Token-First Is Dead. Now What?

Transcript

is hard. [clears throat] >> Answering other questions. >> Okay, I think we can start. >> Hello everyone. >> Are you ready for the next talk? It's a pleasure to welcome Lij here my chess teacher on and he's also the founder of Kerna and the talk is token first is that now what

>> so hi everyone um I'm very excited to be here with you and uh today we're going to talk about airdrops how they've miserably failed for the past two years and what is u the step forward and the best practices if you want to grow a defi app or a onchain protocol sustainably. So my name is Leo Paul. I'm the founder of Kerna. Um we're an onchain brand studio. Previously I was a marketing lead at uh D5 protocol on Ethereum and um I actually started as a crypto YouTuber back in 2021 and I had 50,000 subscribers and I also do some angel investing in onchain startups.

So um 89% of airdrops don't work. I'm sure you've all experienced that before. Maybe you've received air drop. Maybe you've bought tokens that just did an airdrop. And for uh nine airdrops out of 10, the uh price 90day after the airdrop uh was actually lower than on TGE. And these are figures for 2024. Um I'm sure you know a lot of examples. You have ZK sync, you have Starknet, blast, bar chain. Um they basically all these projects are doing between minus 90% and minus 99% uh today uh since uh they did their token generation event.

A few airdrop stats. So in 2024 $19 billion uh worth of tokens were aird dropped only four$4.5 billion in 2025 and I assume that in 2026 less than a billion dollars will be aird dropped. 64% of recipients sell at token generation events. So two out of three users are selling their token on the day uh the token is generated and um as I previously said 89% um have a lower price uh 90 days after. So I was um part of the marketing team of Braavos which is one of the popular wallets on starknet. So I experienced the whole uh startet airdrop phase uh

pre-airdrop uh during the whole uh growth phase of starknet during the airdrop and after the airdrop and so uh airdrop day this is the day where most like the largest amount of users were connected to stocknet and active so 380,000 accounts uh a month later only 15% of these users stayed active uh two months later only 10% and six months later only 1% of the users were still actively uh doing transactions on Starknet. Um and actually that's kind of funny because like so you have 5,000 users after the air drop. uh like there is some kind of like bugs I'd say uh on on the end but what is funny is like there were 5,000

active users at the beginning before Starknet talked about an airdrop and then it became like crazy and there was like hundreds of thousands of users and when all the tokens were air dropped and this things uh was more quiet there were still 5,000 users so you can see that the all the airdrop and all the money that that was spent had no effect on um creating long-term uh usage for startnet and for all these other protocols I'm not going into details with all the other ones that I've cited like blast bar chain zinc these are the same numbers like zkync has 4,000 users on average bar chain is 6,000 like they're all around this 4 to 6,000 um thou users uh right now and it's approximately the same as

before all this airdrop thing and a bit more u data on starknets So um the token was um at a two billion market cap when it air dropped. Now it's sitting at around 200 million and um I'm not even talking about the token price. The token price did minus 99% because the inflation is super high on this token and all the other token you need to pay VCs you need to pay influencers you need to pay all the people who participated in in in this project and who invested. So there is huge inflation and the price is just going down. In terms of TVL, it started at uh 400 million and it's now at 200 million. So a 50% uh decrease. Um

so what was the strategy behind the startnet airdrop? Uh it was a highly uh dev focused airdrop. Like for example, I received as a power user uh $1,600. Um, I mean, I'm happy with that, but compared to like the devs who received up to $360,000, like it was highly skewed towards dev. Um, they had a lowflat high FDV token. So, um, they raised $225 million. So, you know, the investors, they wanted some of their money back. So, obviously, like huge inflation and a lot of sell pressure for that token.

