Starknet: How Not to do an Airdrop

The Details

Want a comprehensive guide on how not to do an airdrop? Then look no further, the recent Starknet token airdrop fiasco will give you everything you will need. From blatant insider games and sketchy tokenomics to horrible eligibility criterions for the airdrops. The $STRK airdrop has it all !!

Starknet, an Ethereum layer-2 solution that uses STARK based ZK-rollup, has announced a 700 million token airdrop, scheduled to commence on February 20. Dubbed a “provisions program” by the Starknet foundation, 700 million tokens are to be distributed to ETH users in the initial phase, Feb 20 - Jun 20 and plan to distribute a total of 1.8billion STRK tokens to users & community members. Despite all their efforts to “reward” the community for all their contributions, they embarrassingly failed to do so.

Outrage sparked about the eligibility requirement for the airdrop that a user had to have held at least 0.005 ETH in their wallet on Nov 15, 2023; at the time of snapshot, which amounted to roughly $14 at the time. This obviously led to major contributors of the on-chain activity being sorely unrewarded.

One user on Starknet’s Discord said they didn’t meet the 0.005 criteria because they added ETH as a liquidity to Ekubo, a decentralized exchange on Starknet, leaving only $5 ETH because he added it all as liquidity. A X user @jruges, had $400k volume and 250 transactions for more than 7 months before the cutoff date but got dropped $500 Stark.

While some people with $10K volume through 5 months ended up farming $850 in tokens, showing no clear provision set up for linear token distribution. And it doesn’t stop there, a github commit of a spelling check in the Readme file earned 1,800 STRK, more than the majority of on-chain community members.

Regan Choucha in Starknet’s Discord claims he had $100k in volume and 500+ transactions through 9 months, spending $1k on fees alone and had $5K in LPs (liquidity provider tokens) but didn’t have 0.05 ETH in the snapshot moment was denied of the airdrop. Just imagine how unfair this is when people with 5 transactions and 100$ volume qualify. They’re basically saying:

“ Oh you’re not qualified for the airdrop cause you don’t have $14 of ETH at the snapshot, but we’ll take the $1000 in transaction fees though.”

The Starknet team announced that to align with their “long-term incentives”, they will be locking in 13% of tokens (1.314B) until April 15.That’s around $2.5B in tokens unlocked after 2 months at current premarket valuation, but I doubt that’s gonna last. Also, incredibly long sighted vision of the team to lock in their token for 2 WHOLE MONTHS!! The token allocations were apparently supposed to be unlocked after a one-year cliff in November 2023, following the token generation event, but this was delayed by five months to April 15 as the token was not ready. The fact that staking the locked tokens can be permissible is certainly not helping their credibility either.

The pre-launch futures market on Aevo, a decentralized exchange, suggests that STRK could debut with a price of $1.65, implying a market cap of $1.2 billion and a fully diluted valuation (FDV) of over $16 billion. Given that Starknet’s 2022 Series D was done at $8bn equity with a 3:1 token warrant ratio, Series D investors are still somewhat underwater with a $24 billion FDV entry price.Moreover, the investors could face dilution and downwards pressure on the token price as more tokens are released into circulation.

On the contrary, there are also supporters of the Starknet foundation claiming Starknet made a difficult decision to bias against airdrop farmers by under-allocating to active users. The supporters of airdrop say the anger of the ‘e-beggars’ are not justified as Starknet has taken the hard road of limited Ethereum Virtual Machine (EVM) compatibility, not working with major crypto wallets like Metamask, Phantom and Coinbase Wallet.

The Starknet token airdrop has been a controversial event for the community and the project. The airdrop did not satisfy the expectations of many active and loyal users, and instead gave more tokens to passive holders and the insiders. The airdrop also revealed some issues in the tokenomics and the governance of the project, as well as the lack of user-friendliness and innovation gravely affecting the reputation and the trust of the project, and may have discouraged some potential users and developers. It's fair to say, the $STRK airdrop has given pretty good lessons on how not to do an airdrop.