Sanctum Airdrop Sparks Community Backlash over CLOUD Token Allocation Strategy: Is Its Co-Founder Deflecting Blame?

Sanctum Airdrop's "Novel" Token Allocation Strategy Sparks Backlash

Over the past few months, the cryptocurrency sector, particularly Solana, has witnessed a succession of high-profile airdrops as new projects launched their native tokens.

These tokens are typically distributed to users based on 'points' earned through protocol usage.

However, recent distributions have sparked discontent, with users engaging in 'farming' for larger allocations and social media debates about the issue of 'low float, high FDV (fully diluted value) tokens.'

The initial enthusiasm for new token launches appears to have waned, giving way to apathy and disappointment.

Many airdropped tokens suffer significant price declines shortly after their debut, leaving both projects and participants disheartened.

Sanctum's CLOUD airdrop on 18 July was intended to buck this trend.

The Solana-based liquid staking project focused its airdrop on 'earnestness,' rewarding long-term alignment with Sanctum's success rather than opportunistic airdrop farming.

Sanctum co-founder FP Lee extensively detailed the project's philosophy and intentions to incentivise good behaviour over bad.

Half of the airdrop was allocated based on Sanctum points, while the other half was based on earnestness, measured by a user's social contribution to the project.

Lee previously said in an X Spaces stream outlining the launch:

“Projects in the past started with so little and launched with crazy inflated FDVs. We don't want that. We want to start low and go up.”

Despite these efforts, some CLOUD recipients were dissatisfied, leading to a contentious debate with the community over Sanctum's token allocation strategy.

“Really disappointed," one wrote.

“Can't believe how badly this team fucked up," said another.

The decision to favour active contributors over capital investors drew criticism from the community, who felt that financial investments were not being adequately valued.

Some community members began tracking users who sold their CLOUD tokens immediately after receiving them, speculating about whether these sellers were among the earnestness recipients.

In response to the outcry, Lee issued a detailed statement on X, acknowledging the community's frustrations and explaining that the 'earnestness allocation' was designed to foster a core group of believers essential for the protocol's development.

He also announced plans to address oversights by allowing further submissions for consideration and committed to rewarding long-term 'capital earnestness' in future airdrops.

Post-airdrop, Lee reflected that Sanctum's execution—from incentivising long-termism with better pricing for those who let their tokens vest to not paying listing fees on exchanges—was "almost perfect."

However, he acknowledged that the attempt to reward earnestness fell short, as the allocation scheme intended to rally the community around good behaviour instead created some "resentment" among those who did not receive allocations.

When questioned about the value of airdrops, Lee expressed uncertainty but leaned towards the idea that fair sales might be preferable to airdrops, as they require participants to invest financially.

He concluded:

“I am of the opinion that probably doing some sort of fair sale is better than doing an airdrop just because people have to put their money where their mouth is.”

Despite the drawbacks of token airdrops, venture-backed crypto founders seem to be in a bind, as VC investors favour projects with tokens that can generate returns in a space where IPOs are rare.

Sanctum has raised over $6 million in venture funding, and Lee noted that investors and founding teams desire the token generation event (TGE), in a way subtly disassociating himself from the blame.

Thus, while airdrops have their downsides, they remain a common, albeit controversial, practice for venture-backed crypto projects.

Sanctum's Innovative Take on Token Distribution

Sanctum implemented a novel strategy for its 18 July airdrop, aiming to tackle the complexities of token distribution.

Eligible participants were presented with a choice: claim their tokens instantly or defer claiming for a potential bonus that could double their initial allocation after up to six months.

This innovative feature, dubbed the "Dynamic Airdrop," was designed to foster long-term engagement with the project.

By postponing the claiming of tokens, recipients could earn up to a 100% bonus on their $CLOUD allocation, with the peak bonus attainable after a six-month waiting period.

The Dynamic Airdrop is structured around two key elements: Capital and Earnestness.

To qualify for the full 100% Capital bonus, users must wait for 14 days, whereas the Earnestness component requires a 180-day wait to receive the maximum bonus.

A total of 10% of CLOUD tokens were allocated for the launch airdrop, with 5% (50 million CLOUD) distributed for Capital and another 5% (50 million CLOUD) for Earnestness.

A total of 108,185 unique profiles (distinct from wallets) were eligible for the airdrop.

This tactic is intended to promote a more stable and enduring token launch, encouraging recipients to retain their tokens while allowing for token sales to public investors if necessary.

However, this approach poses the question of whether airdrop recipients will be inclined to delay their payouts, particularly considering the inherent volatility of the crypto market.

The six-month interval for the maximum bonus is a considerable duration in the rapid-fire world of cryptocurrency, and it remains uncertain whether recipients will be drawn to the prospect of delayed gratification or will prefer immediate liquidity.

Critique From Solana's Co-Founder on the Airdrop Strategy

Anatoly Yakovenko, co-founder of Solana, recently weighed in on the controversy surrounding cryptocurrency airdrops, providing his insights as the Sanctum protocol faces community backlash over its token allocation strategy.

Yakovenko introduced what he calls the "number one rule" for airdrop distribution design: "no whiners or complainers."

He suggested that this principle be explicitly stated so developers can reference it when addressing inevitable complaints.

However, Yakovenko also stressed the importance of rewarding genuine power users who add significant value to the ecosystem.

He argued that the primary goal of distributing airdrops should be to reward these active users while minimising complaints.

He further advised that the benefits to users should exceed the rewards themselves, ideally targeting paying customers.

According to Yakovenko, an effective airdrop means that the value of the reward should be less than the fees users pay for the service.

