Written by: Nanak Nihal Khalsa, co-founder of the Holonym Foundation

Translated by: AididiaoJP, Foresight News

In most past cycles, crypto teams convinced themselves that airdrops were about building community. However, in practice, airdrops have evolved into something entirely different: a massive training mechanism teaching people how to extract value with maximum efficiency and then withdraw.

This outcome is not coincidental; it is a necessary result of the token issuance methods from 2021 to 2024. Low circulation, high fully diluted valuations, as well as points systems rewarding actions rather than intentions, and qualification rules that anyone with sufficient time and scripting ability can reverse-engineer created a system that turned rational behavior into mass wallet creation, simulated participation, and immediate sell-offs.

The crypto industry has been accustomed to discussing trust as an abstract concept. Yet, in reality, trust has eroded because token issuance has no longer aligned incentives with beliefs; participation has turned into a transaction.

Loyalty has turned into fleeting speculation, and governance has become a performance. When users are rewarded for trading volume rather than belief, what is obtained is not a community—but mercenaries.

Airdrops Spawned Value Extraction Manuals

Point systems have exacerbated this trend. Such systems are often packaged as fairer token distribution methods, but in practice, they turn participation into a job. The more time, money, and automation invested, the more points can be accrued. True users are marginalized due to limited resources, replaced by those treating point panels as yield farms.

When this phenomenon occurs, everyone is aware. Teams witness the growing clusters of wallets. Analysts publish post-analysis reports revealing how a few entities have extracted disproportionate amounts of token supply. Nevertheless, this model persists largely because it performs well on growth charts and can be exchanged for short-term market attention.

As a result, airdrops have lost credibility because their mechanisms have become predictable and exploitable. By the time tokens are launched for trading, a considerable portion of the supply is already reserved for immediate exit. The price trends post-launch are no longer price discovery but more akin to clearing legacy issues.

Token Sales Return, Fueled by Airdrop Loss of Credibility

It is against this backdrop that token sales and ICOs are returning. This is not out of nostalgia or a denial of decentralization, but rather a response to structural failure. Teams are seeking ways to reintroduce screening mechanisms into the distribution process. Questions regarding who is qualified to receive tokens, under what conditions, and what constraints apply are now as important as the amount of fundraising.

The difference this time lies not in the act of selling tokens itself, but in the way participation is being reshaped. Early ICOs were open to anyone with a wallet and operational speed. This openness came with significant downsides, including whale dominance, regulatory gray areas, and a lack of accountability mechanisms.

The new generation of token issuance is attempting to introduce screening mechanisms that previously did not exist. Identity and reputation signals, on-chain behavior analysis, jurisdiction-based participation restrictions, and mandatory distribution caps are increasingly becoming important components of issuance design. The goal is not to exclude but to ensure tokens are distributed to those more likely to remain long-term actual users.

This shift exposes deeper divides within the industry. The crypto industry has long positioned itself as permissionless, yet many of its most valuable aspects now rely on some form of access control. Without access control, capital will flow toward automated operations; with access control, teams risk reconstructing the highly monitored systems they claim to replace. The tension between openness and protection is no longer a theoretical question but a practical issue that manifests in every serious issuance discussion.

Now, Participant Qualifications Matter More than Fundraising Scale

The disturbing reality is that we cannot solve this challenge by avoiding identity issues; we already live in a world where identity is ubiquitous. The question is whether identity is implemented in a way that respects user autonomy or in a way that extracts data and centralizes power. The first wave of crypto infrastructure largely deliberately avoided identity issues, not out of principled stand, but due to a lack of tools that could safely accomplish this function at the time. As the scale of various issuances expands and regulatory scrutiny intensifies, this avoidance has become unsustainable.

In this context, privacy-preserving identity is transitioning from a theoretical advocacy to an infrastructural necessity. If teams wish to limit each individual to a single allocation, prevent automated clusters from dominating governance, or meet basic compliance requirements without collecting user profiles, they need a system that can verify specific attributes of participants without exposing user identities. Without such a system, the binary choice is between blind openness and strict real-name authentication—both of which are difficult to scale effectively.

Meanwhile, the crypto industry is also confronting the limitations at the wallet level. Many issues plaguing token issuance trace back to wallets' design and integration methods. Account fragmentation, weak recovery mechanisms, blind signing operations, and browser-based attack surfaces all contribute to making it difficult to establish lasting relationships between users and protocols. When participation must be accomplished through tools that are easy to forge and difficult to trust, the distribution mechanisms inherit these flaws. Projects facing witch hunts also experience user confusion, access loss, and post-launch user attrition—this is not coincidental.

Some teams have begun to consider these issues systematically. They no longer see identity, wallets, and token issuance as independent elements but treat them as a holistic system—in this system, users can demonstrate their uniqueness without disclosing personal identities, interact across different applications with unified accounts, and maintain control without managing fragile private keys. When these elements are integrated, distribution ceases to be a one-time event and begins to exhibit the characteristics of a sustained relationship.

This does not aim to make token issuance smaller or more exclusive but to make it more targeted. A few genuinely concerned participants are often more valuable than a large number of indifferent ones.

Projects committed to aligning with human values usually show stronger user retention, healthier governance participation, and more resilient market performance. This is not ideology but observable objective behavior.

Ultimately, the teams that will succeed are those that no longer view token distribution as a marketing tool but as infrastructure building. They will design with the premise of an adversarial environment, making resistance to automated attacks a design goal from the start. They will see identity as a tool to protect users and the ecosystem, rather than a compliance checkbox. They will recognize that appropriately designed friction is a system characteristic, not a defect.

The failure of airdrops is not due to user greed. The failure of airdrops stems from their mechanisms rewarding greed while punishing steadfastness. If the crypto industry wishes to break beyond the existing audience, it must stop training people to extract value and instead provide them with reasons to belong.

Token issuance is the domain where this transformation can manifest. Whether the crypto industry is willing to fully embrace this transformation remains an open question.