The cryptocurrency market is known for its “rags to riches” stories and its outstanding returns. However, those excess returns all come with a high risk – the risk of losing a large portion of one’s capital.
What if we told you there’s a way to earn high potential rewards without taking on large risk?
This opportunity lies in the world of Decentralised Finance (i.e. DeFi). For reference, DeFi is the newest and hottest sector in crypto. Simply put, it takes all financial institutions and services on-chain, makes them censorship-resistant and removes all middle men. This has created the most efficient financial system to date. In the past 12 months alone, $39 Billion were added into this sector. You can borrow/lend, trade derivatives, exchange assets all while keeping custody of your coins and tokens in your wallet.
Disclaimer: NOT FINANCIAL NOR INVESTMENT ADVICE. Only you are responsible for any capital-related decisions you make and only you are accountable for the results.
Introduction
This opportunity does not necessitate holding any sort of cryptocurrency and undergoing the risk of devaluation of that asset against fiat.
The only expense required by this opportunity is the ETH gas fees. Depending on your portfolio size it may not be lucrative as fees have become rather expensive for a blockchain – this is due to the heightened demand to transact in the Ethereum ecosystem, but even $50-100 may do the trick.
Here’s a table outlining the average costs of gas (at the time of writing).
The least gas intensive sort of transaction you can make on the Ethereum blockchain is transferring ETH, which costs $4.77 (at this time) for an average transaction speed. The most gas intensive is a swap from one asset to another on a DEX (decentralised exchange) which costs $45.40 for average speed.
You can check the costs at any time using this link.
Nonetheless, there are methods to minimise gas costs which will be discussed in a later paragraph below.
Early DeFi Users Rewarded
Despite the parabolic growth, DeFi remains a nascent industry. A large portion of people are yet to interact with any DeFi protocol, this makes us: early users.
Another extremely attractive aspect about DeFi protocols is many of them release the product first and token second. This is the opposite of what ICOs have done: raise money by selling tokens, promise to deliver a product in the future and then fail at delivering.
Therefore, some protocols, when they release a token after delivering a full working product do a retroactive airdrop to early users. These tokens are governance tokens which gives holders voting power on where the platform heads next. As this is “decentralised” finance after all, it is an easy route to get the tokens in the hands of people whom have actually used the product.
The latest two examples are: Uniswap (UNI) and 1inch Exchange (1INCH).
Uniswap’s Retroactive Airdrop
September 16 2020, Uniswap announced the launch of its UNI token. 15% of tokens were distributed amongst past users (150,000,000 UNI). Over 12,000 Ethereum addresses that tried to interact with Uniswap, even if it was a failed transaction, had the right to claim 400 UNI tokens. At the time of launch this was worth about $1,000.
Today, 400 UNI = $8,350+ (1 UNI = $20.9)
1inch Exchange’s Retroactive Airdrop
December 25th 2020, 1inch Exchange announced the launch of its 1INCH token. 6% were distributed amongst 50,000 addresses that have interacted with the protocol. There were conditions to the airdrop though:
Placed at least one trade before September 15 OR
At least four trades in total OR
Trades for a total of at least $20
Potential Airdrops
These airdrops to past users is one of the most efficient ways to get the governance tokens in the hands of actual users. Platforms that do not yet have a token but have a working product with high revenue are: dYdX & MetaMask
Be careful out there, unless the information is vetted and confirmed by the official accounts of dYdX and MetaMask, it could be a scam!
dYdX
The earliest DeFi derivatives platform that was launched in 2017, a severely undervalued platform. In the past 30 days alone, dYdX has seen $4.2 Million in revenue from fees paid to the platform by users. This most certainly is the sort of platform we’d like a piece of should they release a token.
By placing trades on dydx.exchange you may become eligible for a token airdrop should they do one in the future.
Note: There is no timeline as to when they might do it nor is there any certainty that they do release a token and airdrop it. But for such a low cost it is worth it. The Ethereum address you use to interact with it will become on the airdrop list (should it happen).
MetaMask
You’re probably a MetaMask user, you know the third-party web extension that is an Ethereum wallet? Yes, that one.
For the longest time, MetaMask was only a wallet, quite convenient too. Recently they added a “Swap” function which would find the best rates across different DEXs and facilitate the trade all from within the wallet – an aggregator similar to 1inch Exchange.
The swap function has brought a total of $12M in revenue, with a daily average of $200,000.
Should they decentralise decision making and create a governance token, early users of this swap function would likely receive airdrops. (Once again it is not certain but it is worth it should it happen).
Minimising Gas Fees
Since the only expense on this opportunity is gas fees, it’s best to find ways to minimise them.