Participation in Sanctum Wonderland Required for Airdrop Qualification

The Sanctum airdrop is strategically aligned with the launch of their Sanctum Wonderland campaign and their triumph in the LFG launchpad round 2.

To qualify for the $CLOUD airdrop, users must have engaged in Sanctum Wonderland, a gamified platform designed to enhance user interaction and participation within the Sanctum ecosystem.

This platform allows users to collect pets, earn experience points (EXP), and complete community quests.

The allocation of $CLOUD tokens to each user will be based on their level of participation and accumulated EXP.

Participation in Sanctum Wonderland is essential for eligibility in the $CLOUD airdrop; those who did not participate will not be able to claim tokens.

However, $CLOUD tokens can still be acquired through decentralised exchanges (DEXs) within the Solana ecosystem once they are available for trading.

The $CLOUD Token

The CLOUD token serves as the governance token for Sanctum, empowering the community and driving the protocol's growth while offering multiple utilities within the ecosystem.

CLOUD holders actively participate in decision-making processes, such as voting on prospective partners and strategic directions.

The token also grants access to the Sanctum Verified Partner program and exclusive features in Wonderland Season 2.

Additionally, CLOUD will be integral to various new products and services that Sanctum plans to introduce, further fostering platform growth and community engagement.

$CLOUD is currently trading at $0.3046, a 0.8% increase in the past 24 hours but a decline of 7.7% since its all-time-high of $0.3319 on 19 July.

What is Sanctum?

Sanctum is a platform for staking and trading on the Solana network, enabling users to convert traditional stake accounts into liquid staking tokens (LSTs).

This provides instant liquidity and unified staking rewards without lock-up periods.

Sanctum addresses the challenge of liquidity fragmentation in Solana staking, which can cause volatility and inefficient market making.

Fragmented liquidity also leads to inefficient distribution of staking rewards.

By aggregating liquidity from different LST pools, Sanctum offers users access to deeper liquidity.

Meet the Brains Behind Sanctum

The Sanctum team comprises seasoned experts in the crypto and blockchain space who have been pioneering liquid staking on Solana since February 2021.

They played a pivotal role in helping Solana Labs develop the SPL stake pool programme, which is now utilised by nearly all liquid staking tokens (LSTs).

They also launched the first SPL stake pool, Socean.

Over the years, the team has continually refined liquid staking mechanisms and is now focused on building Sanctum.

This platform unifies liquidity for all LSTs, marking the beginning of a new era in liquid staking on Solana.

FP Lee, Co-Founder

Lee, Co-Founder of Sanctum Labs, has been pivotal in the liquid staking ecosystem on Solana since February 2021.

He played a crucial role in designing the Solana Foundation's SPL stake pool programme, which now secures over $10 billion in SOL, and launched Socean, the first stake pool utilising the SPL reference implementation.

Realising that existing stake pools lacked product-market fit, he is now focused on developing Sanctum to address liquid staking on Solana more effectively.

Additionally, he is involved with Pathfinders, a project aimed at enhancing beauty and contributing to the creative commons.

Lee is a graduate of the University of Oxford.

His socials: X and LinkedIn

Jesse Cho, CTO & Co-founder

Cho, Co-Founder and Chief Technology Officer of Sanctum, brings extensive expertise to the team.

Previously, he led software development at Bluebox Labs, specialising in embedded systems, systems design and architecture, and Rust language development.

He holds a Bachelor of Engineering in Computer Engineering from Hanyang University, South Korea, and a Bachelor of Science in Computer Science from the University of Washington, USA.

His socials: X and LinkedIn

Jaye Tan, Co-Founder

Jaye is a legal expert and also the Co-Founder of Sanctum Labs. He has an LLB from the National University of Singapore.

His socials: LinkedIn

In Sanctum's documentation, three other founders are listed as well, although no other details are provided besides their X's account.

With @datascraper69 being a builder and Co-Founder, @0xF812 being another Co-Founder, and @eggpanned yet another Co-Founder.

Oddly, Cho's name cannot be found in the list while Tan's X account might just be @eggpanned since it states "j | sanctum" on their profile.

Sanctum's Socials

Website

X

Telegram

Discord

LinkedIn

Will Sanctum Be Able to Come Out on Top of its Airdrop Backlash?

Sanctum's airdrop experiment proposes a potential remedy for the issues besetting recent DeFi token introductions.

By encouraging long-term token retention and enabling natural price discovery, Sanctum's dual-option token claim strategy seeks to stabilise the market and cater to the interests of diverse stakeholders.

The effectiveness of this approach, however, depends on users' confidence in the project's long-term prospects.

Some users have voiced doubts about the enduring commitment of airdrop recipients, while others advocate for more appreciation of financial investments in protocols.

The primary risk lies in the volatility of the crypto market; should the market decline during the six-month lockup period, the value of the tokens could diminish.

As these discussions continue, the Sanctum controversy serves as a case study in the complexities of token distribution within the ever-evolving DeFi landscape.

Coinlive believes that in Sanctum's case, it is impossible to satisfy everyone; instead, the project must wisely choose its battles to win the war.

This is exemplified by its innovative airdrop token allocation strategy, which emphasizes long-term incentives and objectives.

Furthermore, the listing of CLOUD by a major exchange, ByBit, highlights Sanctum's dedication to providing users with access to pioneering projects within the burgeoning DeFi ecosystem.

In addition, Sanctum is at the forefront of developing innovative liquid staking solutions on Solana, with its infrastructure having facilitated over $1.8 billion in LST swap volume to date.

J, an anonymous co-founder of Sanctum, expressed Sanctum's goal in a message.