Farmhunters. How crypto projects fight scam in Airdrop
The developers of the cryptocurrency project Hop Protocol will pay a reward for helping them fight airdrop spoofing
We tell you how blockchain project developers identify farms of thousands of wallets set up to artificially inflate token distribution activity
Handing out tokens to active users in the form of airdrop, that is, encouraging early user activity, has become a trend in the cryptocurrency market. Decentralized exchanges, NFT marketplaces, games, wallets, social networks, and other services are created on blockchains of ecosystem crypto projects. At the early stage of development, all of them need active users and testing. It is for activity in such projects that tokens are eventually distributed. However, one project recently decided to distribute rewards to those who helped identify the wallets of so-called drop hunters or (Sybil) - those who engage in aggressive scaling of activity in the blockchain project ecosystem in order to maximize the number of tokens that the developers will distribute as an airdrop.
In order to maximize potential rewards, siblings use farms of thousands of accounts to artificially inflate activity in projects that can organize token giveaways.
In creating a decentralized autonomous organization (DAO) in 2022, Hop Protocol developers issued $3.5 million worth of tokens to give away to active users. However, they discovered thousands of addresses that were trying to cheat the system in an effort to get a larger share of the airdrop. Volunteers helped developers identify the interconnectedness of multiple wallets and weed out farms of accounts involved in the faking activity in order to get tokens when giving them away. This ended up saving the project about $1 million, and the developers decided to give away tokens to those who helped uncover dishonest participants.
Hop Protocol co-founder Christopher Winfrey, in an interview with DL News, called the sybil address activity "an entire industry, not a random collection of crafty hackers." "I suspect that they are conducting a set of sophisticated operations using multiple accounts on exchanges and arranging their behavior at random to make the activity indistinguishable from that of real users," Winfrey told reporters. He added that the failure to filter out sybills could have a "devastating impact on projects," as airdrop hunters tend to sell the resulting tokens en masse once they are listed on cryptocurrency exchanges, collapsing the rate.
Despite the relative success in weeding out dishonest users, Winfrey believes that sybills definitely have an advantage. He admits that "it's an impossible battle to win," and that sybil activity is becoming increasingly difficult to detect. He estimates that their farms have collectively made hundreds of millions of dollars on large giveaways.
The surge in activity
The Stargate cryptocurrency bridge, which lets you move tokens between incompatible blockchains, processed more than 300,000 transactions daily with more than $100 million in assets in the past week, surpassing the record levels set more than a month ago and far ahead of direct competitors in user activity.
Stargate uses the LayerZero protocol, developed by LayerZero Labs. The project is valued at $3 billion after an April $120 million investment round led by venture capital fund Andreessen Horowitz and is considered one of the early contenders in the cryptocurrency community for a massive airdrop.
According to Messari analyst Chase Devens, the vast majority of deals and volumes at Stargate are likely to come from "airdrop hunters." The code for the LayerZero project, which is publicly available on the Github repository, mentions the yet-to-be-announced ZRO token. The head of LayerZero, Brian Pellegrino, did not respond to a request from reporters.
Indicators of LayerZero ecosystem projects and other candidates for airdrop began to take off in March, immediately after the successful token giveaway from Arbitrum, whose fame went beyond the cryptocurrency community precisely due to news about the big giveaway.
Such a profitable surge of activity to the projects gave rise to a marketing ploy - a hint of an airdrop. The ecosystem projects zkSync, Starknet, and Polygon zkEVM saw a significant increase in user activity in May. Earlier this month, Polygon Labs co-founder Sandeep Nailwal hinted at the possibility of issuing tokens to the first Polygon zkEVM users.
"App development teams should always be aware of the speculation around airdrops and tokens," Anthony Rose, senior vice president of technology at Matter Labs, the company behind the zkSync solution, wrote in a comment for DL News.
The Struggle Continues
Eirdrops are designed to reward early adopters, testers, and liquidity providers for new projects. But free giveaways largely attract uninterested users whose activity disappears after the tokens are distributed.
For example, the monthly trading volume on the decentralized exchange aggregator Paraswap peaked in November 2021, when the developers conducted a PSP token airdrop. Within a year after that, the project's turnover dropped by 75% and has not returned to its earlier figures. But there are other examples: the value of assets (total value locked, TVL) in Arbitrum's turnover reached an all-time high on May 6 - more than a month after the ARB token was released.
Hop Protocol was one of the first blockchain projects to openly fight mass activity spoofing. Earlier crypto projects ignored the account farms participating in airdrop and gave away tokens even for a single interaction with the ecosystem.
Projects such as Safe or the same Arbitrum adapted sybil detection methods from Hop Protocol during their giveaways. The Optimism Foundation, the organization behind the blockchain project of the same name, has also campaigned to disqualify many token applicants deemed sybils by developers.
As more airdrops are expected, crypto projects will apparently continue to fight aggressive drop hunters and their clusters of wallets deployed to obtain high-yield giveaways.
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