Stablecoins can solve crypto’s airdrop problems

Airdrops are free money and it should always be seen as that. As a project, if you're not comfortable with how people treat free money (and things generally), maybe you shouldn't be handing them out in the first place.

But we get it. You want the attention, you want to attract users and everything else, but the cost is just quite high. How do you pull off a billion dollar airdrop without causing your token value to sink at listing?

I've seen many people try to come up with solutions for this, but most of their attempts just create a hostile environment.

I am of the opinion that a project should not care if one user is using 1 million wallets to farm an airdrop because if they did the needful, they wouldn't have to worry about it.

But this post isn't specifically aimed at addressing exploitation of airdrop campaigns with multiple addresses, but only how projects can potentially attain a more stable token launch.

What makes token prices crash?

Well, people sell.

And what happens when you give people something of value for free?

Well, they trade it for money!

But, what is money?

Well, people say money is a store of value for trade settlements.

But aren't cryptocurrencies, money?

Ah, now that's the problem.

People don't view all cryptocurrencies as money. The term “cryptocurrency” should have been given a meaning different “crypto assets” long back, but it never happened and probably never will.

A currency is something people expect stability from. Bitcoin isn't stable, ETH isn't and all native projects tokens aren't. So they shouldn't be called cryptocurrencies but crypto assets because that's how people view them, given that they clearly are just that.

An asset rises and falls in value, a currency is meant to be stable and store value. Only stablecoins should be called cryptocurrencies because they are based on crypto tech and are stable.

Understanding this, it's easy to see why people would sell tokens they receive from airdrops. They don't view it as money because it is not and they frankly don't care about value appreciation, they just seek stability, so why not just give them what they want?

Airdrops reimagined: giving people a choice that serves the projects

Projects assume everyone wants to be an investor or is interested in holding a stake, but most people are consumers and consumers only care about stability and nothing more.

Instead of air-dropping tokens that are assets and will fluctuate in value, stablecoins should be programmed into airdrop claim processes.

How I would do it.

Let's say I know I can afford a $100 million airdrop.

I know I have a community of over a million people, this is how I'd structure my airdrop, roughly.

I’d give the community two options:

-Claim airdrop as a native stablecoin with a max claim cap.

Or

-Claim airdrop as native governance token with linear vesting but with a mix of a non-tradable liquid access token.

If a user chooses option A, he will receive his airdrop as stablecoins with a cap that is determined by how many people choose option A, a below predictable market valuation rate, eligibility score and pre-determined liquidity.

Eligibility score just means your rank amongst every user on how much token you would generally be entitled to. Maybe it was a point system, so the score would be derived from accumulated points from all qualifying activities.

A below predictable market valuation rate just means that if listing price would be $5 per native governance token, a user that would qualify for 100 tokens worth $500 at listing could get maybe $175 in stablecoins because they choose stability.

Make no mistake, this isn't the final value they'd get because of pre-determined liquidity and max claim cap.

The max claim cap is generally deprived from how many users qualify for an airdrop. This value could be $150 depending on if the math sums up to that for a fair claim. And the available liquidity could also impact how much an individual gets at the end of the day, especially if a lot of users choose to take the stablecoin drop.

Now if a user chooses the second option to claim the drop as the native asset. Well, they get the full drop they were qualified for only that this drop will be linearly vested for maybe 8-12 months?

This means that they cannot get all their tokens at launch, instead, they'd receive the drop over time as drips of the sum over a predefined schedule.

Generally, this set of users will not care about lock-ups because they didn't want to sell in the first place otherwise they would have chosen the stablecoin option.

The inclusion of a liquid non-tradable access token allows all claimers to still participate in things like governance whilst their tokens are locked up, with the design leading to burning said access tokens when the vested tokens hit the wallet.

We create an insane amount of leverage for projects by running airdrops like this.

For instance, one might be wondering where the liquidity for the stablecoins will come from, well, that's simple. The idea that the project aims to airdrop $100 million worth of tokens just means that it aims to provide liquidity up to $100 million.

If most users choose the stablecoin route, much of that money just becomes liquidity to farm the native governance asset. And significant stablecoin claims would also incentivize external players to provide liquidity to farm the launch of these tokens.

To put it simply.

The native assets that should originally go to the users that choose stablecoin drops will become an incentive for liquidity providers.

A user that chooses a stablecoin drop would be forfeiting roughly $325 - $350 of its $500 worth of allocation to liquidity providers. This is a 65% return for covering a $175 or $150 trade, theoretically.

What do you think would happen at launch?

Well, significant LP interest is to be expected. Of course, these token incentives have to also be paid in stablecoins to avoid LPs having the incentive to dump the native governance token at launch.

Projects try to turn everyone into investors or long term holders when they should be optimizing to ensure that anyone who wants to exit, exits and those that stays understand the commitment expected.

Stablecoins will be central to solving DeFi’s stability problems, we just have to start experimenting with them. Everything that involves incentives should be paid in a stablecoin, if it has to be paid in the native governance asset, it has to be linearly vested and if it doesn't require capital injection, it has to be taxed to incentivize LPs to settle exit trades.

The strategy above put users in a position to think hard on what's more profitable, taking the free money to run at launch, or holding for the long-term and regardless of what said user chooses, the projects running these airdrops would still be protected.

Posted Using INLEO