Airdrops are facing a significant branding challenge. Originally designed to distribute token supplies fairly while incentivizing community building around emerging protocols—as LayerZero highlighted in a recent blog post—they have increasingly become targets for automated Sybil attacks and airdrop farming. These tactics efficiently accumulate free tokens, often directing substantial portions of the supply toward actors with little interest in the project’s long-term success.
In response, cross-chain interoperability protocol LayerZero has been keen to emphasize that its recent token distribution is not an airdrop. Instead, the release of ZRO is framed as a reward, requiring users to donate $0.10 in crypto to support Ethereum Layer 1 development. The LayerZero Foundation has pledged to match all donations, contributing up to $10 million in total.
Despite these well-intentioned efforts, the market response has been lukewarm. Since its debut, the non-airdrop ZRO token has declined by roughly 30%.
The Prevalence of Airdrops
Even with these growing concerns, airdrops remain a common method for token distribution. Among the top 200 cryptocurrencies by market cap launched since January 2022, approximately 50 new tokens have entered the market. About half of these were initially distributed via airdrop, accounting for between 1.5% and 20% of their total supplies.
When excluding meme coins, Runes, and Ordinals, the remaining 13 airdropped tokens show mixed performance: seven have appreciated in value since issuance. That said, the median return across all airdropped tokens sits at -30%.
Comparing Token Generation Events
Directly comparing airdropped tokens is challenging due to variations in tokenomics, use cases, and project types. However, when we contrast airdrop performance with other token generation events—such as launchpads and initial coin offerings (ICOs)—it becomes clear that achieving token appreciation post-launch is difficult across the board.
Among the 15 non-airdrop tokens launched in the past two and a half years, seven are trading above their initial listing price, with a median return of -29%—nearly identical to the results seen with airdrops.
Exceptional Performers
Two tokens stand out in this analysis: AERO, the native token of Aerodrome Finance—an automated market maker (AMM)—and ONDO, the native cryptocurrency of real-world asset platform Ondo.
Despite recent pullbacks, AERO has surged tenfold since its launch, which coincided with the second major wave of interest in Base in April and a bullish meme coin market. Meanwhile, ONDO—backed by Coinbase—has risen fivefold, bolstered by growing excitement around real-world assets (RWA). Earlier this year, Ondo’s tokenized securities product, OUSG, began acquiring $95 million in BUIDL, BlackRock’s on-chain money market fund, to improve redemption liquidity.
Alternative Distribution Models
Some projects are exploring new distribution mechanisms to overcome common airdrop challenges. Worldcoin, for example, uses biometric authentication through its Orb device to verify unique human users. Only holders of a WorldID can claim tokens, effectively reducing Sybil attacks through proof-of-personhood.
So far, this method hasn’t gained widespread adoption. But with growing concerns about fairness and distribution efficiency, the next market cycle may see more innovation in this space.
👉 Explore advanced token distribution strategies
Frequently Asked Questions
What is an airdrop in cryptocurrency?
An airdrop is a method of distributing tokens or coins to numerous wallet addresses, usually to promote adoption, reward early users, or decentralize ownership. They are often free but sometimes require completing simple tasks.
Why are airdrops becoming less popular?
Airdrops are increasingly targeted by automated bots and Sybil attackers who exploit these events for quick profits. This reduces the effectiveness of airdrops in building genuine, long-term community engagement.
What are some alternatives to airdrops?
Other token distribution methods include initial coin offerings (ICOs), launchpads, liquidity mining, and proof-of-personhood models like Worldcoin’s Orb-based distribution. Each has its own trade-offs in terms of accessibility, fairness, and regulatory compliance.
How can projects reduce Sybil attacks during airdrops?
Projects can implement stricter eligibility checks, use web-of-trust verification, leverage biometric authentication, or require small donations or tasks that are costly to automate at scale.
Do airdropped tokens usually increase in value?
Not necessarily. While some airdropped tokens perform well, many depreciate due to sell-pressure from farmers and a lack of sustained demand. Historical median returns for airdropped tokens have often been negative.
What was LayerZero’s approach to token distribution?
LayerZero introduced a donation-based model where users contribute a small amount to Ethereum L1 development in exchange for ZRO tokens. This was framed as a reward mechanism rather than a traditional airdrop.