The arbitrage community's setback Monad: "The logic of the testnet arbitrage race has collapsed"

Author: Hu Tao, ChainCatcher

Yesterday, the highly anticipated Layer 1 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 below 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 Layer 1 narrative but also a “tragic” milestone for the “grab and dump” community.

Previously, Monad was valued at $3 billion, making it the highest-valued unissued Layer 1 in the market, and was highly anticipated by the grab-and-dump crowd. 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 the grab-and-dump community is that “sunshine” (public exposure) 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 team did not follow the expectations of the large grab-and-dump crowd by excluding all testnet addresses from the airdrop.

“Testnet interaction addresses are all anti-grab, 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, head of a grab-and-dump studio in Hangzhou, to ChainCatcher.

For a time, Monad became the target of fierce criticism from many grab-and-dump users, 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 into 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 $110k. 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 considers this a substantial contribution, which is also a key criterion for airdrops from 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 way for project teams to attract users.

During this period, the standards for airdrops have continued to diverge and evolve. Some projects emphasize fairness and generosity, being quite accommodating to grab-and-dump participants, while others set strict rules for testnet/mainnet interactions, implementing rigorous “whale” screening based on points systems. 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 early on, losing a broad community base. 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. He believes Monad should give grassroots retail investors a space to grow gradually, even if just a little, so more people can truly become part of the MON network community.

Chasing the trend, some believe that grab-and-dump participants contribute not only fees, data, and traffic to project teams but also serve as effective publicity. Personally, they think these people should be given some incentives. “Monad’s approach is really thoughtless, shaking the very foundation of trust in the industry,” said Bingwa on Twitter.

From the project perspective, they need to formulate airdrop strategies based on long-term development needs. “Grab-and-dump participants 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 grab-and-dumpers as “parasites” in the crypto ecosystem.

Australian master brother also believes that the industry’s airdrop logic 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 grab-and-dump armies: you come to grab-and-dump, help me get listed on major exchanges, and I’ll give you airdrops, sharing the profits. But now, CEX listings no longer look at on-chain data or user metrics because everyone knows these data are heavily inflated,” he tweeted.

The business logic is cold and ruthless. As on-chain data bubbles grow more severe and the selling pressure from grab-and-dumpers negatively impacts many projects’ token prices, Monad’s approach is reasonable. However, this will not be the choice for most projects, because Monad, as a capital-heavy 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, they are essentially marketing projects that 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 the logic and targets of airdrops are undergoing profound changes. “The results of Monad’s airdrop basically mark the collapse of the testnet grab-and-dump track logic. In the future, no one will likely spam the testnet anymore,” said Australian master brother.

In fact, many KOLs predicted this “table-flip” by Monad. Like Master Brother, Bingwa, and Chasewind, many early on openly stated they would not participate in Monad interactions. It is understood that top KOLs will focus more on “mouth-lapping” (talking), arbitrage, and other diverse markets, while also concentrating on high-quality projects like Polymarket to create premium accounts.

Additionally, multiple interviewed studios reported that their earnings are now less than last year and below expectations. “The key is to find areas where we have advantages, such as low labor costs, advanced technology, keen research and early project discovery, or influential KOLs for mouth-lapping. It’s quite difficult to just follow the crowd and grab-and-dump for substantial gains,” said A Du.

As the market cap of top projects like Monad has fallen far below expectations, and many projects lock up user airdrop shares for long periods after TGE, grab-and-dumpers’ position in the project benefit distribution ecosystem continues to decline, with token values shrinking. The grab-and-dump logic based on volume alone is no longer sustainable.

“So, the era of retail newcomers entering the primary market for cheap dividends by providing labor has indeed ended. The door has long been closing, and Monad’s airdrop was just the last crack closed,” sighed Master Brother.