One very important thing also to remember is that uh to be eligible for the airdrop you didn't require any skill. So it means that most of the people were taking that as a job or as a task that they needed to do and they didn't like build some sort of u emotional connection or um any yeah they didn't feel that much part of of the protocol I'd say and they would just like cash in their money and and go out. Obviously there was no product market fit even if the Stark U is the endgame kind of thing. Um yeah was thought to to be something but in the end like there was no clear product market fit for Starknet. Um there was no social recognition built into uh the

strategy and actually a bit the contrary because one of the key members of Starknet actually um said about these um these airdrop hunters that they were ebeggars. So, you didn't really feel recognized at all being part of this community. This is also an important point to remember. And a weak brand like I was super surprised, but um like they used this Stark uh wolves that was based on uh Game of Thrones or they were doing like Dragon Ball Z aesthetics like this is not a good way to build a brand. You can just you cannot piggyback on like another concept to build like a a solid brand. You need to build your own universe. So for me that was kind of like a sort of recipe for a disaster

and I will compare that to u one of the only very highly successful airdrops which is the hyperlquid airdrop. Um right now there is I mean for the past uh year there is around 60 to 80,000 active users daily. So it's a healthy usage healthy protocol. And in terms of uh metrics um TVL is around six billion market cap for the token is around 16 billion and same it's it's growing and they actually have a a burning mechanism to decrease the inflation on the token.

So even if it's right now the same market cap as six months ago the token price is actually higher. So there is a a lot of buy pressure for for this token. So in terms of strategy um they had a fair launch meaning that they had no VCs and they uh allocated 31% of the tokens uh to their users. I know that um like it's it's a really great thing to do but not every protocol can do that. Jeff the founder has put I think something around $10 million from his own pocket to build his protocol. So not every founder has $10 million to inject in his project obviously. But I mean this is if you do it this way like I think you increase your chances of success

and important also it was you needed skill to receive the airdrop. So um it was a skill based bon program and if you did wash trading you were trying to farm the airdrop you could be penalized up to 98%. Even if you did a lot of transactions, a lot of volume, if if um Hyperlid saw that you were doing this as a farmer, you could lose uh 98% of your airdrop. So, and the people who were the most rewarded were the people who um who basically mastered the protocol and did complex trades and were really um power users of the protocol. Obviously, they had product market fits and clear value proposition and they had a clear brand.

uh they built their own universe with their own colors, their own concept and um that was u in their favor and it made them a powerful brand. And I want to talk also about bass. Um who of you are using bass in this room? Yeah, four or five people. Okay. Uh so I'm a heavy base user personally and um I really like that they have no native token. They have no point system and they have been very clear at the beginning that they didn't plan any token. So me personally, I'm using base because I put my assets on Morpho because I want the best riskrewards and I feel that's that's where that's where it it is on Morpho on base. So I'm not doing I'm not putting

my assets on base to farm a token or because I want incentives. No, I just genuinely want to use that blockchain to use a protocol that I like that has the best riskreward. So, and I'm actually like quite um like not anxious but worried about um about their new strategy because now they're they're kind of talking about a token. I'm like personally if they do a token I'm like I have this feeling that okay maybe now it's time to move to another chain because I got everything out of that chain or I I would just not do anything because I still like it and it would not change anything. So I'm like quite I I personally I I I don't think it's a good strategy for them to launch a token at this stage. They already have like uh six billion uh worth of TVL far uh far

above uh arbitum which has uh I think something like two billion. So I don't really know I don't think it will bring any growth to their protocol to airdrop tokens. I I think personally will either have no effect or people will just jump to another chain because they think they've milked everything from from base. So in my opinion that's that's u yeah that's that's not a good strategy. So why are airdrops not working? I'm going to talk a little bit about psychology here and about the overjustification effect and that's the fact that um if people enjoy doing something and then you pay them for doing that it removes uh their motivation to keep doing this thing.

And um this theory is not from me it's from a few guys. Two of them are called Desian Ryans and they've created the self-determination theory the SDT and they uh talk about in intrinsic motivation versus exttrinsic motivation and so I guess you know what it is like extrinsic motivation is when it's something external that pushes you to do something and intrinsic motivation is like internally you want to do something and you choose to do this and intrinsic motivation comes when you have three things autonomy so for example users do choose uh to do something not because they want like they have incentives and they're pushed for an airdrop. No, they just do it because they they like it.

