The Idea of an Airdrop

Airdrops have become a popular method for blockchain projects to distribute tokens fairly and incentivize user engagement. By rewarding users for their participation and support, airdrops help build a loyal community, generate buzz, and promote the project effectively. Whether it's rewarding early supporters, engaging with the community, or marketing the project, airdrops serve as a powerful tool for blockchain projects. Additionally, there is a regulatory incentive for conducting an airdrop: if a DAO (Decentralized Autonomous Organization) has a large number of token holders, it can be considered a decentralized entity. In many parts of the world, decentralized entities are not subject to the same regulations as traditional centralized organizations, providing a more favorable legal environment for blockchain projects.

How to Reward Users in a Fair Way?

One of the key challenges in conducting an airdrop is ensuring that the rewards are distributed fairly. A linear solution, where every dollar is equivalent to the same amount of points, regardless of whether it's in one wallet or spread across multiple wallets, is a straightforward method. For example, a wallet with $1,000 and ten wallets with $100 each would receive the same amount of points. Furthermore, we believe that in addition to material metrics, it’s important to recognize community and their off-chain efforts.

Konoha's Airdrop Framework on Starknet

While frameworks for conducting airdrops exist on various blockchain networks, the Carmine Finance team has created a unique framework specifically for Starknet, where such a solution didn't previously exist. This framework collects and analyzes both on-chain and off-chain data to ensure accurate and fair reward distribution.

Data from On-Chain Activities

Liquidity Provision: One of the key metrics for rewarding users is based on their liquidity provision. By analyzing the volume of liquidity provided by users, the framework can allocate rewards proportionately.

Trading Volume: Another important metric is the trading volume. Users who actively trade can be rewarded based on their trading activity.

Data from Off-Chain Activities

Community Engagement: Off-chain activities such as participating in the community, contributing to testnets, obtaining different Discord roles, earning Zealy or Galxe points, and so on, are also considered. This ensures that users who are actively contributing to the community and promoting the project are rewarded.

Token Listings

After conducting an airdrop, the next crucial step is listing your token on exchanges. This provides liquidity and allows users to trade the tokens they received. There are two main options for token listings: centralized exchanges (CEX) and decentralized exchanges (DEX).

Listing on Decentralized Exchanges (DEX)

Pros:

• Decentralization: DEXs align with the decentralized nature of blockchain, providing more control to the projects and users.

• Lower Fees: When compared to CEXs, listing fees on DEXs are a lot lower, making it more accessible.

• Permissionless: Projects can list their tokens on DEXs without needing approval from a central authority.

Cons:

• Lower Liquidity: DEXs generally have lower liquidity compared to CEXs, which can lead to higher volatility.

• User Experience: The user interface and experience on DEXs can be more complex and less intuitive for newcomers.

• Security Risks: DEXs can be more susceptible to smart contract vulnerabilities and exploits.

Listing on Centralized Exchanges (CEX)

Pros:

• High Liquidity: CEXs generally provide higher liquidity, which can lead to better price stability for the token.

• Wider Audience: Tokens listed on CEXs can reach a broader audience, including institutional investors.

• User Trust: Many users trust CEXs due to their established reputations and security measures.

Cons:

• High Fees: The cost of listing on a CEX can be prohibitively expensive for many projects.

• Stringent Requirements: CEXs often have strict listing criteria, including high liquidity requirements and thorough vetting processes.

• Centralization: Relying on a centralized entity can go against the decentralized ethos of blockchain.

• Market Makers - Most agreements with market makers are structured in a way where MMs are placed in moral hazard situations. They get a loan of the listed token and they also get a call option on the tokens. What happens is that they can sell immediately, creating synthetic long put options (short spot plus long call), which combined with the remaining long call creates a pure long volatility portfolio. The MMs can just push the price a little and end up in profit. Since most token launches end up with prices going down, they often don't even have to push.

Airdrops are an excellent way to reward users, promote engagement, and distribute tokens fairly within the community. By using Konoha's framework on Starknet, projects can leverage both on-chain and off-chain data to ensure a fair and transparent airdrop process. This not only helps in building a loyal community but also sets the stage for successful token listings. Whether opting for a CEX or DEX, understanding the pros and cons of each can help projects make informed decisions that align with their goals and values, ensuring the long-term growth and success of their tokens.

Carmine Options serves as an automated market maker, offering the opportunity for anyone to buy and sell options on the Starknet network at a fair price.

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