TierDrop: Harnessing Airdrop Farmers for User Growth

TL;DR

This paper proposes a novel approach to blockchain airdrops by leveraging farmers to generate activity and attract genuine users, challenging the traditional view of farmers as adversaries.

Contribution

It introduces a new perspective on airdrop strategies, suggesting that farmers can be harnessed to enhance network effects rather than solely being adversaries.

Findings

Farmers can sometimes be revenue-optimal to include in airdrop schemes.

Counterintuitively, giving tokens to farmers can strengthen network effects.

The results apply broadly to activity-based incentive mechanisms.

Abstract

Blockchain platforms attempt to expand their user base by awarding tokens to users, a practice known as issuing airdrops. Empirical data and related work implies that previous airdrops fall short of their stated aim of attracting long-term users, partially due to adversarial farmers who game airdrop mechanisms and receive an outsize share of rewards. In this work, we argue that given the futility of fighting farmers, the airdrop business model should be reconsidered: farmers should be harnessed to generate activity that attracts real users, i.e., strengthens network effects. To understand the impact of farmers on airdrops, we analyze their performance in a market inhabited by two competing platforms and two tiers of users: real users and farmers. We show that counterintuitively, farmers sometimes represent a necessary evil-it can be revenue-optimal for airdrop issuers to give some tokens to farmers, even in the hypothetical case where platforms could costlessly detect and banish all farmers. Although we focus on airdrops, our results generally apply to activity-based incentive schemes.