Hi, this is Gu.

Today's article is about "Airdrop," Web3's unique user acquisition method, which I have been a little curious about for a while.

Airdrop is a marketing method unique to Web3, and is said to be effective in solving the cold start problem in network effects by distributing its own tokens as an incentive to initial users.

It can also function as an incentive to attract users from competing services to one's own service, as in the Vampire Attack.

However, while financial incentives such as airdrops can be a driving force for users, they also raise the issue of user retention and user disengagement when airdrops are terminated.

The following tweet was circulated the other day about Starknet's DAUs. The tweet stated that Starknet had 8 active users as of April 6, 2024.

As it turns out, the tweet was incorrect, and it was misinformed to say that what the above tweet shows is the active users of Starknet with users who have bridged to Starknet. (Starknet-daily-transactions-and-users is not an appropriate title...)

As can be confirmed by looking at Explorer, Starknet has 15,000 accounts moving per day and nearly 100,000+ transactions moving per day.

In the midst of all this, many of the tweets we saw were of the "users have left because the $STARK airdrop is over" variety.

In this article, we would like to examine how airdrops actually work through on-chain analysis in order to confirm the truth of this statement.

The Meaning and Types of Airdrops

Airdrops are one of the most common ways to acquire users on the Web3. Airdrops function as an incentive to move users, but the meaning of an airdrop itself changes depending on the timing and other conditions of its distribution.

There are three intentions of airdrops that come to mind.

• Bootstrapping due to expectations of airdrops
• Return to contributors for decentralization
• Vampire attack for user recapture

There is not necessarily only one meaning to a single airdrop, but most often they act in combination. In other words, it is not only a bootstrap, but also a vampire attack, and in most cases, it is also a bootstrap because there was originally a smell of airdrop from some leak while aiming to give back to the contributor.

One typical example of the first is what Blur and Blast are doing now. The introduction of points is in anticipation of this airdrop, so that users can easily understand and carve out transactions. Airdrop as a way to solve the initial cold start falls under 1.

The second is in the image of Uniswap's $UNI and Optimism's $OP. $UNI is Uniswap's governance token, which will be distributed to initial users and contributors. Most of these airdrops are governance tokens, and airdrops with the intention of making the protocol and dApps community-driven and decentralized fall under 2.

The third category includes X2Y2's $X2Y2 and SushiSwap's $SUSHI, which aim to incentivize users to migrate their services by offering a higher APY than they would with Opensea or Uniswap. The $X2Y2 and $SUSHI are intended to capture users of Opensea and Uniswap, respectively.

---

There are also different types of airdrops, not only in purpose but also in issuer.

• Blockhain-based airdrops (Optimism, Arbitrum, Starknet, etc.)
• Infrastructure-based airdrops (The Graph, Eigen Layer etc.)
• dApps-based airdrops (Uniswap, Sushiswap, LooksRare etc.)

There are also other IP-issued systems such as Ape coin, but I will limit myself to the above for now.

The Numbers to Watch for Airdrop's Purposes

In this article, we would like to see how Airdrop works for services, so we would like to think about the numbers we should follow based on the purpose of Airdrop as mentioned above.

As mentioned earlier, we believe that Airdrop has three main meanings:

• Bootstrapping due to expectations of airdrops
• Return to contributors for decentralization
• Vampire attack for user recapture

We will examine the indicators to look at for each of these objectives.

Bootstrapping due to expectations of airdrops

Bootstrapping is a way to solve the cold start problem of network effects, so it is assumed that the service has network effects.

The metric to look at depends on which number the service is maximizing the utility of the service.

For example, for the DEX, "LP token volume" is likely to be important, since slippage decreases as the number of pairs of tokens to be Liquidity Provided (LP for short) increases. On the other hand, "Amount of tokens to swap" is also likely to be important, since there is no incentive to LP tokens if there is no volume to swap.

Return to contributors for decentralization

Returns to contributors for decentralization should check the degree of uneven distribution of token holders, since the objective is decentralization. However, considering the possibility that the protocol wants contributors to become stakeholders of the protocol as they are, it is also necessary to look at the extent to which users who receive airdrops maintain their holdings or contributions (i.e., whether they remain users). The same time, it is also necessary to look at the extent to which users who received Airdrops maintain their holdings or contributions (whether they remain users or not).

Vampire attack for user recapture

The purpose of the vampire attack for user acquisition is to capture users from competing services and to convert them to the company's services based on the needs that have emerged. Therefore, it would be good to see a comparison of the traction of competing services over the same period.

In addition, it is also necessary to look at the retention rate of users after airdrop, since it is meaningless to capture users if their retention is poor.

