Rug-pull-for-profit crowd meets disaster: Monad — “The logic behind the testnet rug-pull race has collapsed”

Author: Hu Tao, ChainCatcher

Yesterday, the highly anticipated Layer 1 public chain Monad’s token MON officially launched, once dropping below public-sale users’ cost basis. As of now, FDV is still hovering in the $3–3.5 billion range. This is not only lower than Polymarket’s mainstream predicted market cap of $8 billion, but also far below the $15 billion valuation of the earliest Pre-TGE market.

And this is not only a major blow to the Layer 1 narrative, but also a milestone “tragedy” for the profit-taking crowd.

Previously, Monad was valued at $3 billion, making it the highest-valued unissued Layer 1 in the market. Profit-takers had high hopes for it. Its testnet had accumulated more than 300 million interaction addresses; many studios used millions of addresses to register Monad addresses. In late October, Monad officially opened up airdrop query, but unexpectedly excluded all testnet interaction addresses from the airdrop eligibility.

The logic of profit-takers is that “sunshine is for everyone” is a common approach for many project teams. As long as they maintain a relatively high frequency of interactions, they may still be able to receive token rewards ranging from a few dollars to dozens of dollars. With multiple addresses, the total token value can still be substantial. However, Monad’s official team did not deliver the move that the massive profit-taking crowd had hoped for—excluding all testnet addresses from the airdrop.

“The addresses that interacted on the testnet are all anti-profit, and participating in all kinds of NFTs basically has no use. The people who actually got the Monad airdrop are instead some old addresses that have never interacted with Monad but have traded on Hyperliquid,” said A Du (a pseudonym), head of a profit-taking studio in Hangzhou, to ChainCatcher.

For a time, Monad became the target of intense denunciation by large numbers of profit-taking users, but Modad’s official side remained unmoved. In the view of the well-known KOL Fengmi, the thinking behind this airdrop was to bundle people who contribute, have identity, and have potential into Monad—building around 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, currently worth about $110,000. This is not because of his interaction record, but because he served as a Mod of the Monad community for 3 years and helped establish the Monad Chinese community. This is considered by Monad’s official team to be a form of substantive contribution, and it is also an important target for airdrops from most project teams.

For project teams, the significance of an airdrop is twofold. On the one hand, it rewards long-term supporters and shows that the project values community users. On the other hand, it rewards active participants and influential figures in the surrounding ecosystem, and uses the airdrop incentives to attract them into the project’s own ecosystem. From the earliest Uniswap to thousands of later projects such as Gitcoin, Arbitrum, Scroll, Berachain, and Aster, airdrops have long been regarded as a necessary path for project teams to attract users.

During this period, the standards for airdrops have continued to branch out and evolve. Some projects focus on sharing the benefits widely, being generous toward profit-takers who participate in interactions. Other projects set strict rules for testnet/mainnet interactions, launching rigorous “witch-hunt” screening based on a points system. And this time, Monad completely abandoned testnet interaction users—so to speak, retail investors.

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

Zhuifeng believes that profit-takers’ contribution to project teams is not only fees, data, and traffic, but also can play a very good role in promotion. “In my opinion, these people need to be given certain incentives. Monad’s actions are really too inconsiderate—what it shakes is the industry’s foundation of trust,” Bingwa also said on Twitter.

But from the perspective of project teams, they need to formulate their airdrop strategy based on the project’s long-term development needs. “Profit-takers have no loyalty. After they receive the airdrop, they sell and then run to the next project to profit-take. For a project, that only creates selling pressure and no long-term benefits. Is it necessary to give tokens to them?” An anonymous KOL described profit-takers as “parasites” in the crypto ecosystem.

Tucao master brother also believes the industry’s airdrop logic is changing. “In the past, when CEXs examined a project’s fundamentals, they paid a lot of attention to how lively the on-chain data was and the metrics of active users. In the cold start stage, project teams needed hype. So for a long time, project teams tacitly permitted—or even reached an unspoken agreement with—the profit-taking army: you come to my place to profit-take and help me get listed on the big exchanges, and I’ll airdrop to you in return, and we all split the proceeds together. But now, CEX listings no longer look at on-chain data and user metrics, because everyone knows these numbers are massively inflated,” tucao master brother wrote on Twitter.

Business logic is cold. When on-chain data bubbles become increasingly severe and profit-takers’ selling pressure has negative impacts on many projects’ token price trends, Monad’s choice has a certain rationale. But it is destined not to be the choice of most projects. As a public-chain project where capital has been heavily re-allocated, Monad still has many cards to play. Its technical strength and the potential for explosive ecosystem applications could bring it a large number of community users. However, for most projects, which are essentially marketing-oriented, they must rely on airdrops to win 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 the Monad airdrop basically announce the collapse of the testnet servant-grinding / interaction profit-taking track logic. In the future, it’s highly likely that no one will keep farming on the testnet anymore,” tucao master brother said.

In fact, many KOLs had already anticipated Monad’s “turning the table.” Like tucao master brother, Bingwa, and Zhuifeng, many KOLs made it clear early on that they would not participate in Monad interactions. It is understood that top KOLs will devote more effort to “mouth-lapping,” arbitrage, and other more diverse markets, while also focusing on high-quality projects like Polymarket to build premium accounts.

In addition, multiple interviewed studios said their earnings are not as high as last year, and also below expectations. “The key is still to find areas where you have advantages—either low labor costs, advanced technology, or sharp investment research that can spot early projects. Or have influential KOLs who can mouth-lap. It’s much harder to get relatively substantial returns just by following the crowd to profit-take,” A Du said.

As the market cap of first-tier projects like Monad falls far below market expectations— and even many projects lock user airdrop allocations for a longer period after TGE— the profit-takers’ position in the project’s incentive and distribution ecosystem keeps declining, and the value of the tokens they end up with continues to shrink. The profit-taking logic of “win by volume” is no longer sustainable.

“So, the beginner retail investors who enter the primary market by providing labor to catch cheap dividend periods— that really is over. The door has been closing for a long time, and Monad’s airdrop was just closing the last tiny crack,” tucao master brother lamented.