The arbitrage community hits a wall Monad: "The logic of the testnet arbitrage race has collapsed"

Author: Hu Tao, ChainCatcher

Yesterday, the highly anticipated Layer1 public chain Monad’s token MON officially launched, once falling below the cost basis for public sale users. Currently, the FDV remains in the $3-3.5 billion range, which is not only lower than the $8 billion mainstream market cap predicted on Polymarket but also far below the $15 billion valuation of the early Pre-TGE market.

And this is not only a heavy blow to the Layer1 narrative but also a “tragic” milestone for the “profit-taking” community.

Previously, Monad was valued at $3 billion, making it the highest-valued unissued Layer1 in the market, and was highly anticipated by profit-takers. Its testnet has accumulated over 300 million interaction addresses, with many studios registering Monad addresses using millions of addresses. At the end of October, Monad officially opened for airdrop queries, but unexpectedly excluded all testnet interaction addresses from the airdrop scope.

The logic of profit-takers is that “sunshine” is a common practice among many project teams; as long as there are frequent interactions, they can potentially earn tokens worth a few dollars to dozens of dollars. The accumulated token value across multiple addresses can still be significant. However, Monad’s official response was not to include all testnet addresses in the airdrop, contrary to the profit-takers’ expectations.

“All testnet interaction addresses are anti-profit, and participating in various NFTs basically has no use. The only addresses that received the Monad airdrop are some old addresses that never interacted with Monad but traded on Hyperliquid,” said A Du (pseudonym), head of a profit-taking studio in Hangzhou, to ChainCatcher.

For a time, Monad became the target of fierce criticism from many profit-takers, but the Monad team remained unmoved. According to well-known KOL Fengmi, the idea behind this airdrop was to bind contributors, identity, and potential people to Monad—focusing on identity + contribution, such as Monad ecosystem developers, heavy DeFi users, and high-quality NFT holders.

Famous alpha blogger Spark received a reward of 3 million MON in this airdrop, worth about $110,000. This was not due to his interaction record but because he served as a moderator in the Monad community for three years and established the Monad Chinese community. The Monad team regarded this as a substantial contribution, which is also a common criterion for airdrops by most projects.

For project teams, the significance of airdrops is twofold: on one hand, to reward long-term supporters and demonstrate their value for community users; on the other hand, to incentivize active participants and influencers in the surrounding ecosystem, attracting them into their own ecosystem through airdrops. From Uniswap to Gitcoin, Arbitrum, Scroll, Berachain, Aster, and thousands of other projects, airdrops have become an essential method for attracting users.

During this period, the standards for airdrops have continued to diverge and evolve. Some projects emphasize fairness and generosity, being quite accommodating to profit-takers who participate in interactions. Others set strict rules for testnet/mainnet interactions, implementing rigorous “whale” screening based on a point system. This time, Monad completely abandoned testnet interaction users, or retail investors.

“If a network neglects retail investors for a long time, it will make the network overly elite in its early stages, losing a broad community foundation. In the early days of Bitcoin, Ethereum, Solana, and BSC, it was a small group of seemingly insignificant retail investors who brought network effects and community vitality,” Fengmi said on X (Twitter). He believes Monad should give grassroots retail investors a gradual growth space, even if small, so more people can truly become part of the MON network community.

Zhuifeng believes that profit-takers contribute not only fees, data, and traffic to projects but also serve as effective publicity. He personally thinks these people should be incentivized. “Monad’s approach is really thoughtless, shaking the trust foundation of the entire industry,” said Bingwa on Twitter.

From the project perspective, they need to formulate airdrop strategies based on long-term development needs. “Profit-takers lack loyalty; they sell immediately after receiving airdrops and move on to the next project. For projects, this only causes selling pressure without long-term benefits. Is it necessary to give them tokens?” said an anonymous KOL, describing profit-takers as “parasites” in the crypto ecosystem.

Australian master brother also believes that the industry’s logic for airdrops is changing. “In the past, CEXs focused on on-chain data activity and active user metrics when evaluating a project’s fundamentals. During cold starts, projects needed popularity. For a long time, project teams tacitly or explicitly reached an understanding with profit-takers: you come to profit here, help me get listed on major exchanges, and I’ll give you airdrops, sharing the gains. But now, CEX listings no longer look at on-chain data or user metrics because everyone knows these numbers are heavily inflated,” he tweeted.

The business logic is ruthless. As on-chain data bubbles grow more severe and profit-takers’ selling pressure negatively impacts many projects’ token prices, Monad’s choice is understandable. However, this will not be the path most projects take, because Monad, as a heavily capital-backed public chain project, still has many cards to play. Its technical strength and potential explosive power in ecosystem applications could bring it a large community of users. But for most projects, which are essentially marketing-oriented, they must rely on airdrops to attract attention and market hype.

In the long run, airdrops remain one of the important sources of value in the crypto industry, but their logic and targets are undergoing profound changes. “The results of Monad’s airdrop basically mark the collapse of the testnet ‘slave’ profit-taking track, and in the future, testnets are unlikely to be farmed again,” said Australian master brother.

In fact, many KOLs predicted this “table-flip” by Monad. Early on, many, including Australian master brother, Bingwa, and Zhuifeng, openly stated they did not participate in Monad interactions. It is understood that top KOLs will focus more on “mouth-lapping” (content creation), arbitrage, and other diverse markets, while also concentrating on high-quality projects like Polymarket to create premium accounts.

Additionally, several interviewed studios reported that their earnings are now less than last year and below expectations. “The key is to find areas where you have advantages—whether it’s low labor costs, advanced technology, early project research, or influential KOLs for mouth-lapping. It’s quite difficult to just follow the crowd and profit significantly,” said A Du.

As the market cap of top projects like Monad has fallen far below expectations, and many projects lock user airdrop shares for long periods after TGE, profit-takers’ position in the project ecosystem has diminished, and the value of their tokens continues to shrink. The profit-taking logic based on volume is no longer sustainable.

“So, the retail investors who entered the primary market by providing labor and enjoying cheap dividends have indeed come to an end. The door has long been closing; Monad’s airdrop just sealed the last crack,” sighed Australian master brother.