Soul woke up on Christmas Day to a pleasant surprise. It wasn’t an unexpected gift in his Christmas stocking, but rather an unlikely alert on his phone. A new cryptocurrency had launched, and he was eligible to claim some for free.
It sounds like a scam, no more sophisticated than an email from an alleged Nigerian Prince. But it wasn’t. Soul, a recreational trader in his 30s who didn’t offer his real name, hit “claim,” paid a transaction fee and watched $2,000-worth of tokens flow into his wallet.
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In the bewildering world of cryptocurrency, this is called an airdrop. They’re not as rare as you may think.
Many traditional companies raise funds by going public and offering stocks to the public. Organizations operating on, the blockchain-integrated internet, go a similar route by launching a token that people can buy and sell on exchanges. Some of these token launches are accompanied by airdrops. If you’ve used the tool the Web3 organization provides, you get a bunch of tokens dropped into your wallet. Imagine if Adobe went public and, to raise awareness, sent 100 stocks to anyone who’d used Photoshop in the last 12 months.
“Airdrops can be thought of as customer acquisition costs,” explained Alex Gedevani of the Delphi Digital research firm. Their utility is twofold. First, they act as marketing. Nothing captures attention like the prospect of free money. Second, it’s become etiquette that blockchain apps will do an airdrop when they list a token. Punters therefore experiment with new apps with the knowledge that, if the app succeeds, a lucrative airdrop is likely in future.
“It gets me super hyped for Web3,” said Soul, who’s been trading as a hobby since 2020. “Airdrops incentivize you to dip your toes into everything.”
The company behind the Christmas Day airdrop is called OpenDAO. Anyone who bought or sold on OpenSea, the biggest NFT marketplace, could claim OpenDAO’s $SOS tokens. As of Jan. 12, 300,000 wallets have claimed the airdrop. (Unusually for an airdrop, OpenDAO is not officially associated with OpenSea. The purpose of OpenDAO is to support traders in ways that OpenSea doesn’t — but that’s a whole other story.)
The more money users had spent on OpenSea, the bigger the airdrop they were eligible to receive. Anyone who claimed the airdrop would see a Spotify Wrapped-style infographic detailing their NFT trading data from 2021. Soul had spent $25,000 on NFTs via OpenSea, which put him in the top 6%.
The airdrops received by the top 1% border on obscene. Crypto whales published their infographic on Twitter, boasting of airdrops worth tens of thousands of dollars. Several traders had bought so many NFTs, and spent so much on Ethereum’s notoriously expensive transaction fees, that they were able to claim $140,000 worth of $SOS.
6 months into NFTs
1.3M spent@The_OpenDAO decided to bless the community for Christmas $sos for the people! #HODL pic.twitter.com/eW4J5nUWvd
— David Hunnits (@D_Hunnits)
Bro…this is insane I can’t believe it, thank you very much @9x9x9eth pic.twitter.com/yQ1gPf3EdI
— shamdoo.eth 👽🐐🐧 (@TheShamdoo)
I claimed $SOS and $GAS (7/7)
— sneakyninjapants (@SneakyninjaNFTs)
OpenDAO became the hot new token, with $650 million-worth of $SOS being traded on Dec. 26. It now has a marketcap of $312 million, has been listed on several major exchanges and is among the biggest DAOs on the market. (DAOs are, which work by issuing tokens that double as voting rights – token owners then vote on how the DAO’s treasury is spent.)
If there’s one thing that can be counted on in cryptocurrency, it’s that success is immediately imitated by others. OpenDAO garnered a huge amount of attention, and the airdrops have been flowing ever since.
In come the drops
Airdrops aren’t anomalies, but they’re usually spread out over a period of months. Before Christmas, the last big one came in November courtesy of Ethereum Name Service, a tool that allows users to change their wallet number to a wallet name — like Daniel.eth. Since Christmas, however, there have been a flurry of airdrops that have sought to mimic OpenDao’s success. The first was GasDAO, where traders were dropped tokens based on how much they’d spent on Ethereum transaction fees. Soul’s airdrop was worth $1,300. Others got much more.
“How I made over $250K in the NFT space in December, an analysis of the unique opportunities in this space,” a prolific trader tweeted. “I claimed $SOS and $GAS.”
On Monday, Jan. 10, Looks Rare followed. It’s an NFT marketplace that hopes to compete with OpenSea, and issued an airdrop to raise awareness. Anyone who bought or sold an NFT in 2021 is able to claim $LOOKS tokens if they list one NFT on the Looks Rare platform. The lowest tier of airdrop was worth $400, though more active traders received much more.
Next came fees.wtf, on Thursday Jan. 13, an analytics tool that shows traders how much money they’ve spent on transaction fees. The airdrop is designed to hype an analytics dashboard tool that fees.wtf will soon launch.
Yet all airdrops are not created equally. The intended purpose is to get people not to sell their tokens, but to hold them and buy more. Some tokens become more valuable over time, while others fade to obscurity. Looks Rare’s tokens have doubled in value since Monday’s airdrop, while $GAS tokens held their value for a couple days before most airdrops became worthless.
“After OpenDAO’s success, many people have copied,” OpenDAO creator 9x9x9 said to me. “But they use OpenDAO success to raise money for themselves.”
Was in the tier 1 category and eligible for 10,000 $Looks tokens which is worth 10 eth at the time of this post 😳 and what has Opensea ever done for us?? @LooksRareNFT pic.twitter.com/ejAHzh6jFv
— LeBored.eth💎👀 (@LeBoredJames)
9x9x9, who declined to be named, says airdrops are often used to enrich founders. A team will reserve tokens for themselves, launch an airdrop to create hype and then sell the reserved tokens at a high. He didn’t name the airdrops to which he was referring, but boasts that OpenDao is a passion project and that no tokens were reserved for the team.
As is always the case in cryptocurrency though, there are risks and scams. A flaw in fees.wtf’s smart contract caused the token’s price to collapse in less than an hour, a disaster for early investors. The allure of free tokens is strong, and shady developers can take advantage of this by creating dodgy smart contracts that can drain funds from the wallet that claims the airdrop.
“Always question any form of free money received in crypto,” said Delphi’s Gedevani. “Airdrops coming from public-facing teams can be easily identified as legitimate, but there’s been a handful in the past with malicious intent, mostly from unknown sources, that have led to loss of user funds.”
Soul is ambivalent about the risks, and is instead keen to keep the money flowing. “These airdrops have me wanting to buy into every new tool.”
This content was originally published here.