The project team no longer wants to distribute tokens for free to community members through airdrops. In the future, the focus will be on sustainability and intelligent incentives for a genuine community.
Written by: Yu Hu, Founder of KaitoAI
Translated by: AididiaoJP, Foresight News
Over the past 8 months, I have closely witnessed around 30 Token Generation Events (TGE) through Kaito's partner projects and our own projects. Undoubtedly, profound changes have occurred in the entire field during this period. This article will explore the following topics based on my experience and recent thoughts:
Why is the paradigm of token distribution changing?
What constitutes a good token distribution and how can it be achieved?
Intelligent incentive culture: incentive alignment vs. non-incentive signals
Why data-driven ICOs may become a new paradigm alongside airdrops
Why is the paradigm of token distribution changing?
Since the historic airdrop of Uniswap in 2020, the crypto industry has rapidly embraced this token distribution model, partly because it strongly aligns with the spirit of crypto, and partly due to regulatory arbitrage opportunities.
Looking back, this trend may peak at the TGE of Hyperliquid at the end of 2024. Hyperliquid's airdrop is considered another historic moment that is difficult to replicate. Hyperliquid has done an excellent job with airdrops, truly incentivizing many founders to consider giving away a large number of tokens for free to the community.
However, as project teams began preparing for their TGEs, they quickly realized that this was a completely different matter:
When it requires bringing in more than 10 intermediaries to ensure accessibility and liquidity, Hyperliquid was able to accomplish this entirely in-house.
When 99% of projects do not have a substantial revenue stream like Hyperliquid to support large-scale buybacks.
Compared to 2021, tokens in this cycle will face a more severe liquidity crisis without integrating strong buyer mechanisms, especially on the demand side. Most new token prices have rapidly plummeted, leading to a shift in community culture from "diamond hands" (long-term holding) to early selling, which further creates a self-reinforcing cycle.
What is the result? More teams are now rethinking the ways of community distribution. Clearly, at least some projects are exploring alternative structures such as ICO models like pump.fun, Plasma, Sahara, and traditional airdrop models.
For project teams, ICOs create a demand-driven dynamic: true supporters can invest and have a cost basis. In contrast, in a purely airdrop model, the community signal effect is weaker, and non-supporters may become zero-cost recipients.
Does this mean that all community airdrops will come to an end? I don't think so. Airdrops still hold significant marketing and community-building value: identifying, rewarding, and nurturing a loyal community remains a key determinant of project success and long-term development.
However, I believe that as an industry, airdrops increasingly need to be combined with clearer alignment and signaling mechanisms, which is also applicable in broader token distribution and incentive design.
Therefore, I believe there will be a growth trend in the future, with more thoughts and experiments on how teams evaluate and reward past contributions, weigh the costs and benefits of liquidity venues, create opportunity costs, design alignment and signaling mechanisms, and explore all possible ways to expand high-quality distributions.
We all need to consider the implications of these changes and establish a sustainable culture and expectations for all participants, including communities, teams, exchanges, funds, and more.
What constitutes a good token distribution, and how can it be achieved?
In my view, a good token distribution should:
Reward participants based on community consensus and alignment;
Utilize non-incentive behaviors as signals;
Provide ample opportunities for participation throughout the process.
To achieve this, I believe several key shifts are necessary:
Stronger data analytics capabilities to identify meaningful signals;
A clear focus on designing mechanisms that highlight these signals;
A reset of expectations for all stakeholders.
Thus, the future of token distribution will revolve around sustainability and intelligent incentives for genuine communities to ensure the long-term development of their networks and brands.
Intelligent incentive culture: incentive alignment vs. non-incentive signals
As part of this shift, I believe the industry will move towards more data-driven token distribution and smarter incentive design, where return on investment (including both tangible and intangible) will become the core evaluation metric. This emerging culture is built on two pillars:
1) Incentive alignment
2) Non-incentive signals
Incentive alignment refers to behaviors involving opportunity costs (whether based on capital or social), serving as credible signals for future community formulas. For example, participating in ICOs, TVL commitments, holding community NFTs, and public social advocacy. Alignment can be encouraged through incentives, but to be meaningful, it must involve real scarcity or costs; otherwise, it may devolve into low-value signals.
On the other hand, non-incentive signals capture organic behaviors that reveal true intentions. This may include participation during non-incentive periods or any unexpected mechanisms. Hyperliquid's point distribution between seasons is a typical example of this practice.
Today, most market-setting strategies integrate both types of behaviors. The effectiveness of any activity depends on how teams balance incentive alignment with non-incentive signals and how they measure the return on investment of both.
Why Kaito launched a token launch platform and our views on the future of data-driven ICOs
We believe that if designed properly, public sales have the potential to combine the advantages of both: incentive alignment and non-incentive signals. The key lies in adopting a data-driven approach: precisely determining who receives distributions and how to predict future value contributions. As a leading data analytics platform in the crypto space with extensive coverage, we believe Kaito is best positioned to make this model work.
We call this model "data-driven ICOs" and believe it offers teams an appealing option, whether for market entry execution or optimizing token distribution.
A well-structured ICO can test people's consensus beliefs and filter out non-supporters;
Distributions are optimized by combining the best signals of historical contributions and future value contributions;
A carefully curated ICO invites new members to join, expanding the distribution range;
As a non-incentive event, it also serves as a powerful signaling mechanism.
For a simple example, imagine a sale similar to pump.fun, but instead of being based on who is fastest on the exchange (first-come, first-served), it considers product usage, social advocacy, off-chain and on-chain reputation, beliefs, and geographical balance in global community building…
Such a distribution would place tokens in the hands of the right people and provide more confidence in establishing a culture of alignment and shared prosperity within the community.
Conclusion
We are at a critical moment in the industry to rethink what is effective and what is ineffective.
For an industry that self-regulates through free markets, the path forward should always involve redesigning incentives and improving coordination systems.
I believe that as crypto technology becomes more widespread globally, our field will mature, and as an industry, we can not only lead in cutting-edge infrastructure but also build a new global coordination engine through tokens as underlying incentive tools.
This, in my view, requires a completely new approach: one that utilizes more advanced data and data analytics methods in everything we do, from token distribution to designing and aligning incentives.
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