How do airdrop hunters get rich? Windfall or reward for taking risks?

“You can build up to 10 quality accounts in as little as an afternoon. You are not going to fly Apollo. It’s just a daily thing, and that’s why most people regret it.”

The above sentences are a quote from Ilya (pseudonym), a 33-year-old Ukrainian “airdrop hunter”. Ilya also earns money from cryptocurrency trading, but his main job over the past few months has been spending time investigating possible airdrops.

Ilya is just one of hundreds and maybe thousands of traders who try to get free tokens by creating multiple accounts on projects that are likely to airdrop; The so-called Sybil Attack method.

In this way, people somehow exploit the weakness of blockchain projects in identifying fake accounts and sometimes pocket tens or hundreds of thousands of dollars from each airdrop. After getting the airdrop, there is only one thing left; Quick sale of tokens.

The article you read below is based on a report Written from CoinDesk website.

Compete to get free tokens

Active projects in the field of decentralized finance, or DeFi, use airdrop (paying free tokens to active accounts in their project) to attract users and encourage people to do more activities in their network; Activities such as providing liquidity for decentralized exchanges (Dex), interacting with smart contracts or even making transactions.

In most of the airdrops that have been done in recent months, the projects have planned so that big rewards will go to the people who have been the most active and those who create an account a few hours before the airdrop or taking a snapshot will not receive an unreasonable reward. The reason for doing this is clear. Those who do not have an acceptable history of activity in a project sell their tokens immediately after receiving the airdrop, and this causes the price of the digital currency related to that project to fall.

But the problem starts from the place where the airdrop hunters bypass these restrictions by creating several different accounts and imitating the healthy and natural activities of a user in that project’s network. Therefore, organizing an airdrop is not as effective as it should be in making the project known to more users.

for example, researches It shows that in the recent airdrop of Arbitrum, individuals or entities that individually managed several different addresses pocketed 48% of the distributed tokens.

Airdrop millionaires

Ilya of our report, whom you met at the beginning, has spent most of his time on the digital currency market for the past 6 years, and this is his main work. He entered the market at the end of 2016 and before the initial digital currency (ICO) hype. Before this, Ilya was the owner of a small business in Ukraine and was active in the field of grain buying and selling; But after learning about digital currencies, everything changed for him. He says that he invested in several IPOs in the beginning and was able to increase his capital tenfold.

After the initial public offering subsided, however, it went to the initial public offering (IEO) of exchanges, and then it was time for the hot start of DeFi projects in 2020. A little later, the service of non-monogamous tokens (NFT) was also found. Ilya says If you can get ahead of the curve, you’ll get free money, and recent airdrops are just one example of what’s been hot for a while now..

In part of his speech, he said:

I know someone who managed to get 200,000 tokens by creating thousands of different accounts.

Igor Pertsiya, the founder of the Hypra investment fund, says that airdrop is a much safer method of distributing a project’s tokens from a legal point of view compared to an IPO. However, he said that professional airdrop hunters sometimes make millions of dollars from a single airdrop, and projects like Ethereum Semi-Service (ENS), Sui, and Aptos are in this category.

Precia said:

I know people who pocketed 1 to 2 million dollars just from Arbitrum’s recent airdrop. Unlike IPOs, many of which operate like Ponzi schemes, participants in airdrops don’t talk much about it. Because the more people join an airdrop, the less money each person will receive.

What is said about airdrop hunters is not only based on personal stories. Researchers in the field of blockchain addresses they have found who have collected more than a million dollars of Arbitrum tokens from other addresses, and as it turns out, they all end up going to one particular person. At Some cases These addresses have also been seen to belong to fraudsters who have stolen airdropped tokens from several different victims.

Of course, there are some of these multi-account users who pocketed relatively smaller amounts. Researchers at least 198 address They have discovered that after taking a snapshot and specifying the list of eligible addresses, they have consolidated their funds from several different wallets into one address.

“Apollo is not going to fly”

According to himself, Ilya is not among the millionaires from the Arbitrum airdrop. Apparently, some of his addresses were identified as Sybil Attacker and missed Arbitrum’s airdrop. But five of the accounts he set up and managed received a total of 20,000 Arbitrum tokens; That is about twice the maximum amount that an account could receive (10,250 ARB).

Ilya did not hesitate to sell them at the price of $1.40 considering the cost he had spent to get these airdrops; Because he had made a good profit at this price. According to Ilya, he had paid about 50 dollars for transaction fees on the network to create a high-quality account that would not be blocked.

He says:

I know someone who got 200,000 Arbitrum tokens from the total of thousands of accounts he had created. He originally had a team with each member managing 500 accounts.

Ilya says that he has only one colleague to manage his airdrop accounts. This person receives a regular salary and a share of Ilya’s airdrop profits. He says it doesn’t take special expertise to spot a profitable airdrop; It is enough to be able to analyze social behavior and guess the next trends.

You can build 10 quality accounts in just one afternoon. You are not going to fly Apollo. It’s just a routine.

He says that keeping these accounts active isn’t a big deal, and even a high school kid can manage multiple legitimate blockchain wallets to receive airdrops.

Elijah said:

I know people who aren’t even 18 yet manage 150 accounts each and one of them recently made $500,000 from these airdrops. Twenty years of hype for the initial supply of digital currencies [در سال ۲۰۱۷] They lost and now this is a new wave of young and hungry people.

Do not neglect the risk of airdrops

You can never say for sure which projects are going to airdrop, and airdrop hunters monitor several potential projects at the same time; But on what account?

Ilya says about this:

A project with potential is defined by the amount of capital it has raised, its famous developers and investors, the hype surrounding it, as well as what is happening in the cryptocurrency space at that particular time.

According to Ilya, the projects that currently meet these criteria and have the possibility of airdrop, zksynk, StarkNet, LayerZero And almost all plans are related to Ethereum scalability.

With all the praises of the recent big airdrop profits, waiting to do an airdrop like a hunter carries risks such as the project being hacked and losing the liquidity provided by users’ money. DeFi protocols have become the main target of hackers in recent years and only in 2022 2 billion dollars They have lost in various attacks. In particular, interchain bridges or bridges have been one of the main targets of these attacks.

People fund a bridge in hopes of getting an airdrop, and then the bridge gets hacked and the profiteers disappear with your $5,000. Ilya said he doesn’t recall personally losing money in this model of attack, but he knows people who lost up to $10,000 in the recent Euler lending protocol hack. Of course, Euler’s hacker later voluntarily returned the stolen funds.

hunting hunters

Alex Momot, CEO of startup Peanut Trade, says their collection team is closely monitoring the behavior of airdrop hunters. One of the services provided by Peanut Trade to DeFi projects is to provide methods to prevent this activity model. According to Momot, the tactics of airdrop hunters are often very simple, and they usually try to make a minimum number of transactions and with a minimum amount just to pass the airdrop eligibility threshold.

Poachers usually fill their wallets by withdrawing money from centralized exchanges. Of course, since all these withdrawals are made from an exchange’s warm wallet (where the assets of multiple users are pooled), it is impossible to identify exactly which exchange user made these withdrawals. This makes it harder to identify wallets that received their assets from a single account on an exchange and actually belong to the same person.

However, there are still ways to separate multi-account airdrop hunters from real users. For example, projects may strike addresses from their airdrop lists that barely pass the eligibility threshold.

Momot said about this:

On the other hand, it is not bad that projects become more attractive even because of airdropping, but most of them seek to build a real community and get real interaction from their community. The worst thing that can happen is that a project loses its market value after its airdrop token is listed, due to a quick sale of users.