The cryptocurrency industry distributed over $4 billion through airdrops in 2024 alone. Yet research shows that 88% of airdropped tokens declined in value within months of distribution, with 64% of recipients selling immediately upon receipt. This represents a fundamental inefficiency in how protocols allocate value to their communities.

Our analysis of three major airdrops—Optimism Seasons 4 & 5, EigenLayer Season 2, and Ether.fi Season 3—comprising over 29,000 wallets reveals a consistent pattern: low-reputation wallets exhibit extractive behavior at rates exceeding 70%, while high-reputation wallets demonstrate retention rates approaching 100%.

For the 60+ projects highly anticipated to be launching tokens this year, the data is unequivocal: reputation-weighted distribution using zScore could have saved these protocols an estimated $7.3 million in wasted token value while dramatically improving community alignment and token price stability.

Airdrops have become the dominant token distribution mechanism in DeFi, serving as both a marketing strategy and a path toward decentralized governance. However, the ecosystem faces an escalating crisis: the rise of sophisticated airdrop farming operations and Sybil attacks has fundamentally altered the economics of token distribution.

• Sybil attacks capture up to 50% of tokens in some distributions, with bots and fake wallets skewing 85% of campaigns

• Over 60% of recipients sell tokens immediately during the token generation event

• Tokens with high fully diluted valuations (FDV) are up to 70% more likely to crash post-airdrop

• Share of recipients still active after three months often falls below 30%

It's important to acknowledge that airdrop farming exists as a rational economic response to one-time reward mechanisms. When protocols signal future token distributions tied to activity metrics, they create powerful incentives for users to optimize their behavior accordingly. This isn't inherently malicious—it's predictable market behavior.

As one researcher noted, "farming with one wallet address is fair and helps decentralize token distribution." The challenge arises with industrial-scale operations using multiple wallets and automated systems to capture disproportionate shares of distributions intended for genuine community members.

From the venture capital perspective, airdrops serve a dual purpose: they bootstrap initial liquidity and community engagement while providing a path to token decentralization that satisfies regulatory considerations. Projects backed by major VCs like Paradigm, a16z, and Coinbase Ventures have used airdrops as a core distribution strategy—Paradigm-backed projects show a 27% airdrop rate, the highest among major funds.

The solution isn't to eliminate farming or punish participants—it's to design systems that align incentives so that genuine engagement is rewarded proportionally to extractive behavior.

Optimism, the leading Ethereum Layer 2 scaling solution, has distributed over 265 million OP tokens across multiple airdrop seasons since 2022. Our analysis focused on Seasons 4 & 5, examining 11,024 wallets that received approximately 6.63 million tokens.

Optimism's first airdrop in 2022 set a precedent for the challenges to come: the OP token plummeted 70% from its listing price shortly after distribution, as roughly 17,000 wallets immediately dumped their tokens. This prompted a governance proposal to exclude "mercenary actors" from future distributions—though it sparked intense debate about the ethics of punishing users for rational economic behavior.

Our zScore analysis revealed a stark concentration of low-quality wallets: 74% of recipients scored between 0-100, with 46% having zero deposits—clear indicators of airdrop farming activity. These low-score wallets showed predictable extractive behavior:

1. Zero-Deposit Correlation: 46% of wallets in the 0-100 range had no deposits, dropping to 0% beyond score 400

2. Account Age Gradient: Accounts under 1 year old decreased from 57% (0-100 range) to 18% (300-400 range)

3. Repeat Behavior: Low-score wallets (0-300) showed 58-60% repeat bad behavior; high-score wallets (600+) showed 0% repeat rate

4. Instant Dump Concentration: 22% of all tokens were dumped within 1 day, 26.6% within 7 days—overwhelmingly from the 0-200 range

The 500+ Threshold Effect: A dramatic behavioral shift occurs at score 500+. Bad actions drop from 37-54% to under 2%, holding behavior increases to 75-100%, and CEX exits vanish completely. Wallets above 600 demonstrate 98.5% good behavior with 87-100% retention—these are the protocol champions who drive genuine ecosystem growth.

EigenLayer pioneered the restaking paradigm on Ethereum, accumulating over $16 billion in deposits within its first year. The protocol's EIGEN token distribution became one of the most anticipated—and ultimately controversial—airdrops in DeFi history.

