The Good Tech Companies - Can Anything Stop the Death of the Token Airdrop? No, Bring It On.

Episode Date: October 3, 2024

This story was originally published on HackerNoon at: https://hackernoon.com/can-anything-stop-the-death-of-the-token-airdrop-no-bring-it-on. 'Node Drop' is a sustainable alternative to token airdrops, aligning incentives by rewarding active network participants with LiteNodes instead of free tokens. Check more stories related to tech-stories at: https://hackernoon.com/c/tech-stories. You can also check exclusive content about #portal-to-bitcoin, #george-burke, #node-drop, #airdrop, #sustainable-growth, #litenodes, #decentralization, #good-company, and more. This story was written by: @phillcomm. Learn more about this writer by checking @phillcomm's about page, and for more stories, please visit hackernoon.com. Token airdrops are flawed, leading to sell-offs and disengagement. Portal to Bitcoin introduces the 'Node Drop,' where participants earn tokens through running LiteNodes, performing vital network tasks. This model promotes long-term participation, decentralization, and sustainable growth by aligning incentives with meaningful contributions, unlike traditional airdrops which incentivize short-term gains. Crucially, it also opens novel participation from US audiences without the regulatory risk seen in token drops.

This audio is presented by Hacker Noon, where anyone can learn anything about any technology. Can anything stop the death of the token airdrop? No, bring it on, by Philcom Global. Hash hash how the coming, node drop, fixes the airdrop's perverse incentive structure and increasingly bland appeal. Token airdrops are fundamentally flawed crypto token airdrops, once hailed as a groundbreaking community building tool, have reached the end of their useful life. The promise of free tokens has devolved into a predictable cycle of overpromises that lead to sell-offs, farming by low engagement users, and oversaturation. It's time to acknowledge this inevitable death and move towards more sustainable solutions that align community incentives with long-term growth.

Enter the NodeD drop, a solution for sustainable growth at Portal to Bitcoin. We've designed an alternative mechanism, the node drop. Instead of handing out free tokens to the community, light node slots, functional units that play a critical role in maintaining the network can be distributed fairly and transparently to community members who are most actively involved in building, shaping, and maintaining the network. Light nodes not only decentralize network from day one. They align incentives for long-term participation by enabling recipients to earn token emissions over time. Think of Bitcoin. Every Bitcoiner knows that the more full nodes people run, the more decentralized the network is and the less vulnerable to minor collusion and rule changes.

ITIS a volunteered public good, which costs the node runner bandwidth, electricity, and computation, all without returned incentives. In contrast, the portal network incentivizes maximum decentralization by incentivizing light nodes, independent of validator nodes, so that the number of entities that independently verify, keep a record of, and maintain the network are rewarded for doing valuable work with a portion of emissions. Nodes that work and earn light nodes are not free money. They are operational units that perform vital network tasks, such as transaction verification, that anyone with an internet connection can run. Like Bitcoin's full nodes, the more light nodes in operation, the stronger the network becomes. This shift away from free tokens to earned tokens fundamentally changes the game, making participation meaningful and rewarding for those who contribute to the network's success.

Aligning incentives with participation the node drop introduces a sustainable approach to token distribution. Rather than flooding the market with tokens that feed short-term sell-offs, LiteNode recipients earn tokens through legitimate work that enhances the network's growth, robustness, and utility. This method avoids supply shocks, prevents mad scrambles from short-term acquirers like airdrop farmers and dumping, and fosters a healthier, more engaged community. Requiring a stake to run each light node makes sure that node runner's skin is in the game for the long term, ensuring that those who earn tokens are genuinely contributing to the network's strength. Architecting a new economic game theory, the node drop model also incorporates several optional design features to mitigate

selling risk, boost demand, and ensure long-term network health hardcap on light nodes. A limited number of nodes creates scarcity, driving competition and community excitement. Staking and deactivation. Light node slots become permanently deactivated if minimal staking and uptime requirements aren't met. Reward share then redirects to remaining nodes. This disincentivizes unstaking and encourages long-term commitment. Compound staking. Earned rewards can be recursively deposited into a staked position, reducing available circulating supply. Temporary non-transferability. Locking nodes to user wallets disallows secondary markets. This keeps existing nodes coveted and in high demand. Node drops

engage and incentivize. What if the future of community building is via node giveaways? This shift from freebie tokens could eliminate dumping, prevent supply surges, and encourage genuine participation. Tokens are earned, not handed out in bulk, and the community is incentivized to stick around, not sell off. Tokens that get into the hands of several hundred thousand light node recipients can now be rewarded via network distribution or minted by a smart contract. No longer is a central organization promising tokens in a potential securities offering. Backslash dot dot. Tokens are earned over time commensurate with network participation. No longer is a crowd of

