Just lately, Starkware initiated their much-awaited airdrop. Like, most airdrops it resulted in a ton of controversy. Which in a tragic method, does not actually shock anybody anymore.

So why is it the case that this retains on occurring again and again? One may hear a couple of of those views:

• Insiders simply wish to dump and transfer on, cashing out billions

• The crew did not know any higher and did not have the fitting counsel

• Whales ought to have been given extra precedence since they bring about TVL

• Airdrops are about democratising what it means to be in crypto

• With out farmers, there is no such thing as a utilization or stress testing of the protocol

• Misaligned airdrop incentives proceed to provide unusual unintended effects

None of those view is unsuitable, however none of those views are fully true by themselves. Let’s unpack a couple of takes to verify we’ve a complete understanding of the issue at hand.

There exists a basic rigidity when doing an airdrop, you are selecting between three elements:

• Capital Effectivity

• Decentralisation

• Retention

You typically finish up in a situation the place airdrops strike effectively in 1 dimension, however hardly ever strike stability between even 2 or all 3. Retention particularly is the toughest dimension with something north of 15% usually extraordinary.

• Capital effectivity is outlined as the factors used to what number of tokens you give to a participant. The extra effectively you distribute your airdrop, the extra it is going to change into liquidity mining (one token per greenback deposited)—benefiting whales.

• Decentralisation is outlined as who will get your tokens and beneath what standards. Latest airdrops have adopted the strategy of going for arbitrary standards so as to maximise the protection of who will get mentioned tokens. That is usually factor because it saves you from authorized troubles and buys you extra clout for making individuals wealthy (or paying for his or her parking fines).

• Retention is outlined as how a lot do customers stick round after the airdrop. In some sense it is a method to gauge how aligned had been your customers together with your intent. The decrease the retention, the much less aligned your customers had been. 10% retention charges as an trade benchmark imply only one in 10 addresses are literally right here for the fitting causes!

Placing retention apart, lets look at the primary 2 in additional element: capital effectivity and decentralisation.

To know the primary level round capital effectivity, let’s introduce a brand new time period referred to as the “sybil co-efficient”. It mainly calculates how a lot you profit from splitting one greenback of capital throughout a sure variety of accounts.

The place you lie on this spectrum will finally be how wasteful your airdrop will change into. When you’ve got a sybil coefficient of 1, it technically means you are operating a liquidity mining scheme and can anger a number of customers.

Nonetheless whenever you get to one thing like Celestia the place the sybil coefficient balloons out to 143, you are going to get extraordinarily wasteful behaviour and rampant farming.

This leads us to our second level round decentralisation: you wish to finally assist “the small guy” who’s an actual consumer and taking the prospect to make use of your product early — regardless of them not being wealthy. In case your sybil coefficient reaches too near 1 then you are going to be giving near nothing to the “small guy” and most if it to the “whales”.

Now that is the place the airdrop debate turns into heated. You’ve got three courses of customers that exist right here:

1. “small guys” who’re right here to make a fast buck and transfer on (perhaps utilizing a couple of wallets within the course of)

2. “small guys” who’re right here to remain and just like the product you have made

3. “industrial-farmers-who-act-like-lots-of-small-guys” right here to completely take most of your incentives and promote them earlier than transferring to the subsequent factor

3 is the worst, 1 remains to be sort of acceptable and a couple of is perfect. How we differentiate between the three is the grand problem of the airdrop downside.

So how do you resolve for this downside? Whereas I haven’t got a concrete answer, I’ve a philosophy round the way to resolve this that I’ve spent the previous few years excited about and likewise observing first-hand: project-relative segmentation.

I will clarify what I imply. Zoom out and take into consideration the meta-problem: you’ve gotten all of your customers and also you want to have the ability to divide them up into teams based mostly on some kind of worth judgement. Worth right here is context-specific to the observer so will fluctuate from challenge to challenge. Making an attempt to ascribe some “magical airdrop filter” isn’t going to be ample. By exploring the info you can begin to know what your customers really appear to be and begin to make data-science based mostly choices on what the suitable method to execute your airdrop is thru segmentation.

