Understanding Crypto Airdrops

Crypto airdrops are known for distributing billions in value to active ecosystem participants, but they come with complications.

Over the years, many have attempted to game the system by using multiple wallets to “farm” airdrops, which is a speculative strategy that often pays off. This has led projects offering airdrops to tighten their distribution methods, employing on-chain analytics to identify and exclude such farmers, at times affecting real users. Consequently, airdrops have become controversial, and poorly executed ones can tarnish a project’s reputation.

Ethereum co-founder Vitalik Buterin believes there’s a solution. He recently shared on X that “Airdrops are a fascinating initial use case for ZK/blockchain-based identity/credential/attestation frameworks,” referring to zero-knowledge proof technology that enhances privacy through cryptographic means.

Buterin highlighted that airdrops should aim to reward genuine community members rather than farmers and to promote fair distribution. “These are the properties that identity/credential/attestation frameworks seek to achieve,” he stated. For developers of such frameworks, using token issuance as a beta testing ground can serve a dual purpose: refining their work while addressing real-world challenges.

When asked about potential obstacles to this approach, Buterin noted that there is no singular solution, emphasizing that the problem is complex and requires multi-faceted evolution over time. However, succeeding in this endeavor could lead to efficient methods for compensating various forms of currently unpaid work in the broader economy.

He also mentioned that tokens don’t necessarily have to be distributed for free; discounted sales based on a contributor’s involvement in the project could be a viable alternative for determining token access at a reduced price.