Case Study Research

From here, we would like to look at specific examples of airdrops to see the numbers. To be honest, there are plenty of airdrops out there, so in the first half of this article, we will focus on the L2 chain Optimism and Arbitrum. We will also look at how "bootstrapping by expectation to Airdro" is working mainly in this case.

L2 chain #1 Optimism

Overview on $OP

• Main Net Start: 2021/09/21

• Token Launch: 2022/06/01

• Token Listing: 2022/06/01

• Airdrop:

  • #1: 2022/5/31
  • #2: 2/10/2023
  • #3: 2023/9/20
  • #4: 2024/2/21

• token_address: 0x4200000000000000000000000000000000000042

• Acquisition conditions (1st time)

  • Multiple transactions on the OP mainnet
  • Participation in Ethereum governance
  • Multi-sig signatory user with at least 10 transactions
  • Gitcoin donors, etc.

Traction Trends on Optimism

In the graph below, the blue area shows the number of transactions for users who received $OP tokens at Airdrop, and the gray area shows the overall number of transactions. The number of transactions increased immediately after Airdrop, but this is not only due to the influence of Airdrop, but is also expected to be influenced by the numbers from another campaign called OP Quest.

Optimism Trend of Transactions

In addition, the following chart shows the overall tx trend as well as the percentage of transactions initiated by users who received $OP airdrops.

Percentage of Transactions Initiated by $OP Airdrop Users

In addition, in the graph below, the orange line shows the transition of users who made transactions among users who received $OP tokens, and the pink line shows the overall transition of users.

Optimism User Trends

Perhaps due to the nature of $OP, which is not a single airdrop, but a series of airdrops, it seems that users continue to use the system even after the airdrops have been completed. Even after the end of Airdrop, both transactions and number of users have shown steady growth.

The network effect of the blockchain is established by the feedback loop of increasing the number of applications in the ecosystem, increasing the utility of the network, and increasing the number of users, so the fact that transactions are growing even after Airdrop suggests that the $OP's Therefore, it can be said that $OP's airdrop is functioning as a bootstrap in that transactions continue to grow after the airdrop.

L2 Chain #2 Arbitrum

Overview on $ARB

• Main Net Start: 2021/09/01

• Token Launch: 2023/3/23

• Token listing: 2023/3/24

• Airdrop:

  • #1: 2023/04/26

• token_address: 0x912CE59144191C1204E64559FE8253a0e49E6548

• Terms and Conditions of Acquisition:

  • Funds bridge to Arbitrum
  • Interaction with SMACON on Arbitrum
  • Must have been using Arbitrum for a certain period of time
  • Transaction volume exceeding a certain amount

Traction Trends on Arbitrum

As before, the graph below shows the number of transactions that occurred on Arbitrum, with gray showing the overall number of transactions and blue showing the number of transactions by users who received airdrops.

While Optimism has shown a steady increase due to the launch of OP Quest immediately after Airdrop, Arbitrum has shown a temporary drop in transactions both overall and for Airdrop users after the token listing / Airdrop.

Arbitrum Trend of Transactions

The following chart shows the transaction rate of $ARB airdro users. One major difference from $OP is that transactions increased at the timing of the Nitro update, and the percentage of airdro users dropped significantly during the same period. While 80% of the transactions before the $OP airdrop was implemented were by airdrop users, the $ARB airdrop was only close to 20% of the total.

Percentage of Transactions Initiated by $ARB Airdrop Users

Arbitrum has also seen a steady increase in the number of users in recent years.

Arbitrum User Trends

Comparison of Optimism and Arbitrum

We have looked at the numbers for Optimism and Arbitrum,

The differences between the two can be roughly summarized as follows.

Comparison of Optimism and Arbitrum

Although not necessarily superior, Arbitrum's ecosystem is larger than Optimism's. Arbitrum has a larger ecosystem than Optimism.

There is a difference in the timing of the token launch: $OP was launched less than a year after the mainnet was up and running, while $ARB was launched about a year and a half after the mainnet was up and running. I have the impression that ARB has been carefully nurturing its ecosystem (Optimism is not so careful). (Not that Optimism is not careful or anything.)

Looking at the graph of Arbitrum's traction, it looks like the turning point for Arbitrum was not Airdrop, but the Nitro update, which seems to be quite dependent on Arbitrum's high quality as an L2. In that sense, the lack of real traction growth after airdrop may indicate that Arbitrum has failed to bootstrap airdrop, but since Arbitrum is a decentralized airdrop, bootstrapping may not be the target in terms of timing.

On the other hand, Optimism seems to be making good use of airdrops as a bootstrap to build traction with multiple airdrops and airdrops from the initial stage. Airdrop policy has been a success.

Continued in the second half…

In the next article, I plan to summarize vampire attack-type airdrops such as Uniswap, SushiSwap, and LooksRare.

The illustrations in this article are summarized in the dashboard below.