The controversy centered on several factors: tokens were initially non-transferable, geographic restrictions excluded users from the U.S., Canada, and China despite accepting their deposits, and only 5% of tokens went to early stakers while 55% was reserved for investors and contributors. The immediate aftermath saw $351 million in TVL outflows and a sharp price decline from $4 to $3 within days of transferability.

Our analysis tracked 8,226 wallets over 90 days post-distribution. The correlation between zScore and retention was striking:

• Wallets scoring below 250 exhibited 75-85% dump rates

• Wallets above 500 demonstrated 50-100% retention

• High-score users held tokens 3.4x longer than low-score counterparts

• LP participation increased 180% among filtered recipients

The 650+ Elite: Scores above 650 showed 70-100% good behavior. These established DeFi users with complex histories—LPs, borrowers, and long-term holders—represent the optimal target for maximum ROI on token distribution.

Ether.fi emerged as the leader in the liquid restaking sector, with TVL growing from $100 million to over $3 billion in early 2024. The ETHFI token launched via a $210 million airdrop in March 2024, immediately followed by the pattern that has become all too familiar in DeFi.

The token debuted at $4.13 before plummeting 25% within hours as points farmers claimed and immediately sold their allocations. The rapid sell-off demonstrated the extractive dynamic that emerges when distribution mechanisms fail to distinguish between committed users and mercenary capital.

Our 90-day analysis of 10,015 Season 3 wallets revealed perhaps the most concerning concentration pattern:

• 54.8% of all recipients (5,492 wallets) scored below 100—primarily new wallets, test accounts, or minimal engagement users

• Historical bad actors showed 39-59% repeat behavior rates

• Bad actors in the 0-200 range received 715,760 ETHFI tokens worth $1.79 million

• Score 700+ wallets showed 100% retention—perfect ecosystem alignment

The Pattern Persists: Historical bad actors—wallets that dumped previous airdrops—showed 39-59% repeat behavior in the Ether.fi distribution. This predictability is precisely what makes reputation-based filtering so effective: past behavior reliably predicts future actions.

Across all three case studies, several consistent patterns emerge that inform the design of more effective distribution mechanisms:

1. The Critical Threshold Effect: In all studies, score 500+ marks a dramatic behavioral inflection point. Below this threshold, dump rates range from 40-85%; above it, retention approaches 80-100%.

2. Zero-Deposit Red Flag: Wallets with no deposits consistently show the highest extractive behavior. This simple metric alone can filter 30-50% of likely bad actors, or at least actors who will not use your protocol post-airdrop.

3. Account Age Correlation: Older, established wallets demonstrate significantly better retention. The correlation coefficient between account age and positive behavior exceeded 0.89 in the Optimism study.

4. Behavioral Persistence: Past airdrop behavior is a powerful predictor of future behavior. Wallets that dumped previous distributions show 39-60% repeat rates; those with good history show near-zero repeat bad behavior.

5. LP Participation Premium: High-score wallets provide 2-3x more liquidity than low-score counterparts, creating compounding positive effects for protocol health.

The Optimism study provided rigorous statistical validation of zScore's predictive power:

The current discourse around airdrop farming often frames the relationship between protocols and users as adversarial—projects try to "catch" farmers while farmers try to evade detection. This framing is counterproductive.

Airdrop farming, at its core, represents users responding rationally to the incentives presented to them. As one prominent farmer put it: "Technical expertise is not necessary to recognize a profitable airdrop." Users deposit capital, provide liquidity, and interact with protocols—exactly the behaviors projects want to encourage.

The problem isn't that users optimize for rewards; it's that current systems can't distinguish between:

• Single-wallet users genuinely interested in the protocol

• Multi-wallet operations extracting value through automated systems

• Industrial-scale Sybil attacks using thousands of coordinated wallets

Venture capitalists view airdrops through the lens of community building and regulatory compliance. As Matheus Guelfi, co-founder and crypto researcher at Modular Crypto, stated: "Airdrops also serve as a way to decentralize governance and attract users interested in participating in proposals."

However, when 64% of recipients sell immediately and 88% of tokens decline in value, the community-building thesis breaks down. VCs are increasingly concerned about:

• Token price instability undermining long-term project viability

• Wasted capital that could fund protocol development

• Community sentiment damage when distributions feel "unfair"

The solution isn't to punish participants or create increasingly complex eligibility criteria. It's to build behavior-based infrastructure that allows protocols to reward genuine engagement proportionally.

