Airdrops are mechanisms used by cryptocurrency and NFT projects for marketing purposes and as a way to reward their communities with free tokens. This report will focus on airdrops for NFT projects.
With NFT projects, an airdrop involves rewarding NFT holders with either a new NFT or fungible tokens. Like fungible token airdrops, NFT airdrops often incorporate a snapshot approach; wallets holding the NFT at a certain time are eligible for the airdrop. Alternatively, another common approach is to allow wallets to claim an airdrop if they hold the NFT at the time of the airdrop itself.
Unlike fungible token airdrops, NFT airdrops are not usually applied retrospectively. In the vast majority of cases, the date of the snapshot for NFT airdrops is in the future. Projects tend to announce impending airdrops to the public before the snapshot date, giving people time to accumulate their NFTs and claim free tokens.
Informing people about an airdrop or snapshot before the “eligibility event” occurs (be it the snapshot or the airdrop itself) can be problematic. It provides a window for speculators to purchase the NFT to claim the airdrop and sell the NFT immediately after. This is commonly known as airdrop farming.
This report will analyze the impact of airdrops on NFT projects that have airdropped in 2022 & discuss the reasons why some airdrops are successful and others fail.
Airdrop strategies will be placed into three categories.
This report quantifies success based on whether the airdrop adds financial value to a project’s ecosystem. In this context, an airdrop is deemed successful if the most profitable airdrop strategy is to HODL. Airdrop farming and selling the hype occur only when an airdrop has extracted value from the ecosystem within the available time frame.
This analysis uses a sample of nine NFT airdrops, which occurred in 2022. Conclusions about price movements focus on internal factors and do not take into consideration external factors, such as broader market movements.
Overview: The Bored Ape Yacht Club is a collection of 10,000 unique Bored Ape NFTs — unique digital collectibles on the Ethereum blockchain. Your Bored Ape doubles as your Yacht Club membership card, and grants access to members-only benefits. BAYC is the largest NFT project in terms of market capitalization and has the highest floor price.
Airdrop Details: BAYC were airdropped 150 million ApeCoins (APE), the governance token for the BAYC ecosystem. BAYC ecosystem collections, Mutant Ape Yacht Club NFTs and Kennel Club NFT holders received smaller portions of the 150 million allocation. There was no snapshot. Instead, anyone holding a MAYC NFT is able to claim their APE between 17th March 2022–15th June 2022. The airdrop was announced on 16th March 2022. Each BAYC holder is able to claim 10,094 APE.
Most profitable strategy: HODL.
Overview: Deadfellaz is a collection of 10,000 zombie-themed pfp NFTs minted on the Ethereum blockchain. DeadFellaz have a strong community, referred to as “The Horde,” which is led by co-founder, Betty. Deadfellaz have collaborations with other well-known NFT collections like Cool Cats, Ghxsts and Gevols.
Airdrop Details: The Deadfellaz airdrop involved sending Deadfellaz NFT holders a Deadfrenz NFT. The airdrop was announced on November 29th 2021. The snapshot was on 31st January 2022 and the airdrop itself was on February 13th 2022.
Most profitable strategy: Airdrop farm.
Overview: Alien Frens is a collection of 10,000 randomly generated alien NFTs minted on the Ethereum blockchain. Alien Frens has a large community that they keep engaged by regularly reworking and updating their roadmap. The creator and artist behind Alien Frens is Mason Crowe.
Airdrop Details: The airdrop was first announced on April 5th, 2022. The snapshot was on April 10th, and Alien Frens holders were airdropped an “incubator” on April 13th. To claim the Alien Frens Evolution one would need both the incubator and their original Alien Frens NFT. The mint for the Alien Frens Evolution was 2 days later, on the 15th of April.
Most profitable strategy: Airdrop farm.
Overview: World of Women is a collection of 10,000 NFTs representing strong and powerful women, minted on the Ethereum blockchain. World of Women has built a large community following with their mission for inclusivity in the web3 space, creating opportunities for women and diverse creators. This project is led by the artist Yam Karkai.
Airdrop Details: The World of Women Galaxy (WoWG) airdrop was announced on March 10th 2022 when they released more details about the second collection, including the mint date of March 26th. There was no snapshot for the WoWG NFTs.
Most profitable strategy: Airdrop farm.
Overview: VeeFriends is a collection of 10,255 NFTs, all hand drawn by Gary Vaynerchuk, minted on the Ethereum blockchain. VeeFriends is led by Gary Vaynerchuk’s ideas of building a community using NFTs and smart contract technology, developing into one of the largest and strongest communities in Web3.
