The emergence of tokenization platforms based on blockchain technology has led to the use of free airdrop to replace traditional expensive financial incentives to enhance user engagement. However, critics argue that such incentives may devalue tokens and prompt nonrecipients to panic sell. To investigate the impact of airdrops, we conducted a quasi-experiment on Axie Infinity. Our findings indicate that airdrops significantly enhance engagement among both recipients and nonrecipients. Mechanism analysis shows that cross group spillover effects stems from expectation of another airdrop program and increased market liquidity. While recipients tend to immediately sell tokens and often sell more tokens than received, we did not find evidence of nonrecipients panic selling tokens. Furthermore, we investigated the heterogeneous effects of airdrops. Our work contributes to the ongoing debate of the effectiveness of airdrops and provide insights into the study of tokenization platforms
