In-depth understanding of the airdrop industry: "fake data" and the "haircut" group
As long as the cost is lower than the potential reward, grabbing airdrops will be prevalent.Original Title: Follow the (fake) Data: Understand the「airdrop farming stack」and the industry around it
Original Author: Kerman Kohli
Original Compiler: Kaori, BlockBeats
One thing that has increasingly troubled me over the past few years is how much this industry relies on "data." I put it in quotes because most of it is fake/not real. To showcase what is happening and how it works, I thought I should write a longer article around the whole issue.
When I started researching this article, I realized how industrialized this whole thing is and how many investors have been fooled by it. The whole thing is a huge joke, indicating how far the entire industry still has to go.
Layer 1 Valuation
Our problem starts with these overpriced, overhyped tokens that investors are willing to pay billions for. All you need is a fancy white paper, and you can twist the unit economics of it all. My research began with Dune, where I found a dashboard that calculates the CAC of multiple airdrops.
This is a good start, although I do want to point out that these CACs (from the project's perspective) are underestimated figures because they are simply: dollar value ($) / claimed addresses. This calculation does not take into account the actual percentage of addresses that retain the airdrop. Given that usually only 10% - 20% of addresses hold the airdrop, it is safe to assume that these CAC figures are 5 to 10 times higher than what you see above.
The second thing is that we have an implied airdrop value tier:
Layer 1 / layer 2 / hyped protocol = thousands of dollars spent
Small to medium applications = hundreds of dollars spent
Fortunately, the two are not mutually exclusive! If you use the right application on the right chain, you will receive both airdrops.
So ideally, you want to focus on farming airdrops on the chain first and interact as much as possible. Well, but the question is, what happens next?
Finding the Right Airdrop
Fortunately, for you airdrop hunters, there is an entire industry built specifically for finding airdrops. Typically, these airdrop discovery sites require you to perform some very specific "actions," and they need on-chain evidence that you have performed these actions. Whether it's your grandma or your bot performing the actions, just make sure the transaction is visible on-chain.
All these "task" platforms are essentially disguised airdrop discovery sites. If these sites can attract high-quality users, there usually won't be a problem, but the users attracted by these sites are often highly employed, representing the short-term speculation that the industry as a whole suffers from.
Let's connect with our trusted friends at dApp Radar to see what airdrop activities might be happening at this time.
Based on this, my game plan is likely to be:
- Use zkSync as my base chain
- Bridge my funds with Layer Zero
- Use Metamask as my chain wallet
All of this could just be my natural workflow without any extra work. But the question is, what do you need to do to understand your ranking in these potential airdrops? To my surprise, an entire community of "airdrop simulators" has emerged. These people exist to help you understand your position relative to other airdrop farmers. Simply search for "airdrop," and you can find dashboards that simulate how projects distribute airdrops using past airdrop standards.
The level of detail depicted is fascinating. Check out all the columns mapped out in this table. Arbitrary scores, last transaction time, transaction count, unique contracts, total transaction dollar amount, unique active days/weeks/months, wallet age, and block time.
When your "community" has already done the airdrop calculations for you, why bother doing the airdrop calculations yourself?
Gaming the System
If you are surprised by the planning of the whole thing, wait until you see the next part: if you know all the permutations and combinations of the standards, you can start automating and building efficient systems around it. I spent some time researching and discovered these two magical tools. You might want to give them a try, just to report how corrupt the whole airdrop game is.
The first is our friends at nftcopilot.com, who have built a flexible dashboard for you to automate and set up your farming.
The depth and detail they are associated with are astonishing. In the product, you can create "groups," and you can customize the following parameters:
Number of transactions routed through the bridge
Bridging networks (Ethereum, Polygon, Binance Smart Chain, Arbitrum, Avalanche, Optimism, Metis, Aptos)
Configured random operations including configured probability, sleep intervals, and maximum random transaction count per transaction.
Let's be clear, this is far from value-added and value destruction for the entire ecosystem.
Counterfeit products to justify the false valuations.
If you narrow it down, what is really happening is that the cost of proving the legitimacy of these airdrops is lower than the potential returns that such efforts might bring. Another site I found helps clarify the transaction by detailing prices and potential ROI.
Now, you can use your own simplified math to calculate how much you want to invest and what you expect to see in return. Wow, solving a real problem for everyone. To some extent, venture capitalists farming airdrops might be more profitable than investing in actual projects. Liquidity is faster, and the psychological burden is less.
As long as the cost of the airdrop is lower than the potential rewards, farming airdrops will prevail.
Final Thoughts
So, what do you think the outcome is of building a farming sub-industry on top of these overhyped projects? It’s just a battle of who can build a larger zombie network industry on its foundation. If the on-chain numbers are inflated, then unsuspecting participants who do not know how to dissect the data will report what they see and ultimately deceive retail investors into believing that the projects they are investing in have real market appeal.
Take a look at the tweets below. If you are on Twitter, you might be misled by this and think, "Wow, this thing is really starting to work, I should buy in." The more people believe these numbers, the further this cycle continues. Here are some examples of data misuse I found on Twitter.
Based on what I have shown you in this article, do you think any of these traction metrics are real? Of course not, they are all fake. The data is fake.
The Answer
Permissionless identity.
Before we truly examine the metrics based on who is generating this activity, we are all deceiving ourselves. Simply calculating the basic numbers as they are means you set the standards for the identities included very low (considering the cost of creating a permissionless identity is zero).
The commonality among all the issues mentioned above is the lack of consideration for past behavior or behavior in a broader context. So, if you have a stronger identity layer in the crypto space, how would you address the issues mentioned above?