They want to do it by themselves. Competence like if you use something and you become a master at it by using it multiple times, it it it creates intrinsic motivation and relatedness. If you feel that other people are doing this and you build a community around that, this bring intrinsic motivation. And actually a very good way I think in in in DeFi and in onchain products in general is to do offline events to bring a community together and it's not to just aird drop them tokens. That's not how you build a a a a solid comm community. And another guy called Bruno Frey uh he has another theory which is the uh motivation crowding theory and he says a bit similar things that uh exttrinsic reward to an activity that people already enjoyed will destroy

their intrinsic motivation and uh on the contrary if you give them a badge that highlights their genuine expertise this will strengthen their uh motivation and keep them uh doing uh what they're doing. And I want to give a simple example. I think it's it's a way to really show what intrinsic motivation is versus exttrinsic. So here is um um a picture of guys um who are uh washing a beach. This is like a real picture from real guys in from two years ago. And um let's say you have two options on how to bring these people. Option one is you say that um you're volunteer for the local community and that was the case.

So people are happy you know they feel like proud of themselves. they feel that they helped um this island and and they're happy and this is like pure intrinsic motivation. Now imagine that uh on the contrary you said hey guys you're going to be paid $10 per hour to do this. Imagine the different crowds like for me this is a completely different crowd of people that you're going to get here and they they will do it once and they will never want to do it again if they're not paid. So yeah, I think that's um a very good example to illustrate this airdrop thing and and how it uh motivates or not people.

And um that's a very personal example. So it's not a very well-known protocol. It's called Sysmo. Has any of you uh heard about this before? Okay. Um so Sysmo they um invented ZK badges. So they were one of the first protocols um to build on ZK but for privacy not for speed and execution but for privacy and um like they had badges and uh it was really a status symbol and unfortunately I was a little bit late uh following this protocol but I remember I really wanted to have this Ethereum power user batch because for me it it meant that I would be this OG guy who was the first to encounter this protocol to interact

with it and for meet was kind of a status symbol and I and I felt like I had another badge and I felt really proud being part of this uh project and community and u they didn't plan any airrop they had no points nothing and I also really fell in love with the uh care that they put in their brand like all these little uh characters they were called Zikis and I just fell in love with their universe and I felt really attracted and and yeah really part of uh their mission and really aligned. So actually at that time I had my YouTube channel. I did a free video for them and I I just wanted to you know push the word out because I just genuinely loved their innovation and the care that they've put uh in their brand. Um so at

what yeah 15 minutes good uh so what's next? What are now since we've learned like what has not worked stark nets layer 2's other typical airdrops and what has worked uh projects like hyperlquid what can we learn from that? So um to avoid at all cost and something that um is not working is money as a primary hook as we've seen like if you only bring people because they are going to earn money the day you stop uh giving them this money they will not use your protocol anymore and this is not the type of people you want to attract. The second thing is um rewarding before a product market fits because I I I like to think about airdrops as like you have

a gun and you have just one bullet and if you fire it too early then you have nothing to defend uh against the competition. So you really need to think carefully about when you uh you know fire the gun and it's way before to reward uh after product market fits because you start to have real users and not uh inflated numbers by people who just want to earn money uh on your protocol. Um earning points that doesn't require your skills. It's the same. It's like if you're not skilled um if you don't need skill to um to earn points like um it's like a video game, you know, you don't feel like you feel it's a job. It's just a minial task and you're here for the

money and and uh yeah, you should not do that. Um no way to show status and progression. I like to think about I know are there any League of Legends players in the room or people who played this game in the past? Yeah. So I guess you know the like gold, silver, bronze, platinum like personally I never reached gold. I was only like silver but I was still proud and and this is the kind of thing that you want to you know show in your project is like a way to showcase uh social recognition among your community and I think u yeah that that's something that doesn't cost you anything and that people if if you state it clearly that it's just like for community purposes and you don't plan to launch a token this is a a powerful way