This shift reframes the relationship:

• From "catch and exclude" to "recognize and reward"

• From adversarial to aligned

• From binary eligibility to graduated allocation

• From one-time snapshots to continuous reputation building

Based on our cross-study analysis, the Zeru team recommends the following tiered allocation approach:

Pre-Airdrop:

1. Integrate zScore API for wallet scoring

2. Set minimum threshold at 200 (eliminates 89% of low-quality wallets)

3. Design tiered allocation based on zScore ranges

4. Implement time-based vesting for medium-risk tiers

During Distribution:

• Real-time score validation before token release

• Graduated unlock schedules by score tier

• Reserve 10% allocation for future high-score wallets

• Monitor for score manipulation attempts

Post-Airdrop:

• Track behavior by score cohort (30/60/90 days)

• Measure retention, LP participation, protocol usage

• Calculate actual ROI vs. traditional distribution

• Refine thresholds for subsequent campaigns

The data across 29,000+ wallets and three major protocols is unequivocal: reputation-based distribution dramatically outperforms traditional approaches. zScore filtering could have saved these protocols an estimated $7.3 million in combined wasted value while improving retention by 20-112% and reducing Sybil concentration by 29-87%.

But the real opportunity extends beyond individual protocol savings. By implementing reputation infrastructure across the ecosystem, we can:

• Create positive-sum incentives where genuine engagement is rewarded proportionally

• Reduce the arms race between protocols and farmers that wastes resources on both sides

• Improve token price stability by ensuring distributions reach committed community members

• Build sustainable communities rather than mercenary capital flows

The choice is clear: protocols can continue distributing tokens to extractive participants and watching value evaporate, or they can adopt reputation-weighted distribution and build lasting ecosystems. The tools exist. The data is compelling. The path forward is reputation for the 60+ protocols that are expected to launch token generation events in 2026.

• Get ahead of the curve by minting your zPass

• Explore our research at research.zpass.ai

• Book an exploratory call with our business development team

The cryptocurrency industry distributed over $4 billion through airdrops in 2024 alone. Yet research shows that 88% of airdropped tokens declined in value within months of distribution, with 64% of recipients selling immediately upon receipt. This represents a fundamental inefficiency in how protocols allocate value to their communities.

Our analysis of three major airdrops—Optimism Seasons 4 & 5, EigenLayer Season 2, and Ether.fi Season 3—comprising over 29,000 wallets reveals a consistent pattern: low-reputation wallets exhibit extractive behavior at rates exceeding 70%, while high-reputation wallets demonstrate retention rates approaching 100%.

For the 60+ projects highly anticipated to be launching tokens this year, the data is unequivocal: reputation-weighted distribution using zScore could have saved these protocols an estimated $7.3 million in wasted token value while dramatically improving community alignment and token price stability.

Airdrops have become the dominant token distribution mechanism in DeFi, serving as both a marketing strategy and a path toward decentralized governance. However, the ecosystem faces an escalating crisis: the rise of sophisticated airdrop farming operations and Sybil attacks has fundamentally altered the economics of token distribution.

• Sybil attacks capture up to 50% of tokens in some distributions, with bots and fake wallets skewing 85% of campaigns

• Over 60% of recipients sell tokens immediately during the token generation event

• Tokens with high fully diluted valuations (FDV) are up to 70% more likely to crash post-airdrop

• Share of recipients still active after three months often falls below 30%

It's important to acknowledge that airdrop farming exists as a rational economic response to one-time reward mechanisms. When protocols signal future token distributions tied to activity metrics, they create powerful incentives for users to optimize their behavior accordingly. This isn't inherently malicious—it's predictable market behavior.

As one researcher noted, "farming with one wallet address is fair and helps decentralize token distribution." The challenge arises with industrial-scale operations using multiple wallets and automated systems to capture disproportionate shares of distributions intended for genuine community members.

From the venture capital perspective, airdrops serve a dual purpose: they bootstrap initial liquidity and community engagement while providing a path to token decentralization that satisfies regulatory considerations. Projects backed by major VCs like Paradigm, a16z, and Coinbase Ventures have used airdrops as a core distribution strategy—Paradigm-backed projects show a 27% airdrop rate, the highest among major funds.

