Innovation is the core of Double. At Double, we strongly believe that true innovation is the only way to take DeFi to the next level. As part of Double’s mainnet launch, we are introducing 7 true innovations to DeFi and crypto. In today’s episode, we are explaining how Double solves most issues with airdrop via a simple elegant tokenomics design!
Crypto-native Marketing
Every crypto-native project absolutely should leverage crypto-native marketing tools to achieve its goals and achieve them faster than using web2 marketing tools. Airdrop is a crypto-native marketing tool which just could not be replicated in the non-crypto web2 marketing. More importantly, airdrop has proven to be a super effective user acquisition marketing tactic! The age of “build the product, users will come” is long gone. But the “show me the money, users will come” still prevails! So let’s scream like Jerry Maguire!
Aftermath of Airdrops
While the airdrop is a very effective marketing tactic, the aftermath is NOT pretty. Almost all projects that have offered airdrops suffer the same fate — a supermajority of airdrop receiving wallets dumped reward tokens immediately and showed little further engagement after the airdrop programs. Even for Uniswap, the best project in Defi, over 75% of wallets dumped the $UNI within the first 7 days. Due to the dump, almost all projects also suffered the big token price drop in the short-term, and the price drop had caused many projects to collapse with no recovery.
Root Cause
Why did airdrop receivers dump their tokens immediately?! Some explanations are “saw it as a free money reward and nothing more”, “weren’t interested in participating in governance”. And improvements have been proposed such as “reputation-based airdrop” by Bankless to target the right users.
Unfortunately, no analysis has recognized the basic fact — it is the RATIONAL move for users to dump the reward tokens immediately! Let’s analyze this using game theory and set up a simple game between two users — User A and User B as shown in the table below:
Since a token dump will cause the token price to drop (ignoring other factors here of course), if User A holds but User B dumps, User A will lose and User B will win, e.g. top left box (lose, win), and vice versa, e.g. the bottom right box (win, lose). If both users dump, then whoever dumps first, e.g. front runner, will win. Even if both hold either through agreements and signaling or due to airdrop lock/vesting, front running is still the winning move after hold/lock.
If a user thinks that thousands of other users will dump and try to dump first, then the only rational move for the user is to front-run other users to dump! Please note: even for users who like to participate in governance and believe the potential future value of the token, the rational move for them is actually to dump first and buy back those tokens at a lower price and generate profits in the short-term!
Clearly, if other users can’t frontrun, then the rational move for a user will be different. Hence the right solution to the aftermath of airdrops is to:
Innovation: use tokenomics to prevent front-running
Double Down to Genesis is a crypto native marketing program designed to give-back to the community while at the same time bootstrap Double’s initial user base via token incentives, aka airdrop. Double uses a simple and elegant tokenomics design to prevent front-running to dump reward tokens by incentive receivers and solve the aftermath faced by other airdrop programs.
Double Dip Joy (DDJ) is an ERC20 token that is designed like a loyalty point and will be issued based on the user’s contribution to the Double economy. Users who supply either the capital side or token side contribute to the Double economy and hence will earn DDJ.
Double excels at tokenomics design! To grow a healthy economy, DDJ reward balances will be stored in a smart contract and an adjustable monetary policy parameter, “withdrawal threshold”, is configured to manage the DDJ supply into circulation. Wallets can only withdraw and mint DDJ into circulation when their balance is higher than the “withdrawal threshold”.
The top (up to) 100,000 wallets based on the Double Down to Genesis program rules will receive 100 DDJ per wallet. When claimed, these 100 DDJ will be credited inside the Double smart contract, same as the DDJ incentive program design, and the withdrawal threshold will be set above 100 initially. With this simple and elegant tokenomics design, no user can withdraw and dump airdrop rewards. As a result, a user could not front-run other users and should not worry about other users front-running him/her!
Of course, users (wallets) can and should continue to use Double to earn additional DDJ tokens and when the total balance including the airdrop amount of 100 is above the threshold, DDJ can be withdrawn and minted to the wallets. Since the timing for each wallet to earn enough additional DDJ tokens to surpass the threshold is random and unpredictable, there is no way that thousands of wallets can earn enough additional to withdraw all at the same time and hence users have more incentives to hold than front-run other users to dump tokens!
The design solves another airdrop issue — no further user engagement after the airdrop. Some projects use vesting/lock on airdrop rewards to keep users, but the reality is that users just don’t do anything and wait for the unlock to dump. In Double’s elegant design, users have to continue using Double and either supply capital, tokens, or do both to earn additional DDJs so they can actually gain the airdrop benefit.
Fundamentals
To succeed, a project and a token must have solid fundamentals. Airdrop is an effective crypto native marketing tactic and solid token fundamentals can strengthen the marketing program. Double has solid fundamentals in both product and tokens:
No premine means that nobody, neither the team nor the investors, will have DDJ at genesis. The airdrop receivers will be the only users who own DDJ at genesis! DDJ has strong utility in Double and is the only token that can be used to purchase or breed Double Down Club (DDC).
Bring-it-on
When executing airdrop programs, many projects spent lots of effort to prevent sybil attacks. The Double Down to Genesis program has a design goal to be sybil attack resistant! However, any design may not be perfect. So we are calling all airdrop hunters and sybil attackers to game the design. Since we could learn from your attacks and improve the design, we will appreciate your efforts. Bring-it-on!
Forking-it
Most projects have not been effectively leveraging airdrop, an effective crypto native marketing tactic, to its full potential due to bad designs. Double is a true believer in the crypto community ethos. We hope our elegant design to use tokenomics to solve the aftermath of airdrops can inspire other projects to design better airdrop programs. So feel free to fork it and when you do, please reach out so we can compare notes and improve together!
