Crypto airdrops are back.
A true crypto-only phenomenon, airdrops involve the distribution of crypto tokens to early adopters of protocols and platforms.
While it may sound incredible to the uninitiated, these airdrops can yield very valuable tokens, sometimes worth thousands of dollars – if not more. Such windfalls have come and gone over the years, but have recently seen a resurgence thanks to Layer 2 networks such as Optimism and, most recently, Arbitrum.
With so much potential money on offer, some on-chain users are, unsurprisingly, trying to grab as much of the airdrop stock for themselves as possible. These so-called “airdrop farmers” try to speculate which projects could airdrop and make themselves eligible for as many tokens as possible. Such communities have gained momentum over the past year, with some hardcore players managing hundreds or more wallets.
The rewards can be shockingly good for those who play the game well.
“We made almost $1 million,” said a pseudonymous Russian person known as LEOresearch, referring to the total amount of money their team generated. “Blur gave us about $300,000, Arbitrum gave us about $180,000, Aptos gave us $125,000 and Optimism $120,000.”
LEOresearch has been active in crypto since 2020. They maintain a Telegram channel that sends crypto information to over 56,000 Russian speakers from the Commonwealth of Independent States region, as well as an active side chat with 6,000 members.
Turning airdrop hunting into a business
During the crypto bull market, LEOresearch focused on making money by investing in token sales and offers. Once the bear market hit, they looked for new ways to make money, turning to aidrops after the Aptos team ran one in October 2022.
“Then we decided to team up with researchers, with software, with management, and go hunting [airdrops] a business for us, a great way to make regular money,” they said.
In some ways, hunting airdrops is a simple matter. The core idea is to identify projects that are likely to issue a token to early adopters of the platform, then interact with that platform over a period of time, ideally with significant amounts. Then when an airdrop occurs, each wallet receives an allocation – the payday.
But there are risks involved. Depending on the network, there are some costs associated with using the network, including transaction and blockchain-to-blockchain bridging fees, trading fees, and slippage, and so on. The more wallets used, the higher the cost.
Then if an airdrop doesn’t happen, an airdrop farmer could end up losing money.
In the case of LEOresearch, they usually only use a handful of wallets per person because it’s a slow, manual process. But they said they encourage their friends and family to follow the same strategies, increasing the benefits within their communities.
In addition, they recently started testing software that automatically executes regular trades while randomizing their amounts and frequency – a move that makes airdrop farming much more efficient.
LEOresearch and his team have also built a community focused on airdrop farming and similar crypto strategies called NFD. The goal is to provide this community with research aimed at helping them maximize their chances of getting an airdrop. They sold 2,000 NFTs providing trial access to the platform, proving there is a serious demand for airdrop farming among the wider crypto community.
Getting $80,000 for filling out a form
A pseudonymous Russian crypto user named Auri said their first airdrop came from filling out a Google form for a project called Inverse Finance.
In March 2021, they were living rent-free in a frat house with a friend, spending only $400 a month on expenses. When the airdrop happened, they received 80 tokens worth $80,000 – all for filling out a form.
Auri said the broader crypto market crash last spring wiped them out. But they stayed in crypto and engaged in projects that were in the pre-launch phase. Then came the Biconomy airdrop in September 2021, where a bug in the code meant some people were able to get much larger allocations.
“Some of my friends made half a million off that mistake and I thought ‘what am I even doing?’ they said.
From that moment on they had no choice but to start growing airdrops. They used 100 wallets to transact on the Arbitrum network in hopes of qualifying for a potential — but unconfirmed at the time — airdrop. They also made sure that these wallets were not clearly connected as this would make it likely that they would be banned from the token distribution.
Auri said these wallets were eligible for the airdrop, but did not share how much they earned from them (there were multiple levels of rewards depending on certain requirements, such as transaction volume). The minimum airdrop was 625 tokens, suggesting they received at least 62,500 tokens – worth about $80,000 at launch.
Auri says they’ve been trying to farm between 10 and 20 projects with potential airdrops. They target the larger potential projects, thinking that smaller ones are more likely to hunt down and remove farmers. They named Scroll, zkSync, Fuel, and StarkNet as projects they’ve focused on. They said they do all transactions manually and use centralized exchanges to distribute the funds to wallets without connecting them. That and talking to other farmers about the best strategies.
“I feel like all communities are about airdrops right now. The ones I’m in are like little groups of people I’ve met along the way. There’s no alpha in those kinds of groups, frankly. Everything is so simple and obvious,” said Auri. “It’s all about the scale — that’s all.”
Share the alpha
Some argue that a much wider range of projects could have potential airdrops. For example, Alpha Drops, a website focused on providing information about airdrop farming, has strategies targeting about 170 projects.
Alpha Drops founder Aram Barzani, 28, from Erbil, Kurdistan, said he set up the site in May 2022 as a clearer way to make this information available, having previously managed a widely shared spreadsheet used by airdrop- farmers. He said he saw a community grow around airdrops and quickly saw a rapid growth in followers on Twitter.
Barzani said the strategies are largely based on past airdrops, especially ones that provide clear checklists for how to allocate tokens. He said projects typically reward similar actions — such as transaction volumes or the number of smart contract interactions — and estimated that about 10 to 15% of projects would airdrop.
That said, he doesn’t see himself as an airdrop farmer. He will focus on projects with only a handful of portfolios, but he will go for high volumes to maximize the achievement of the criteria that yield multiplier effects. Before the Arbitrum airdrop, he made over 1,000 trades with a trading volume of around $300,000. This cost him $1,000 in transaction fees and other costs. But he received a $15,000 airdrop, which more than made up for the cost.
Barzani takes a much more secure approach by using only a few wallets. That’s because airdrops try to weed out airdrop farmers where they can identify them. Usually they look for clusters of wallets that are likely to be connected and remove them from the airdrop. This largely began with Hop Protocol’s airdrop in June 2022 and continues to this day – creating a back and forth battle against farmers, forcing them to find new ones to evade detection.
Is airdrop farming ethical?
Airdrop farming raises numerous ethical questions, but no clear answers.
In many ways, airdrop farmers simply use the many-wallet protocols when there is typically no public indication or guarantee that there will be an airdrop. If the project chooses to reward them with tokens, it doesn’t mean they broke any rules or agreements. That said, it is generally seen as deliberately exploitative.
“A project rewards you because you are a real user and want you to keep using the project. But when you work with multiple purses, you try to get the maximum reward from the project, which should be distributed fairly among the people. I think somehow that’s not fair,” Barzani said.
Auri, who is more of a farmer, acknowledged their discomfort with the whole idea of airdrop farming. “For some reason I feel inside, I’m kind of uncomfortable with it, and I feel like it’s some form of a lie.”
Still, they justified it by claiming that big projects don’t try as hard to get rid of airdrop farmers, speculating that they’d rather be too generous than too restrictive and annoy real users (as has happened with previous airdrops like Para swap).
“I don’t know, unfortunately I’ve become more and more cynical about crypto. For [the Arbitrum airdrop] I definitely felt a bit on edge. But now I feel like it’s good,” said Auri. “Like that’s the game we’re playing, just play the game.”
© 2023 The Block Crypto, Inc. All rights reserved. This article is for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial or other advice.