The solution isn't to eliminate farming or punish participants—it's to design systems that align incentives so that genuine engagement is rewarded proportionally to extractive behavior.

Optimism, the leading Ethereum Layer 2 scaling solution, has distributed over 265 million OP tokens across multiple airdrop seasons since 2022. Our analysis focused on Seasons 4 & 5, examining 11,024 wallets that received approximately 6.63 million tokens.

Optimism's first airdrop in 2022 set a precedent for the challenges to come: the OP token plummeted 70% from its listing price shortly after distribution, as roughly 17,000 wallets immediately dumped their tokens. This prompted a governance proposal to exclude "mercenary actors" from future distributions—though it sparked intense debate about the ethics of punishing users for rational economic behavior.

Our zScore analysis revealed a stark concentration of low-quality wallets: 74% of recipients scored between 0-100, with 46% having zero deposits—clear indicators of airdrop farming activity. These low-score wallets showed predictable extractive behavior:

1. Zero-Deposit Correlation: 46% of wallets in the 0-100 range had no deposits, dropping to 0% beyond score 400

2. Account Age Gradient: Accounts under 1 year old decreased from 57% (0-100 range) to 18% (300-400 range)

3. Repeat Behavior: Low-score wallets (0-300) showed 58-60% repeat bad behavior; high-score wallets (600+) showed 0% repeat rate

4. Instant Dump Concentration: 22% of all tokens were dumped within 1 day, 26.6% within 7 days—overwhelmingly from the 0-200 range

The 500+ Threshold Effect: A dramatic behavioral shift occurs at score 500+. Bad actions drop from 37-54% to under 2%, holding behavior increases to 75-100%, and CEX exits vanish completely. Wallets above 600 demonstrate 98.5% good behavior with 87-100% retention—these are the protocol champions who drive genuine ecosystem growth.

EigenLayer pioneered the restaking paradigm on Ethereum, accumulating over $16 billion in deposits within its first year. The protocol's EIGEN token distribution became one of the most anticipated—and ultimately controversial—airdrops in DeFi history.

The controversy centered on several factors: tokens were initially non-transferable, geographic restrictions excluded users from the U.S., Canada, and China despite accepting their deposits, and only 5% of tokens went to early stakers while 55% was reserved for investors and contributors. The immediate aftermath saw $351 million in TVL outflows and a sharp price decline from $4 to $3 within days of transferability.

Our analysis tracked 8,226 wallets over 90 days post-distribution. The correlation between zScore and retention was striking:

• Wallets scoring below 250 exhibited 75-85% dump rates

• Wallets above 500 demonstrated 50-100% retention

• High-score users held tokens 3.4x longer than low-score counterparts

• LP participation increased 180% among filtered recipients

The 650+ Elite: Scores above 650 showed 70-100% good behavior. These established DeFi users with complex histories—LPs, borrowers, and long-term holders—represent the optimal target for maximum ROI on token distribution.

Ether.fi emerged as the leader in the liquid restaking sector, with TVL growing from $100 million to over $3 billion in early 2024. The ETHFI token launched via a $210 million airdrop in March 2024, immediately followed by the pattern that has become all too familiar in DeFi.

The token debuted at $4.13 before plummeting 25% within hours as points farmers claimed and immediately sold their allocations. The rapid sell-off demonstrated the extractive dynamic that emerges when distribution mechanisms fail to distinguish between committed users and mercenary capital.

Our 90-day analysis of 10,015 Season 3 wallets revealed perhaps the most concerning concentration pattern:

• 54.8% of all recipients (5,492 wallets) scored below 100—primarily new wallets, test accounts, or minimal engagement users

• Historical bad actors showed 39-59% repeat behavior rates

• Bad actors in the 0-200 range received 715,760 ETHFI tokens worth $1.79 million

• Score 700+ wallets showed 100% retention—perfect ecosystem alignment

The Pattern Persists: Historical bad actors—wallets that dumped previous airdrops—showed 39-59% repeat behavior in the Ether.fi distribution. This predictability is precisely what makes reputation-based filtering so effective: past behavior reliably predicts future actions.

