In-depth analysis of the relationship between ether.fi's first quarter airdrop and Loyalty Point (with analysis data link attached)

Author: @Web3Mario

Data link:

EtherFi participating address analysis Thegraph: _airdrop_analyze
All accounts received airdrop results:

Introduction: In the previous article, the author discussed how Web3 oligarchs exploit users through Loyalty Point. In this article, we choose a real case to further demonstrate this point of view;

On March 18, 2024, Ether.Fi, the leader in the Restaking track, took the lead in TGE and carried out the first round of airdrops of its ETHFI tokens, which brought a considerable wealth effect. As of the time of writing, the price of $ETHFI has reached $5.54, and the fully diluted market value has also reached US$5.5 billion. This valuation is very impressive for an early project whose core business has not yet been launched, and it also reflects investors' recognition of the project's vision.

However, many users have complaints about the results of this round of airdrops. This is because for a long time in the past, EtherFi’s promotion focus and incentive mechanism have been centered around EtherFi Loyalty Points. Naturally, users would associate airdrops with the amount of accumulated Points. However, after the airdrop results were announced, many users found that there seemed to be no necessary connection between the two. Many loyal users who had accumulated a lot of Points received similar rewards to some “shallowly involved” users. It was also discovered that many whales quickly occupied a large portion of the airdrop allocations by virtue of their financial advantages.

Therefore, the author spent some time analyzing the design ideas of the project side in this round of EtherFi airdrop activities in detail from the data side, and positioned the biggest beneficiaries of this round of airdrops. I hope it can help readers optimize their subsequent participation in similar airdrop competition strategies, and in Finally, we look forward to the possible design direction of EtherFi’s airdrop rules for the second quarter and estimate the potential benefits.

Review of EtherFi Season 1 Airdrop

First, let’s review the official rules of EtherFi’s first season airdrop:

EAP**:**You are participating in the Early Adopter Program
ether.fan**:** You are the holder of ether.fan NFT
Solo Staker**:** You are an ether.fi Solo Staker
eETH / weETH**:**You hold eETH or weETH
DeFi rewards**:** You participated in eETH or weETH DeFi pool or vault
Badges**:** You have unlocked one or more ether.fi badges
Refrals**:**You have invited one or more new users to participate in ether.fi

There is no direct description related to Loyalty Point, and the specific calculation algorithm is not very clear. However, after analyzing the full amount of data, we can still find certain patterns.

Through TheGraph, we obtained the addresses of all users who participated from July 10, 2023, when EtherFi deployed the Liquidity Pool smart contract, to March 18, 2024 (TheGraph Query Link). After that, we used Python crawlers to crawl these addresses to obtain the airdrop information. I have uploaded the results to IPFS, and interested friends can analyze them by themselves. The analysis results are as follows:

A total of 82,102 addresses participated, of which 71,380 received airdrops;
Among all the users who received the airdrop, each user has an average of 536,444 Loyalty Points, and each user received an average of 702 ETHFI airdrops;
Each user needs to accumulate 755 LoyaltyPoints on average to obtain 1 $ETHFI, that is, the $ETHFI conversion rate is 755 Loyalty Points / ETHFI.
The Matthew effect of the project is extremely obvious. Among all the users who received airdrops:

The top 20% of users in terms of Loyalty Points received 94% of the total Loyalty Points, and received 77.5% of the total airdrops;
The top 10% of users in terms of Loyalty Points received 87.8% of the total Loyalty Points, and received 72.2% of the total airdrops;
The top 5% of users in terms of Loyalty Points received 79.2% of the total Loyalty Points, and received 65.6% of the total airdrops;

The project's airdrop distribution mechanism is more favorable to "shallowly involved" users and "heavy loyal" users (usually whale users).

First, let's look at the distribution of Loyalty Points obtained by users, as shown in Figure 1. The horizontal axis is the user's Loyalty Point ranking, and the vertical axis is the amount of Loyalty Points held by the user. We can see that the average amount of Loyalty Points obtained by each user is 536,444, but at this time only the top 7,588 users can meet this standard. Compared with 82,102 participants, this is a relatively small range, which means that whales hold a large number of Loyalty Points.

