Recent research shows that decentralized exchanges that distribute tokens via airdrops see a big boost in user numbers and transactions. But, is building communities this way just crypto’s version of printing money?

Airdrops — the disbursal of free tokens to early users as a way of rewarding and building momentum — have been around for years but came to prominence thanks to Uniswap’s retroactive largesse in 2020. Nearly anyone who’d used the exchange before a certain date was gifted 400 UNI tokens and those who held their tokens saw a substantial increase.

But, as the market became more mature and more people entered the space, the use cases for airdrops have become more complex. For example, LooksRare more recently sought to siphon off some of OpenSea’s user base by airdropping tokens to new users but with two key rules: They had to have bought or sold a minimum of 3 ETH of NFTs on OpenSea and would need to contribute a new NFT to the LooksRare marketplace.

There have also been notable bad airdrop examples, ranging from a lack of liquidity for to phishing expeditions whereby recipients of the airdrop are baited into connecting their wallets to a malicious site.

The question for builders is: Are airdrops effective tools for galvanizing new users and building communities?

Building a community

Unless you’re an already established exchange or NFT project, attracting new users is very difficult and handing out free tokens is one way to do it. In the DeFi and DAO space, tokens often come with governance rights that confer the authority to vote on the…

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