Across all three case studies, several consistent patterns emerge that inform the design of more effective distribution mechanisms:

1. The Critical Threshold Effect: In all studies, score 500+ marks a dramatic behavioral inflection point. Below this threshold, dump rates range from 40-85%; above it, retention approaches 80-100%.

2. Zero-Deposit Red Flag: Wallets with no deposits consistently show the highest extractive behavior. This simple metric alone can filter 30-50% of likely bad actors, or at least actors who will not use your protocol post-airdrop.

3. Account Age Correlation: Older, established wallets demonstrate significantly better retention. The correlation coefficient between account age and positive behavior exceeded 0.89 in the Optimism study.

4. Behavioral Persistence: Past airdrop behavior is a powerful predictor of future behavior. Wallets that dumped previous distributions show 39-60% repeat rates; those with good history show near-zero repeat bad behavior.

5. LP Participation Premium: High-score wallets provide 2-3x more liquidity than low-score counterparts, creating compounding positive effects for protocol health.

The Optimism study provided rigorous statistical validation of zScore's predictive power:

The current discourse around airdrop farming often frames the relationship between protocols and users as adversarial—projects try to "catch" farmers while farmers try to evade detection. This framing is counterproductive.

Airdrop farming, at its core, represents users responding rationally to the incentives presented to them. As one prominent farmer put it: "Technical expertise is not necessary to recognize a profitable airdrop." Users deposit capital, provide liquidity, and interact with protocols—exactly the behaviors projects want to encourage.

The problem isn't that users optimize for rewards; it's that current systems can't distinguish between:

• Single-wallet users genuinely interested in the protocol

• Multi-wallet operations extracting value through automated systems

• Industrial-scale Sybil attacks using thousands of coordinated wallets

Venture capitalists view airdrops through the lens of community building and regulatory compliance. As Matheus Guelfi, co-founder and crypto researcher at Modular Crypto, stated: "Airdrops also serve as a way to decentralize governance and attract users interested in participating in proposals."

However, when 64% of recipients sell immediately and 88% of tokens decline in value, the community-building thesis breaks down. VCs are increasingly concerned about:

• Token price instability undermining long-term project viability

• Wasted capital that could fund protocol development

• Community sentiment damage when distributions feel "unfair"

The solution isn't to punish participants or create increasingly complex eligibility criteria. It's to build behavior-based infrastructure that allows protocols to reward genuine engagement proportionally.

This shift reframes the relationship:

• From "catch and exclude" to "recognize and reward"

• From adversarial to aligned

• From binary eligibility to graduated allocation

• From one-time snapshots to continuous reputation building

Based on our cross-study analysis, the Zeru team recommends the following tiered allocation approach:

Pre-Airdrop:

1. Integrate zScore API for wallet scoring

2. Set minimum threshold at 200 (eliminates 89% of low-quality wallets)

3. Design tiered allocation based on zScore ranges

4. Implement time-based vesting for medium-risk tiers

During Distribution:

• Real-time score validation before token release

• Graduated unlock schedules by score tier

• Reserve 10% allocation for future high-score wallets

• Monitor for score manipulation attempts

Post-Airdrop:

• Track behavior by score cohort (30/60/90 days)

• Measure retention, LP participation, protocol usage

• Calculate actual ROI vs. traditional distribution

• Refine thresholds for subsequent campaigns

The data across 29,000+ wallets and three major protocols is unequivocal: reputation-based distribution dramatically outperforms traditional approaches. zScore filtering could have saved these protocols an estimated $7.3 million in combined wasted value while improving retention by 20-112% and reducing Sybil concentration by 29-87%.

But the real opportunity extends beyond individual protocol savings. By implementing reputation infrastructure across the ecosystem, we can:

• Create positive-sum incentives where genuine engagement is rewarded proportionally

• Reduce the arms race between protocols and farmers that wastes resources on both sides

• Improve token price stability by ensuring distributions reach committed community members

• Build sustainable communities rather than mercenary capital flows

The choice is clear: protocols can continue distributing tokens to extractive participants and watching value evaporate, or they can adopt reputation-weighted distribution and build lasting ecosystems. The tools exist. The data is compelling. The path forward is reputation for the 60+ protocols that are expected to launch token generation events in 2026.

• Get ahead of the curve by minting your zPass

• Explore our research at research.zpass.ai

• Book an exploratory call with our business development team