Next, let's look at the distribution of the number of airdrops received by users. As shown in Figure 2, the horizontal axis is the user's Loyalty Point ranking, and the vertical axis is the amount of $ETHFI airdrops received by the user. We can see that the average amount of airdrops received by each user is 636. At this time, users ranked close to the top 6,500 can meet this standard. Compared with the distribution of Loyalty Points, the distribution of airdrops is more concentrated on users with higher rankings.

Finally, let's explore the scatter plot of the user's Loyalty Point and the number of airdrops. As shown in Figure 3, the horizontal axis represents the user's Loyalty Point amount, and the vertical axis represents the user's $ETHFI airdrop conversion rate, that is, how many Loyalty Points are needed to obtain 1 $ETHFI airdrop. We can find that Loyalty Point and airdrop conversion rate present the approximate law of piecewise function. In the first piecewise function, the user's airdrop acquisition rate and Loyalty Point are roughly proportional. The more Loyalty Points held, the greater the corresponding airdrop conversion rate, which means that the Loyalty Points required to obtain a unit of $ETHFI airdrop become higher and the difficulty of obtaining becomes greater. When the Loyalty Points held by the user exceed about 200,000, the entire piecewise function enters the second part. This section reaches a peak, and the user's airdrop conversion rate is approximately 1140 at this time, which means that at this stage, holding more Loyalty Points will not further increase the difficulty of obtaining airdrops, which is more friendly to whales.

To better reflect this relationship, as shown in Figure 4, we transform the horizontal axis into the user's Loyalty Point ranking. From left to right, the higher the user's ranking, the fewer Loyalty Points they hold. The vertical axis is the user's $ETHFI airdrop conversion rate, and the relationship is more obvious at this time. When the user's Loyalty Point ranking is around 14,500, the piecewise function is at a critical point.

Looking Forward to EtherFi Season 2 Airdrop

Next, let’s look ahead to EtherFi’s second season of airdrops. They have already released details about Season 2: StakeRank:

StakeRank is a rating system with 8 levels or "tiers"
Users who pledge ETH on ether.fi will be upgraded by 1 level every 100 hours
Each level has a progressively higher loyalty points rate boost
Your stake balance needs to be higher than 0.1 eETH to continue to improve your ranking
Users who participated in the first season start from rank II
Ranking improvement range is 1x - 2x (subject to change)
Ether.Fan NFT holders automatically upgrade to Rank III
Each NFT holder can only use it once
In the transition to Season 2, the protocol aims to recognize Season 1 participants while not disproportionately allocating Season 2 airdrops to them. To achieve this, everyone's loyalty point accumulation rate will be increased by 10 times. While this will dilute old points, they will still be valid, subject to the following conditions.
All eETH and weETH, whether held or in DeFi positions, including Liquid, will be treated equally by StakeRank.
If by the end of Season 2 your total points means that 70% of them come from the points you accumulated in S1, then you are not eligible. However, the base rate of Loyalty Points in S2 will be increased 10 times. Staking in S2 means that your new points balance should significantly exceed the amount collected in S1. This means that Season 1 stakers are recognized in Season 1. Season 2 will recognize stakers who were active in Season 2.

The overall plan is designed around the ranking of Loyalty Points, with different stratifications and different boosting effects for each tier. Most importantly, in the guidance on the final redemption method of the second season airdrop, the focus is on diluting the impact of the Points obtained in the past on the final airdrop. This means that users who have accumulated a lot of Points will have a sharp decline in the advantages of the Season 2 airdrop, and loyal users will have to start over. And more importantly, EtherFi still chose to use a more vague description to express the relationship between the final airdrop amount and Loyalty Point. This also introduces a lot of uncertainty. Considering that in the design of the first season airdrop, the team seems to prefer shallowly involved users and whale users, which seems to be able to bring a certain guiding effect to users participating in the second season airdrop activities. **But don't forget that the first season airdrop has distributed ETHFI, which accounts for ****6% of the total issuance, and the total amount of airdrops in the second season is only 5%. **

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