Airdrop rewards “farmers” while killing the real community.

By Nanak Nihal Khalsa, Co-Founder of Holonym Foundation

Translated by AididiaoJP, Foresight News

In most prior cycles, crypto teams convinced themselves that airdrops were about building communities. In practice, however, airdrops evolved into something entirely different: large-scale training programs teaching people how to extract value with maximum efficiency—and then exit.

This outcome was not accidental. It was the inevitable result of token distribution practices between 2021 and 2024: low circulating supply, high fully diluted valuations, point systems rewarding behavior over intent, and eligibility rules easily reverse-engineered by anyone with sufficient time and scripting ability. The system we built made rational behavior synonymous with mass wallet creation, simulated engagement, and immediate dumping.

The crypto industry is accustomed to discussing trust as an abstract concept. Yet trust erodes precisely because token distributions no longer align incentives with belief—participation becomes transactional.

Loyalty becomes short-term speculation; governance becomes theater. When users are rewarded for volume—not conviction—the result isn’t community, but mercenaries.

Airdrops Spawned the Value Extraction Manual

Point systems have exacerbated this trend. Often marketed as fairer token distribution mechanisms, in practice they turn participation into a job. The more time, capital, and automation one invests, the more points one accrues. Genuine users—constrained by limited resources—are marginalized, replaced by those treating point dashboards as yield farms.

Everyone knows this is happening. Teams watch wallet clusters grow. Analysts publish post-mortems revealing how a handful of entities captured disproportionate shares of token supply. Yet the model persists—largely because it looks good on growth charts and generates short-term market attention.

The result? Airdrops have lost credibility, as their mechanics have become predictable and exploitable. By the time tokens launch, a significant portion of supply is already pre-allocated for immediate exit. Post-launch price action ceases to be price discovery—it becomes cleanup.

Token Sales Are Returning—Because Airdrops Have Lost Credibility

It is against this backdrop that token sales—and even ICO-style offerings—are making a comeback. This isn’t nostalgia, nor a rejection of decentralization. It’s a response to structural failure. Teams are seeking ways to reintroduce filtering mechanisms into distribution. Questions like *who qualifies*, *under what conditions*, and *with what constraints* now carry equal weight to how much capital is raised.

What’s different this time isn’t the act of selling tokens itself—but how participation is being redesigned. Early ICOs were open to anyone with a wallet and fast fingers. That openness brought clear downsides: whale dominance, regulatory blind spots, and a lack of accountability.

Next-generation token launches are experimenting with filtering mechanisms previously absent from the space. Identity and reputation signals, on-chain behavioral analysis, jurisdiction-based participation restrictions, and mandatory allocation caps are increasingly central to issuance design. The goal isn’t exclusion for its own sake—but ensuring tokens reach real users more likely to stay long-term.

This shift exposes deeper fractures within the industry. For years, crypto positioned itself around permissionlessness—yet many of its most valuable functions now rely on some form of access control. Without it, capital flows to automation; with it, teams risk rebuilding the highly monitored systems they claimed to replace. The tension between openness and protection is no longer theoretical—it surfaces in every serious issuance discussion.

Today, Participant Eligibility Matters More Than Fundraising Size

The uncomfortable truth is that we cannot solve this challenge by avoiding identity—we already live in a world saturated with identity. The question is whether identity is implemented in ways that respect user autonomy—or in ways that extract data and concentrate power. First-wave crypto infrastructure largely sidestepped identity—not out of principle, but because secure tooling wasn’t yet available. As issuance scales and regulatory scrutiny intensifies, that avoidance is no longer sustainable.

In this context, privacy-preserving identity is shifting from ideological aspiration to infrastructure necessity. If teams want to limit allocations to one per person, prevent Sybil-dominated governance, or meet basic compliance requirements without collecting user dossiers, they need systems capable of verifying specific participant attributes—without exposing identity. Without such systems, teams face only binary choices: blind openness or strict KYC—neither of which scales effectively.

Meanwhile, the crypto industry is also confronting wallet-layer limitations. Many issues plaguing token launches trace back to how wallets are designed and integrated: account fragmentation, weak recovery mechanisms, blind signing, and browser-based attack surfaces—all make it harder to establish durable relationships between users and protocols. When participation relies on tools that are easy to fake and hard to trust, distribution mechanisms inherit those flaws. Projects hit by Sybil attacks also suffer from user confusion, lost access, and post-launch churn—not coincidentally.

Some teams are beginning to treat these problems systematically. They no longer view identity, wallets, and token issuance as siloed components—but as a unified system: one where users can prove uniqueness without disclosing personal identity, interact across apps via a single account, and retain control without managing fragile private keys. When these elements integrate, distribution ceases to be a one-off event—and begins to exhibit the characteristics of an ongoing relationship.

This isn’t about making token launches smaller or more exclusive—it’s about making them more targeted. A few genuinely engaged participants often outweigh thousands of disengaged ones.

Projects aligned with human values consistently demonstrate stronger user retention, healthier governance participation, and more resilient market performance. This isn’t ideology—it’s observable behavior.

Ultimately, the teams that succeed will be those who stop treating token distribution as marketing—and start treating it as infrastructure building. They’ll design by default for adversarial environments, treating resistance to automation as a core design goal from day one. They’ll see identity not as a checkbox for compliance—but as a tool to protect users and ecosystems. And they’ll recognize that thoughtfully designed friction isn’t a bug—it’s a feature.

Airdrops failed—not because users were greedy. Airdrops failed because their mechanics rewarded greed and punished fidelity. If crypto wants to move beyond its current audience, it must stop training people to extract value—and start giving them reasons to belong.

Token issuance is where this shift becomes visible. Whether the crypto industry commits to it fully remains an open question.