Airdrop Details: The first mention/announcement of VeeFriends Series 2 was on February 1st 2022, with additional details published February 23rd 2022. More details about the collection were published on the 4th and 7th of March. There was a snapshot for the friends list, but not for the series 1 holders, who could claim their Series 2 NFT for free at any point after April 18th.
Most profitable strategy: Sell the hype.
Overview: Doodles are a collection of 10,000 hand drawn NFTs designed by Burnt Toast, and minted on the Ethereum blockchain. Doodles have developed a strong community through voting on different events, products, and a collaborative roadmap, funded through their community treasury.
Airdrop Details: Doodles announced the Dooplicator on May 6th, but there was an earlier tweet from the founder on April 15th, which caused a price rise. There was no snapshot, any Doodles holders could claim their Dooplicator during the claiming period. The claiming period opened on May 12th 2022, and closes on June 21st 2022.
Most profitable strategy: Sell the hype.
Overview: Azuki is a collection of 10,000 NFTs designed to provide access to “The Garden,” minted on the Ethereum blockchain. Azuki was designed as a brand for the metaverse by the community, and had gathered a strong following before it was struck by concerns over the founder’s previous ventures.
Airdrop Details: The Beanz airdrop was announced at a private garden party on the 30th of March to all Azuki holders, and was quickly then published on the Discord. By the time the announcement was made, the snapshot had already been taken. Airdrop farming was not possible. The airdrop date was the next day. The Beanz collection was given an official name and information was released about it on April 2nd, 2022.
Most profitable strategy: HODL.
Overview: Clone X is a collection of 20,000 NFTs run by RTFKT studios, which is owned by Nike. They have accumulated a large following through their idea of the clones being human avatars ready to explore the metaverse.
Airdrop Details: An airdrop was announced on Twitter to all Clone X and Pod holders on the 1st of February, 2022. CloneX holders were airdropped MNLTH boxes on the 4th of February 2022, but the NFT itself was not revealed until April 22nd.
Most profitable strategy: HODL.
Overview: NFT Worlds is a collection of 10,000 NFTs that provide access to “the largest multi-metaverse in existence.” Each NFT is a plot of land in the ecosystem, and gives rights to the holder in the minecraft world.
Airdrop Details: In December, NFTWorlds announced that there would be an airdrop in February. The snapshot was on February 28th 2022, for a claim on March 1st 2022. Both of these airdrops were announced in the whitepaper, but the specific date for the second was announced on the 24th of February.
Most profitable strategy: Sell the hype.
The sample data above shows that 66% of airdrops in 2022 were unsuccessful in terms of price action. Projects like BAYC, CloneX and Azuki appear to be the exception, not the rule. In most circumstances, projects pump on the announcement and tank then slowly bleed out post airdrop or snapshot. In some instances, the complete set ends up worth less than the original lone NFT.
The results of this analysis beg the question: why are retrospective airdrops not standard practice for NFT collections? Holding an eligibility event in the future and announcing the drop beforehand invites speculators to airdrop farm your collection. It is unlikely that this cohort of new purchasers care deeply about the NFTs and want to be part of the community. In this way, the pattern revealed by the data in this sample is arguably unsurprising.
Retrospective airdrops are commonplace for fungible cryptocurrency projects. NFT projects could adopt this type of approach and only reward current holders. Alternatively, NFT projects could even more closely resemble fungible token drops and attempt to funnel rewards towards the stakeholders they want to reward the most. On-chain data makes it easy for projects to tell when wallets purchased their NFTs and whether they still hold them. This enables teams to reward early adopters that still hold their NFTs. Combined with Discord tooling to monitor engagement, projects could funnel resources to their most loyal fans. Soulbound tokens (SBTs), could present another opportunity to reward key stakeholders with airdrops. SBTs, which are in early development, are non-transferrable tokens which signal something other than wealth: credentials, membership, affiliations, among other information. Projects could airdrop SBTs to longstanding community members and contributors to act as verification that their interest in the project appears to extend beyond purely financial motivations. Projects could opt to only airdrop holders of these SBTs, rewarding those that are most engaged in the project.
The promise of free “stuff” brings more ETH into an NFT ecosystem, but this is mercenary capital, and comes at the expense of increased supply. Most airdrops involve sending holders of the original NFT a new NFT, doubling the supply of NFTs in the ecosystem. NFT projects need to ask the question: is the demand for our collection sufficient enough to mean that 100% inflation does not correspond with price dilution? And, who is benefiting from my airdrop?’
More often than not, the answers appear to be “no” and “the wrong people.”