Why does nobody do that? That is one other article that I will be writing sooner or later however the very lengthy TLDR is that it is a laborious information downside that requires information experience, money and time. Not many groups are prepared or in a position to do this.

The final dimension that I wish to discuss is retention. Earlier than we discuss it, it is most likely greatest to outline what retention means within the first place. I would sum it up to the next:
“

quantity of people that an airdrop is given to
---------------------------------------------
quantity of people that maintain the airdrop

What most airdrops make the traditional mistake of is making this a one-time equation.

So as to show this, I assumed some information may assist right here! Fortunately, Optimism has truly executed on multi-round airdrops! I hoped I would discover some straightforward Dune dashboards that gave me the retention numbers I used to be after however I used to be sadly unsuitable. So, I made a decision to roll up my sleeves and get the info myself.

With out overcomplicating it, I needed to know one easy factor: how does the proportion of customers with a non-zero OP stability change over successive airdrops.

I went to: https://github.com/ethereum-optimism/op-analytics/tree/primary/reference_data/address_lists to get the record of all addresses that had participated within the Optimism airdrop. Then I constructed slightly scraper that may manually get the OP stability of each tackle within the record (burned a few of our inner RPC credit for this) and did a bit of information wrangling.

Earlier than we dive in, one caveat is that every OP airdrop is impartial of the prior airdrop. There isn’t any bonus or hyperlink for retaining tokens from the earlier airdrop. I do know the explanation why however anyhow let’s keep on.

Given to 248,699 recipients with the factors obtainable right here: https://neighborhood.optimism.io/docs/governance/airdrop-1/#background. The TLDR is that customers got tokens for the next actions:

• OP Mainnet customers (92k addresses)

• Repeat OP Mainnet customers (19k addresses)

• DAO Voters (84k addresses)

• Multisig Signers (19.5k addresses)

• Gitcoin Donors on L1 (24k addresses)

• Customers Priced Out of Ethereum (74k addresses(),

After operating the evaluation of all these customers and their OP stability, I bought the next distribution. 0 balances are indicative of customers who dumped since unclaimed OP tokens had been despatched on to eligible addresses on the finish of the airdrop (as per https://dune.com/optimismfnd/optimism-airdrop-1).

Regardless, this primary airdrop is surprisingly good relative to earlier airdrops executed that I’ve noticed! Most have a 90%+ dump charge. For under 40% to have a 0% stability is surprisingly good.

I then needed to know how every standards performed a task in figuring out whether or not customers had been prone to retain tokens or not. The one situation with this system is that addresses could be in a number of classes which skews the info. I would not take this at face worth however relatively a tough indicator:

One time OP customers had the best proportion of customers with a 0 stability, following customers who had been priced out of Etheruem. Clearly these weren’t the perfect segments to distribute customers to. Multisig signers had been the bottom which I feel is a superb indicator since it isn’t apparent to airdrop farmers to setup a multi-sig the place you signal transactions to farm an airdrop!

This airdrop was distributed to 307,000 addresses however was rather a lot much less considerate imo. The factors was set to the next (supply: https://neighborhood.optimism.io/docs/governance/airdrop-2/#background):

• Governance delegation rewards based mostly on the quantity of OP delegated and the size of time it was delegated.

• Partial gasoline rebates for lively Optimism customers who’ve spent over a specific amount on gasoline charges.

• Multiplier bonuses decided by further attributes associated to governance and utilization.

To me this intuitively felt like a nasty standards as a result of governance voting is a straightforward factor to bot and pretty predictable. As we’ll discover out under, my instinct wasn’t too off. I used to be shocked simply how low the retention truly was!

Near 90% of addresses held a 0 OP stability! That is your regular airdrop retention stats that persons are used to seeing. I might love to enter this deeper however I am eager to maneuver to the remaining airdrops.

