Airdrops: Building communities or building problems?

Recent research shows that decentralized exchanges that distribute tokens via airdrops see a big boost in user numbers and transactions. But, is building communities this way just cryptos version of printing money?

Airdrops the disbursal of free tokens to early users as a way of rewarding and building momentum have been around for years but came to

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Know your product

Web3, especially DeFi, remains a wild west and the rules of the game have not fully formed. However, the United States Department of Treasurys Office of Foreign Asset Controls applies regulations on all U.S. companies. That means projects need to conduct Know Your Customer and Anti-Money Laundering checks on individuals receiving airdrops, Ivan Ravlich, co-founder and CEO of Hypernet Labs, tells Magazine.

Verifying identities is not easy, but Hypernet Labs has created, a digitally-native and privacy-preserving nonfungible token that is minted to the end users crypto wallet. In this sense, users can now transact compliantly with blockchain-based decentralization projects, which was impossible in the past, says Ravlich.



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That service whether by Hypernet Labs or someone else is what the Web3 community desperately needs. For example, consider the recent confusion between CryptoPunks v1 and v2. Because of a glitch in the first version of CryptoPunks minted in 2017, Larva Labs issued a second version. However, some community members nonetheless created variants of the initial mint with different background colors, selling these NFTs as historical relics which led to a backlash by Larva Labs threatening to pursue legal action. In the presence of privacy-preserving validation mechanisms, these incidents could be entirely avoided.



CryptoPunks v1
CryptoPunks V1 were delisted from OpenSea.



While technology is never a panacea, it can be an important tool and airdrops are one such mechanism for creating momentum and cultivating community. However, caution is required: Even when a project owner does not have bad intent, airdrops can be executed poorly and not achieve the desired results.

Ultimately, potential token and NFT holders need to evaluate a project on its merits and believe it actually holds value. Simply accepting tokens from a project without a plan and clear value proposition is, at best, a short-term play and not a long-term wealth creation strategy.





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