Traditional airdrops are dead? Community incentive-based ICOs may become the primary way to distribute airdrops

Author: Yu Hu, Founder of KaitoAI

Translation: AididiaoJP, Foresight News

Over the past eight months, through Kaito's partner program and our own initiatives, I’ve closely observed approximately 30 token generation events (TGEs). It’s clear that profound changes have taken place across the industry in this cycle. This article combines my experience and latest thinking to explore the following topics:

• Why is the paradigm of token distribution shifting?

• What constitutes good token distribution and how can it be achieved?

• Smart incentive culture: incentive alignment and non-incentivized signals

• Why data-driven ICOs may become a new paradigm alongside airdrops

Why the Paradigm of Token Distribution Is Shifting

Since Uniswap’s historic airdrop in 2020, the crypto industry rapidly embraced this model of token distribution—partly because it strongly resonated with crypto ethos, and partly due to regulatory arbitrage opportunities.

In hindsight, this trend may have peaked around the end of 2024 with Hyperliquid’s TGE. Hyperliquid’s airdrop was another historic moment nearly impossible to replicate. For all of us, Hyperliquid executed exceptionally well on their airdrop, truly inspiring many founders considering giving away large token allocations to their communities for free.

However, when projects began preparing for their own TGEs, they quickly realized it was an entirely different story:

1. Hyperliquid could handle internally what now requires over ten intermediaries to ensure accessibility and liquidity;

2. 99% of projects lack Hyperliquid-level revenue streams to support massive buybacks.

Compared to 2021, tokens in this cycle without strong built-in buying mechanisms face more severe liquidity crises, especially on the demand side. Most new tokens experience sharp price declines shortly after launch. This trend has shifted community culture from “diamond hands” (long-term holding) toward early selling, creating a self-reinforcing cycle.

What’s the result? More teams are now rethinking their approach to community distribution. Clearly, at least some projects are exploring alternative structures such as ICO models like pump.fun, Plasma, Sahara, as well as traditional airdrops.

For project teams, ICOs create a demand-driven dynamic: real supporters can invest and establish a cost basis. In contrast, pure airdrop models exhibit weaker community signaling, and non-supporters may receive tokens at zero cost.

Does this mean all community airdrops will end? I don’t think so. Airdrops still hold significant marketing and community-building value: identifying, rewarding, and nurturing loyal communities remains a key determinant of project success and long-term growth.

However, I believe the industry increasingly needs airdrops to be combined with clearer alignment and signaling mechanisms—a principle that also applies broadly to token distribution and incentive design.

Therefore, I believe we’ll see a growing trend of deeper thinking and experimentation around how teams evaluate and reward past contributions, weigh the costs and benefits of liquidity venues, create opportunity costs, design alignment and signaling mechanisms, and find every possible way to expand high-quality distribution.

We all need to reflect on the implications of these shifts and build a sustainable culture and set of expectations for all participants—including communities, teams, exchanges, and funds.

What Is Good Token Distribution, and How to Achieve It

In my view, good token distribution should:

• Reward participants based on community consensus and alignment;

• Use non-incentivized behaviors as signals;

• Be broad and relevant—providing ample participation opportunities throughout the process.

To achieve this, I believe several key shifts are necessary:

• Stronger data analytics capabilities to identify meaningful signals;

• A clear focus on designing mechanisms that highlight these signals;

• Resetting expectations for all stakeholders.

Thus, the future of token distribution will center on sustainability and smart incentives for genuine communities, ensuring long-term network and brand development.

Smart Incentive Culture: Incentive Alignment and Non-Incentivized Signals

As part of this shift, I believe the industry will move toward more data-driven token distribution and smarter incentive design, where return on investment (both tangible and intangible) becomes a core evaluation metric. This emerging culture rests on two pillars:

• 1) Incentive Alignment

• 2) Non-Incentivized Signals

Incentive alignment refers to actions involving opportunity cost—whether capital-based or social—and serve as credible signals in future community formulas. Examples include participating in an ICO, TVL commitments, holding community NFTs, and public social advocacy. Alignment can be encouraged through incentives, but to be meaningful, it must involve real scarcity or cost; otherwise, it risks becoming low-value signaling.

Non-incentivized signals, on the other hand, capture organic behaviors that reveal true intent. These might include participation during non-incentivized periods or any unexpected mechanism. Hyperliquid’s point distribution between seasons is a prime example of this practice.

Today, most market strategies blend both types of behavior. The effectiveness of any activity depends on how well teams balance incentivized alignment with non-incentivized signals, and how they measure ROI for each.

Why Kaito Launched a Token Launch Platform and Our View on the Future of Data-Driven ICOs

We believe that, if designed correctly, public sales can combine the strengths of both: incentive alignment and non-incentivized signals. The key lies in adopting a data-driven approach: precisely determining who receives allocations and how to predict future value contribution. As a leading data analytics platform in crypto with extensive coverage, we believe Kaito is best positioned to make this model work.

We call this model "data-driven ICO" and believe it offers teams a compelling option, whether for market entry execution or optimizing token distribution.

• A well-structured ICO can test community consensus and filter out non-supporters;

• Allocations are optimized by combining the best signals of historical and future value contribution;

• A carefully curated ICO invites new members, expanding distribution reach;

• As a non-incentivized event, it also serves as a powerful signaling mechanism.

Imagine, for example, a pump.fun-style sale—but instead of rewarding whoever gets listed on exchanges first (first-come, first-served), it considers product usage, social advocacy, off-chain and on-chain reputation, conviction, and geographic balance in global community building…

Such a distribution puts tokens into the right hands and builds greater confidence in a culture of alignment and shared prosperity within the community.

Conclusion

We are reaching a pivotal moment when the industry is re-evaluating what works and what doesn’t.

For an industry that prides itself on free-market self-regulation, the path forward should always be redesigning incentives and improving coordination systems.

I believe that as crypto technology spreads globally, our field will mature further—and as an industry, we can not only lead in frontier infrastructure but also build a new global coordination engine using tokens as foundational incentive tools.

To me, this requires a completely new approach: one that leverages more advanced data and analytics in everything we do—from token distribution to incentive design and alignment.