That is by far the perfect executed airdrop by the OP crew. The factors is extra subtle than earlier than and has a component of “linearisation” that was talked about in earlier articles. This was distributed to about 31k addresses, so smaller however more practical. The main points are outlined under (supply: https://neighborhood.optimism.io/docs/governance/airdrop-3/#airdrop-3-allocations):

• OP Delegated x Days = Cumulative Sum of OP Delegated per Day (i.e. 20 OP delegated for 100 days: 20 * 100 = 2,000 OP Delegated x Days).

• Delegate will need to have voted onchain in OP Governance throughout the snapshot interval (01-20-2023 at 0:00 UTC and 07-20-2023 0:00 UTC )

One crucial element to notice right here is that the factors for voting on-chain is AFTER the interval from the final airdrop. So the farmers that got here within the first spherical thought “okay, I’m done farming, time to move on to the next thing”. This was sensible and helps with this evaluation as a result of take a look at these retention stats!

Woah! Solely 22% of those airdrop recipients have a token stability of 0! To me this alerts the waste on this airdrop was far lower than any of the earlier ones. This performs into my thesis of retention being crucial and extra information that having multi-round airdrops has extra utility than individuals given credit score for.

This airdrop was given to a complete of 23k addresses and had a extra fascinating standards. I personally thought the retention of this may be excessive however after excited about it I’ve a thesis for why it was most likely decrease than anticipated:

• You created participating NFTs on the Superchain. Whole gasoline on OP Chains (OP Mainnet, Base, Zora) in transactions involving transfers of NFTs created by your tackle. Measured throughout the trailing 12 months earlier than the airdrop cutoff (Jan 10, 2023 – Jan 10, 2024).

• You created participating NFTs on Ethereum Mainnet. Whole gasoline on Ethereum L1 in transactions involving transfers of NFTs created by your tackle. Measured throughout the trailing 12 months earlier than the airdrop cutoff (Jan 10, 2023 – Jan 10, 2024).

Absolutely you’d suppose that folks creating NFT contracts can be indicator? Sadly not. The information suggests in any other case.

Whereas it is not as unhealthy as Airdrop #2, we have taken a fairly large step again when it comes to retention relative to Airdrop #3.

My speculation is that if they did further filtering on NFT contracts that had been marked as spam or had some type of “legitimacy”, these numbers would have improved considerably. This standards was too broad. As well as, since tokens had been airdropped to those addresses straight (relatively than having to be claimed) you finish up in a state of affairs the place rip-off NFT creators went “wow, free money. time to dump”.

As I wrote this text and sourced the info myself, I managed to show/disprove sure assumptions I had that turned out to be very invaluable. Particularly, that the standard of your airdrop is straight associated to how good your filtering standards is. People who attempt to create a common “airdrop score” or use superior machine studying fashions will fail vulnerable to inaccurate information or a number of false positives. Machine studying is nice till you attempt to perceive the way it derived the reply it did.

Whereas writing the scripts and code for this text I bought the numbers for the Starkware airdrop which can be an fascinating mental train. I will write about that for subsequent time’s publish. The important thing takeaways that groups must be studying from right here:

1. Cease doing one-off airdrops! You are taking pictures your self within the foot. You wish to deploy incentives sort of like a/b testing. A lot of iteration and utilizing the previous’s learnings to information your future goal.

2. Have standards that builds off previous airdrops, you are going to improve your effectiveness. Really give extra tokens to folks that maintain tokens on the identical pockets. Make it clear to your customers that they need to stick to at least one pockets and solely change wallets if completely essential.

3. Get higher information to make sure smarter and better high quality segmentation. Poor information = poor outcomes. As we noticed within the article above, the much less “predictable” the factors, the higher the outcomes for retention.

For those who’re actively pondering of doing an airdrop or wish to jam about these things, attain out. I spend all my waking hours excited about this downside and have been for the previous 3 years. The stuff we’re constructing straight pertains to all the above, even when it does not appear so on the floor.

Aspect observe: I have been a bit out of the loop with posting as a consequence of poor well being and many work. Which means content material creation usually ends up sliding off my plate. I am slowly feeling higher and rising the crew to make sure I can get again to having an everyday cadence right here.