to keep people to keep people in uh low float high FDV tokens of course like um if you do that there is a lot of sell pressure which u just creates a downward trend for the token and uh treat branding as an afterthought. I think branding is something super powerful that helps um any startup uh being taken seriously and uh creates a lot of equity right from the start and so the path to follow and what's working it's new products with real use cases but you know this is um hard like nine startups out of 10 uh doesn't reach product market fits um reward mastery of the protocol um social recognition baked into the strategy uh TGE after product

market fits and create iconic brands for compound effect. And um this is my uh one of the last slides just to wrap up the talk. Uh so the best practices for 2026 is to think product first, token second. Um is to build in your in your um like social strategy or marketing strategy, social recognition over cash. um to think retention over acquisition because as we've seen like you can have inflated numbers with thousands and and thousands of users but if these users are not real users and they're here for the money like it's better to have way less users but users who keep coming to the

protocol for good reasons and to invest um in branding and uh a few words about what we do at Kerna. So we're a um onchain uh brand studio and actually it's kind of like this whole token thing I was quite affected being part of of Starknet and seeing that all the effort that I've put in the start ecosystem were were worthless. I think it really got to me and uh for me I would rather prefer um having a protocol that puts all his money into products and brands and not on airdrop. Uh and I think this is the way to go. So at kernow we build brands for startups and this help with three things. First, it's um for a uh securing

investor conviction. If you had good branding, it's easier to get investors in. It's uh it also helps you um recruit great talents and it will also help with um users and uh getting users and turning them into advocates and ambassadors. So, these are my uh contacts uh LinkedIn and Telegram. You can scan the QR codes if you want to send me a message. I'll be happy to connect with you guys. Thank you so much and uh have a good day. >> Hey. Um are there any questions for >> Thanks for the talk. It was really good.

Um I think a lot of people kind of don't talk enough about TGUs now anymore. Um so thanks for doing that. Um in your opinion what is like the most successful um token launch if you haven't already. Um like nothing related to you right don't be biased but in your opinion what was the most successful launch >> so apart from hyperlquid you mean? Yeah, >> for me I think uh but it really depends also on the success of the protocol like Morpho what they did was like I think they've locked the tokens. Uh they didn't do the airdrop right away and they waited for one year. Um and then they did the airdrop in like way better

conditions. Um I think that was a smart way to do it. Um I'm not familiar with like every single mechanism that they've put in place but from um like a token health perspective I think they did great uh in that regard. >> Perfect. Thank you. >> And I think on that also it's important now you cannot have a token if you don't have a burn mechanism if you don't have a way uh to reward holders of these tokens. I know like Hyperlid is doing it. A is doing it. I think unis swap I think they've implemented it too. So you if you want to have a healthy token, you need a burn mechanism uh or or like a fee switch or some way to reward these holders. And actually I've talked with like a few um like hedge funds or or traders like they are actually looking

now to evaluate uh tokens who are doing that and they want to use the trify models that they're using and treat them as equity token and see like the PE ratio, you know, these kind of things from Trefy to evaluate the health of a company. So you need that in your token if you want to succeed. And how what's your stance on like AI doing the token launches nowadays versus humans? >> Wow. So can you elaborate on the question because like AI doing token launches is is a >> do you still like believe that like the actual mechanics can only be done basically through humans right now or uh are you see are you seeing other token launches just using AI agents to do it instead? Personally, I haven't seen any

token launch only using AI. I know that there are more and more tools uh to help with that. But uh I don't know for me it's such a complex topic with like so many parties, you have like content creators, you have marketing, you have partnerships, you have media. Like I don't see right now an AI agent or multiple AI agents being able to um organize that super efficiently for one big day. Uh maybe on the technical part like you know setting up the contract stuff like that maybe it could work but yeah not sure. >> All right.

>> Great. Thank you guys. [applause]