Airdrops Rewarded the "Farmers," but Killed the Real Community

Written by: Nanak Nihal Khalsa, Co-Founder of Holonym Foundation

Translated by: AididiaoJP, Foresight News

In most past cycles, crypto teams convinced themselves that airdrops were about building communities. But in practice, airdrops have evolved into something entirely different: a large-scale training mechanism that teaches people how to extract maximum value efficiently, then step away.

This outcome is no accident; it’s an inevitable result of token distribution methods from 2021 to 2024. Low circulation, high fully diluted valuations, reward schemes that incentivize behavior rather than intent, and qualification rules that anyone with enough time and scripting skills can reverse-engineer. The system we built turns rational behavior into mass wallet creation, simulated engagement, and quick sell-offs.

The crypto industry tends to treat trust as an abstract concept. But in reality, trust erodes because token issuance no longer aligns incentives with beliefs—participation becomes a transaction.

Loyalty turns into short-term speculation, governance into performance. When users are rewarded based on trading volume rather than conviction, what they get isn’t a community—it’s mercenaries.

Airdrops have spawned a manual for exploitation

Point schemes have intensified this trend. These programs are often packaged as fairer token distribution methods, but in practice, they turn participation into a job. The more time, capital, and automation involved, the more points one can earn. Genuine users, limited by resources, are marginalized, replaced by those viewing point dashboards as yield farms.

Everyone is aware of this phenomenon. Teams watch wallet clusters grow. Analysts publish post-mortem reports revealing how a few entities have captured disproportionate token shares. Yet, the pattern persists largely because it performs well on growth charts and attracts short-term market attention.

As a result, airdrops have lost credibility because their mechanisms are predictable and exploitable. By the time tokens go live on exchanges, a significant portion of the supply has already been reserved for immediate exit. Post-launch price movements are less about price discovery and more about clearing out leftovers.

Token sales are making a comeback, driven by the loss of credibility in airdrops

Against this backdrop, token sales and ICOs are returning. This isn’t nostalgia or a rejection of decentralization, but a response to structural failures. Teams are seeking ways to reintroduce vetting mechanisms into the distribution process. Who qualifies for tokens, under what conditions, and with what constraints—these questions are now as important as fundraising amounts.

The key difference isn’t in the act of selling tokens itself, but in how participation is being reshaped. Early token launches were open to anyone with a wallet and quick enough execution. This openness had clear downsides: whale dominance, regulatory blind spots, and lack of accountability.

The new generation of token issuance is trying to introduce previously absent vetting mechanisms. Identity and reputation signals, on-chain behavior analysis, jurisdiction-based participation restrictions, and mandatory caps on distribution are increasingly integral to design. The goal isn’t exclusivity for its own sake but to ensure tokens reach users more likely to hold long-term.

This shift exposes deeper industry divides. For years, crypto has positioned itself as permissionless. Yet now, many of its most valuable segments rely on some form of access control. Without gatekeeping, capital flows to automation; with restrictions, teams risk rebuilding the highly monitored systems they claim to replace. The tension between openness and protection is no longer theoretical but a practical issue in every serious issuance discussion.

Today, participant qualification matters more than fundraising size

The uncomfortable truth is that we can’t solve this challenge by avoiding identity altogether—we live in a world where identity is everywhere. The question is whether identity is respected as a user right or exploited for data extraction and centralized control. Most early crypto infrastructure deliberately avoided identity—not out of principle, but because tools to do so securely were lacking. As issuance scales and regulations tighten, this avoidance becomes unsustainable.

In this context, privacy-preserving identity is shifting from a conceptual ideal to an infrastructural necessity. If teams want to limit each person to a single allocation, prevent automated governance dominance, or meet basic compliance without collecting user profiles, they need systems that verify specific attributes without exposing identities. Without such systems, they face a binary choice: open access or strict real-name verification—both of which are hard to scale.

Meanwhile, the industry is also confronting wallet-level limitations. Many issues plaguing token issuance trace back to wallet design and integration. Fragmented accounts, weak recovery mechanisms, blind signing, and browser-based attack surfaces all make it harder to establish lasting relationships between users and protocols. When participation relies on easily forgeable tools that are hard to trust, distribution mechanisms inherit these flaws. Projects suffering from sybil attacks also face user confusion, access loss, and post-launch user attrition—no coincidence.

Some teams are beginning to systematically address these issues. They no longer see identity, wallets, and token issuance as separate steps but as parts of an integrated system—where users can prove their uniqueness without revealing personal info, interact across applications with a unified account, and maintain control without managing fragile private keys. When these elements are combined, distribution becomes less a one-time event and more a continuous relationship.

This isn’t about making token issuance smaller or more exclusive, but more targeted. Engaged participants who truly care are often better than large numbers of indifferent ones.

Projects committed to aligning with human values tend to show higher retention, healthier governance participation, and more resilient markets. This isn’t ideology but observable behavior.

Ultimately, successful teams will be those that stop viewing token distribution as a marketing tool and start treating it as infrastructure. They will design with adversarial environments in mind, aiming to resist automation attacks from the outset. They will see identity as a tool to protect users and ecosystems, not just a checkbox for compliance. They will recognize that carefully designed friction is a feature, not a flaw.

The failure of airdrops isn’t due to user greed. It’s because their mechanisms reward greed and punish loyalty. If crypto wants to break through its current audience, it must stop training people to extract value and instead give them reasons to belong.

Token issuance is where this shift becomes most visible. Whether the industry is willing to fully embrace this change remains an open question.