in a bid to maximize their return is welcome news. 

There will be teething problems, though, as many influential social media crypto influencers have multiple wallets - and many have already voiced their vitriolic resentment primarily aimed at LayerZero chief Bryan Pellegrino. This will be water off a duck’s back for Bryan, who has laughed off this criticism online and has spoken to some of the world’s most prominent publications detailing just how innovative the project and subsequent airdrop are set to be.

More projects will airdrop, whether they’re smaller tokens like Dymension or potentially life-changing ones like Hyper Liquid. We’re in the midst of the golden age at the moment, and while there’s still a lot of value, it does feel as though we’re approaching a bottleneck, and the door is slowly beginning to close.