Solana project Sanctum will double airdrop rewards for ‘long-term aligned’ users
Crypto airdrops are a favourite way for DeFi protocols to attract users, drum up interest and ultimately launch tokens.
Yet in recent months, new token launches, which traders previously piled into in droves, aren’t attracting the same attention they used to. Many recent airdrops have seen their tokens plummet on launch.
Onlookers have blamed everything from airdrop Sybil attackers to the projects themselves for the situation.
Controversies
Sanctum, a liquid staking protocol on Solana, is trying to avoid the controversies that have plagued recent airdrops.
Those eligible for the project’s July 18 airdrop have a choice.
They can claim their tokens straight away, giving them the opportunity to sell them, or wait and get up to double their initial allocation.
“You can claim immediately, but waiting gives you up to a 100% bonus,” Sanctum co-founder FP Lee said in an X post announcing the airdrop details.
The hope is that by incentivising airdrop recipients to wait before claiming and selling, while at the same time selling tokens publicly to investors, Sanctum can create a more stable and sustainable token launch.
But whether airdrop recipients will be willing to defer their payouts is another question.
To get the maximum possible bonus, Lee said, recipients will need to wait six months before claiming their tokens.
In the ever-volatile crypto market, that’s a long time.
The airdrop dilemma
DeFi projects launching tokens have to strike a difficult balance.
A token’s distribution, in the form of sales to early investors or through an airdrop, can make or break a project.
In recent months, several DeFi projects have been criticised for purposefully launching tokens at high valuations to make their project appear more valuable.
“If you start at $20 billion and drop 95% in a bear, you’re still a $2 billion project,” Marc Weinstein, a partner at crypto investment firm Mechanism Capital, previously told DL News.
At the same time Sybil attacks are a constant worry. These buccaneering DeFi players create multiple wallet addresses to spoof airdrops by pretending to execute legitimate activity.
Sybil attackers cashing out en masse after airdrops causes the prices of newly-launched tokens to plummet, leaving a bad taste in the mouth of many legitimate users.
When crypto bridge Wormhole airdropped its W token in April it initially traded at $1.33. It has since dropped 71%.
Similarly, Ethereum layer 2 network ZKsync’s ZK token has dropped around 32% since its June airdrop.
There are exceptions, though. The token of LayerZero, another crypto bridge that took measures to exclude Sybil attackers, has maintained its value since it launched through an airdrop.
Delayed gratification
Sanctum’s strategy is twofold.
Incentivising airdrop recipients to delay their claims only works if those users believe the token will trade higher in the future. Attempting to juice the token’s value in the short-term, therefore, isn’t an option.
“Projects in the past started with so little and launched with crazy inflated FDVs,” Sanctum co-founder FP Lee previously said in an X Spaces stream outlining the launch. “We don’t want that. We want to start low and go up.”
Lee was referring to fully diluted valuation, — or FDV — the total value of a token’s supply, including those locked or yet to be distributed, and not just those that are circulating.
To avoid launching at a high FDV, Sanctum will let investor demand for CLOUD tokens help set a fair market price.
The project is selling 50 million CLOUD — 10% of the token’s supply — to the public at $0.15 each through Jupiter’s LFG launchpad.
The CLOUD token will start trading at a higher or lower price depending on what portion of the 50 million tokens investors buy.
But there’s a catch. Like those deferring their airdrop claims, tokens bought through the launchpad will be locked up for six months before investors can sell them.
“The key question to ask yourself on launch day is: are you long-term aligned? or more short-term curious?” Lee said.
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at [email protected].
