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 token MON officially launched, and it once even dipped below the cost basis for public offering users. As of now, FDV is still hovering in the $3–3.5 billion range. This is not only lower than the $8 billion mainstream market-cap prediction on Polymarket, but also far below the $15 billion valuation set by the early Pre-TGE market.

And this is not only a blow to the Layer1 narrative—it’s also a “tragic” milestone for the farm-the-airdrop crowd.

Previously, Monad—with a $3 billion valuation—became the highest-valued unissued Layer1 in the market, drawing great expectations from the farm-the-airdrop community. Its testnet accumulated more than 300 million interactive addresses. Many studios were registering Monad addresses using millions of addresses. In late October, Monad officially opened airdrop query. But unexpectedly, it excluded all testnet interaction addresses from the airdrop scope.

The logic of the farm-the-airdrop crowd is that “sunshine reaches everyone,” which is a common practice for many project teams. As long as interactions are frequent enough, users may be eligible for token rewards ranging from a few dollars to dozens of dollars. When accumulated across multiple addresses, the total token value can still be substantial. However, Monad’s official team did not come up with the move the huge farm-the-airdrop crowd had hoped for—they excluded all testnet addresses from the airdrop.

“Every address that interacts on the testnet is basically anti-farm. Participating in all kinds of NFTs is also basically useless. The only ones who got a Monad airdrop are certain old addresses that have never interacted with Monad, but have traded on Hyperliquid,” Du Ao (a pseudonym), head of a farm-the-airdrop studio in Hangzhou, told ChainCatcher.

For a time, Monad became the target of fierce attacks by a large number of farm-the-airdrop users. But Modad (Monad) remained unmoved. In the view of well-known KOL Fengmi, the thinking behind this airdrop was to bundle people who have contributions, an identity, and potential into Monad—building around identity + contributions. For example: Monad ecosystem developers, heavy DeFi users, and holders of high-quality NFTs, and so on.

Famous alpha blogger spark received a reward of 3 million MON in this airdrop, currently worth about $110,000. This was not because of his interaction history; rather, he served as Mod of the Monad community for 3 years and helped establish a Chinese Monad community. Monad’s official team considers this to be a meaningful contribution, and it is also a key target for many projects’ airdrops.

For project teams, the purpose of an airdrop is twofold: on the one hand, to reward long-term supporters and show that they value community users; on the other hand, to reward active participants and influential figures in the surrounding ecosystem, drawing them into their own ecosystem through airdrop incentives. From the earliest Uniswap to later projects such as Gitcoin, Arbitrum, Scroll, Berachain, Aster, and thousands upon thousands of others, airdrops have long been seen as a required path for project teams to attract users.

During this period, the standards for airdrops kept forking and evolving. Some projects emphasized “fairness for all” and were quite generous to farm-the-airdrop users who participated in interactions. Other projects set strict rules for interactions on testnets/mainnets, conducting rigorous Sybil/witch-hunt screening based on a points system. And this time, Monad completely abandoned testnet-interaction users—or, in other words, retail users.

“If a network ignores retail users for a long time, it makes the network overly elitist from the very early stage and loses a broad base of community users. In the early days of Bitcoin, Ethereum, Solana, and Bsc, it relied on a small group of seemingly insignificant retail users. They brought network effects and community vitality,” Fengmi said on X. He believes Monad should give grassroots retail users a space to grow gradually—if only a little—so that more people can truly become part of the MON network community together.

Zhuifeng believes that farm-the-airdrop participants provide project teams not only with transaction fees, data, and traffic, but also serve as excellent promotion. “Personally, I think these people should be given some incentives. Monad’s handling is simply too inconsiderate. What it shakes is the very cornerstone of trust across the entire industry.” Bingwa also said on Twitter.

But from the perspective of project teams, they need to start from the needs of the project’s long-term development to formulate their airdrop strategy. “Farm-the-airdrop participants have no loyalty. Once they receive the airdrop, they will sell and then run to the next project to farm again. For projects, this only creates sell pressure, with no long-term benefits. Is it necessary to give them tokens?” an anonymous KOL described, saying that farm-the-airdrop groups are like “parasites” in the crypto ecosystem.

Tu’ao Master Brother also believes that the industry’s logic behind airdrops is changing. “Back when CEXs assessed a project’s fundamentals, they paid a lot of attention to how lively the on-chain data looked and the metrics of active users. When projects are in cold start, they need hype. So for a long time, project teams tolerated it, even reached an unspoken agreement with the farm-the-airdrop army: you come farm on my side to help me get listed on large exchanges; I’ll give you an airdrop in return, and we’ll all split the proceeds together. But now, CEX Listing no longer looks at on-chain data and user metrics—because everyone knows these data are heavily inflated.” Tu’ao Master Brother wrote in a post on Twitter.

Commercial logic is cold-blooded. When on-chain data bubbles become increasingly severe, and the sell pressure from farm-the-airdrop participants brings negative impact to many projects’ token price movements, Monad’s choice has its rationale. But this also means it is unlikely to become the choice for most projects. As a capital-rekindled re-funding chain project, Monad has many more cards to play. Its technical strength and the potential breakout power of ecosystem applications could bring it a large number of community users. However, for most projects, they essentially fall into the marketing category, and they must rely on airdrops to win attention and generate market hype.

In the long run, airdrops are still one of the important sources of value in the crypto industry, but the logic and target of airdrops are undergoing profound changes. “The Monad airdrop results basically announce the collapse of the farm-the-airdrop logic in the testnet-slave interaction track. In the future, it’s highly likely that nobody will keep刷ing on the testnet anymore,” Tu’ao Master Brother said.

In fact, many KOLs had already anticipated Monad’s “flip-the-table” move this time. KOLs such as Tu’ao Master Brother, Bingwa, and Zhuifeng, among many others, had long openly stated that they would not participate in Monad interactions. According to information, top KOLs will put more of their effort into other markets such as “talk-farming” and arbitrage, which are more diverse. They will also focus on curating high-quality projects like Polymarket to build premium accounts.

In addition, multiple studios interviewed also said that their earnings were lower than last year and also below expectations. “The key is still to find areas where you have advantages—either lower labor costs, or advanced technology, or sharp research that can spot early projects, or influential KOLs who can talk-farm. It’s relatively difficult to get relatively substantial returns just doing the ordinary ‘follow the crowd’ farm-the-airdrop,” Du Ao said.

As the market capitalization of top-tier projects such as Monad has fallen far below market expectations—and even after TGE many projects lock the portion of user airdrops for a long period—farm-the-airdrop groups’ position in the project teams’ profit-allocation ecosystem keeps declining, while the value of the tokens they end up with continues to shrink. A farm-the-airdrop logic that relies on volume is no longer sustainable.

“So the cheap-rent dividend period for small-time retail users—getting into the primary market by providing labor—has indeed already ended. The door closed long ago. Monad’s airdrop just closes that last tiny gap,” Tu’ao Master Brother lamented.