Azuki was the only airdrop in this sample which applied the airdrop retrospectively, leaving no window for airdrop farming. It was also one of the few successful airdrops (Azuki’s recent price drop is unrelated to the airdrop) and the collection’s floor actually pumped post-drop. Of course, you cannot draw the conclusion that this means retrospective NFT airdrops should be gold standard. Azuki is (or was) considered a blue-chip collection. It was sought after. There was high demand. The same can be said about BAYC and CloneX. By many metrics, BAYC is the most successful NFT collection ever. Yuga Labs have consistently rewarded BAYC holders.
Combined with other factors, this instills confidence that holding your BAYC will be financially fruitful. As for CloneX, RTFKT, the company behind the collection, is owned by Nike. The collection is also considered a blue chip in the NFT world. For each successful airdrop, it was clear that there was sufficient demand.
This demand can be reflected by price.
The three most expensive NFT collections in terms of 90 day average floor price and pre-announcement floor price were the three successful drops. Doodles and VeeFriends are priced similarly. However, macroeconomic factors mean it is not possible to definitively make assumptions about the Doodles drop. As for Vee Friends, 55,555 Series 2 NFTs were airdropped. This is significant dilution. The benefits of Series 2 NFTs were also unclear (unless you’re a big Gary Vee fan), reducing the incentive.
Hosting an airdrop when your project is already expensive can be an effective tool for community building. It gives people cheaper access to a popular, sought after community at a lower tier — perhaps you can afford a MAYC, whose floor is 80% cheaper than a BAYC.
Cheaper projects do not have the same appeal. Airdrops are not done to provide access to their ecosystems. A cheaper alternative is not necessary. Speculating and airdrop farming have lower economic barriers to entry and are therefore less risky endeavors. This might also be a factor that contributes to the apparent lack of success for cheaper projects.
A smaller price divide between the original NFT and the airdropped NFT could also skew perceptions on which NFT is superior. The main NFT might seem less attractive.
Perceptions of superiority can also be affected by visual appeal.
Consider the two images below. One is an original WoW NFT. The other is a WoWG NFT. If you are unfamiliar with the collection, it is unclear which NFT is superior. There is little visual differentiation. In many cases, the WoWG NFTs are arguably more visually appealing than the originals. The WoWG drop was also particularly erroneous when it came to inflation. The team released 22,000 WoWG NFTs despite there only being 10,000 WoW NFTs, inflating supply by 220%.
Contrast the above with the Azuki and Beanz below. The Azuki’s aesthetics are indisputably more attractive than the Beanz NFT. This acts to pronounce the Azuki’s superiority.
An airdrop can seem like a great marketing and utility play. However, more often than not, for many projects, over the short to medium term (there is no long term data), they can have a negative impact. This is because in the nascent NFT world, for many people the main game is not art or community, but maximizing value extraction. Airdrops are clearly a great way to do this.
Airdrops create hype. Hype stimulates an influx of capital. An influx of capital raises prices. On top of raised prices, you also get another NFT or tokens for free. These are often worth thousands of dollars. You’re up, a lot. The temptation not to sell is difficult to fight. Those that don’t sell are either (1) deeply loyal community members, (2) not keeping track of the airdrop, or (3) believe in the long-term financial viability of the project and that holding is the most fruitful strategy. Announcing an airdrop prematurely might onboard some of the cohort from (3), but it certainly does materially increase the number of people in cohort (1). The impact of NFT projects onboarding mercenary capital is akin to the problems with yield farming in DeFi: you sacrifice long-term sustainability for short-term gains.
The disappointment following an unsuccessful airdrop is where most of the damage is caused. It is not just a matter of reverting back to square one. Loyal community members and teams are left disheartened after witnessing the rise and demise of their project’s floor price. The short-term euphoric bullish price run and subsequent collapse is de-motivating for all stakeholders. And unless the community is given a reason to stay, it is likely that many will seek to avoid going down with a sinking ship. This highlights the importance of post-airdrop anticipation. The stigma around airdrops is that they’re the best way to extract value from a project. It is up to the team to change this narrative and keep the carrot dangling in front of their community. Yuga Labs are excellent at this. BAYC holders have enjoyed five airdrops, the acquisition of Crypto Punks, the promise of a metaverse, and the handing over of governance. The issue here is that maintaining anticipation is labor intensive and difficult to achieve in a cost-effective manner.
This report has analyzed the impact of airdrops on NFT collections in 2022. The results have shown that most airdrops have been unsuccessful in the short to medium term in terms of price action. And that the most profitable airdrop strategy is to exit the ecosystem immediately. This is damaging to the project and its community.
This outcome can be mitigated by carefully considering the following questions:
This report also suggests that NFT projects should consider taking a retrospective approach to airdrops. This could operate to reduce speculation and ensure that rewards are funneled towards the community.
NFT Price Floor. (n.d.). Retrieved from: https://nftpricefloor.com/
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