100,000 people receiving a giant percentage of liquid freebies in a series of dumps. Backslash dot dot, light node recipients might earn the same or more tokens than an airdrop, but not all at once. No more large, singular token airdrop distributions. Instead, rewards are earned algorithmically over time, ensuring supply and circulation remains low. Backslash dot dot, Light node recipients can stake a portion of their earnings from network rewards to run their node. Less dumping. No more supply shock. Unlock. Dates. Backslash dot dot. Light nodes operators are rewarded with tokens for performing important work in the network. No more unearned freebies that go unvalued by the community backslash dot dot unlike a token airdrop

requiring a minimal stake for each active light node may reduce the available circulating supply no more community dumping how a node drop is a massive step up from the old failed model a flawed incentive structure the fundamental problem with token airdrops is that they inadvertently encourage mass sell-offs low propensity users who are with token airdrops is that they inadvertently encourage mass sell-offs. Low-propensity users who are farming for airdrops often rush to cash out before prices collapse, rewarding short-term actors while long-term community participants lose out. The marketing tactic, born out of the need to build a community in a hurry, backfires in the end. Real-world sell-off. The U.S. stimulus checks The U.S. Federal Reserve's stimulus checks in 2020-2021 serve as an apt analogy. Investors quickly offloaded their

free, airdrop, dollars into growth assets, front-running the inevitable inflationary consequences. The same logic applies in crypto. Token airdrop recipients sell fast, tanking prices and triggering a destructive cycle that harms projects and erodes community trust. Misleading metrics and empty engagement for top visibility, crypto projects are asked to demonstrate robust community engagement and on-chain activity. However, airdrop campaigns inflate the symmetrics artificially, as airdrop farmers create the illusion of engagement. The result is a false

sense of momentum that crumbles when the tokens inevitably flop post-listing. Now that we've seen how the node drop is far superior to the airdrop model to build engaged, sustainable communities, what do we see going forward? In the US regulatory blockade in 2018, the US SEC cracked down on token sales to Americans, deeming many of them as securities offerings. In response, teams turned to airdrops, believing this method would avoid US regulatory scrutiny. But by 2020, the SEC clarified that even free token distributions to US residents could be considered securities offerings. The result was to exclude all Americans, the world's largest investment

market, from participating in airdrops, further eroding the decentralization that crypto projects aim to achieve. Instead, why not strive to unblock Americans from participation and benefit? Nodes aren't free money or free tokens. They're opportunities to earn through legitimate work, ensuring those who contribute to the network benefit alongside its growth. This approach aligns incentives across the board, from airdrop to liftoff the era of token airdrops is fading, and what comes next could revolutionize how communities are built and sustained in the crypto space. Light node slots represent a more thoughtful, decentralized approach to incentivizing network participation, ensuring that rewards are aligned with long-term growth. At Portal to Bitcoin, we're not into failed models like airdrops.

We're inviting users to become active participants in the network, contributing to its success and earning rewards commensurate with their efforts. The future belongs to those who reward with purpose and grow through meaningful participation. Welcome to the next chapter, Community Engagement 2.0, about George Burke. Burke is co-founder of Portal to Bitcoin, the only bridgeless cross-chain swaps AMM. He has 11 years of experience working in Bitcoin, founder with three exits INP2P, community startups, including early exchange CryptoStreet. Burke created the first BTC debit card and runs the world's oldest Bitcoin meetup.

About Portal to Bitcoin Portal to Bitcoin, formerly known as Portal DeFi, conceived by a team of veteran Bitcoin and AI engineers, is dedicated to empowering financial self-sovereignty. Portal is the only custody-less interoperability protocol for Bitcoin portal enables fast low-cost atomic swaps between native Bitcoin assets like BTC ordinals and runes to L2s and other L1s with portal's technical breakthroughs there is no bridging or wrapping user funds are always safe portal is backed by coinbase ventures okxEx Ventures, Gate.io, Arrington Capital, and many other prominent investors. For more information, visit https colon slash slash

portal to bitcoin.com, ex, twitter, discord, medium and telegram. This document is for informational purposes only, is not legal advice, and only acts as a guideline that may, and is expected, to change based on ongoing legal and regulatory requirements, as well as internal business developments. It does not provide any guarantees, representations, or warranties for how the final product will operate, how regulations or laws will be applied, or who will be a contributor to the final product. N, N, N, N, N, N, Thank you for listening to this Hackernoon story, read by Artificial Intelligence. Visit hackernoon.com to read, write, learn and publish.