This website gives you an overview of which days and times are the least congested for the Ethereum network, meaning which days and times that have the lowest costs for gas fees: Ethereumprice.org/GAS
7 months later
The above was published on the 18th of February 2021, and there have been some significant updates in the last 7 months. Most notably from the above two protocols which we hypothesized could reward users with airdropped tokens, dYdX proceeded to do so. Users received an amount of tokens that reflected the level of their interaction with the protocol. As can be seen below, if someone simply deposited into the protocol they would have been eligible to redeem 310 dYdX tokens after making one trade on dYdXs’ Layer 2 product. Simply placing a trade would have allowed a user to claim 1,1163 tokens. With the price of dYdX seeming to stabilize above 10USD, as the articles title implies, the risk to reward ratio was truly exceptional. This strategy was beneficial for dYdX and its user base, and confirmed our expectation that airdrops would make up a future avenue for protocols to reward existing users and attract new ones.
As you know here at PoF we monitor the crypto space constantly and decided to revisit the topic of airdrops as we have identified some other protocols which we believe could follow the same airdrop strategy.
OpenSea – Premier NFT marketplace on the ETH blockchain
This is one of the biggest candidates with the most potential to become extremely lucrative if it occurs. We have seen other competing NFT marketplaces such as Superrare follow a token airdrop model to drive decentralisation, enhance their user engagement and try to increase their marketshare. OpenSea however dominates the NFT market on Ethereum with a marketshare of upwards of 80%. Thus they have no need to airdrop a token to their users, as they are happy operating with things the way they are now. Add in their lucrative fee structure as well as their dominant marketshare there is no incentive for OpenSea to ‘giveaway’ or share some of their profits via an airdrop. Currently OpenSea is effectively eBay for NFTs, operating for all intents and purposes as a private company leveraging the Ethereum blockchain for their marketplace business model. To not deviate from the point, if OpenSea does do an airdrop, it will be extremely lucrative for the recipients. If you’ve bought an NFT it has most likely been from OpenSea, meaning anyone in the NFT space will probably be a recipient. For the airdrop by Superrare the amount of tokens users would receive was calculated as a mix of core actions such as buying and/or selling art on SuperRare prior to the cutoff date of July 21, 2021. A similar formula would probably be used by OpenSea.
Phantom Wallet – Most used wallet in the Solana ecosystem
For the next protocol with airdrop potential we move to the rapidly evolving Solana ecosystem. If you’ve interacted with the Solana ecosystem in any way, you’ve most likely used either the Sollet or Phantom wallets. Sollet is open source and developed by Project Serum. As Serum already has its own token, and the wallet is not under intense development, we don’t anticipate a Sollet token existing at any point. Phantom on the other hand is being actively worked upon by a development team and has established itself as the premier Solana wallet. Phantom has plans to become a cross chain wallet, expanding onto the Ethereum chain. It faces stiff competition there with MetaMask having the majority of the marketshare. This is where an airdrop to its existing users can help it capture market share and attract new users. Tokens linked to wallets have performed well, with the best example being the Coin 98 token. Additionally with plans for phantom to expand into the mobile sector as well, a token works as a further incentive for users. The potential for a token is clear for wallet based applications that offer further utility such as swapping functions. Our thought process here mimics our analysis regarding MetaMask. Indeed, it is likely that if one of Phantom or MetaMask proceeds to airdrop a token, the other one will proceed to do so to not give up a competitive advantage. Regardless, if you’ve interacted with the Solana ecosystem, you will most likely have used Phantom. If not make sure to check it out with the link in the heading, and fingers crossed we see an airdrop!
p.s With transaction fees on Solana being sub 1 cent there is no reason not to try out Phantom.
Solana Wormhole
Inspired by the recent Goodbridge airdrop on Avalanche, it is worth highlighting the Solana wormhole. Wormholes effectively look to facilitate moving assets across chains. I.e. you could move a Solana token or NFT to the ETH blockchain and vice versa. Cross chain interoperability is an important need for the solana ecosystem to drive wider adoption and use. Currently using the wormhole consists of fees on both the Solana and Ethereum side. With Solana fees being sub 1cent, the only significant fees are on the Ethereum side and it currently costs the standard amount of gas to move assets from the ETH to SOL blockchains. With the recent airdrop of the Goodbridging token which rewarded users who bridged to the Avalanche ecosystem from the ETH blockchain, it adds another incentive to interact with the latest in cross chain interoperability. An airdrop for the Solana wormhole is less likely to occur than for the projects outlined above, but still remains a distinct possibility. The Solana wormhole still remains a work in progress and the utility of assets which have been ported from one chain to another is still extremely limited.
A final and important note to remember is that the above are simply educated guesses regarding what might occur with projects, potential tokens, and then distribution avenues. It involves a lot assumptions. You should never look to use a protocol specifically to increase your ‘potential airdrop’ allocation. Interact with the protocol to see if it offers something of value or use to your crypto activities, but do not look to increase your usage of it, specifically for a greater airdrop. To clarify with an example, do not look to buy/sell NFTs simply to increase you potential rewards. If NFTs are of interest then look to find a platform that caters to your requirements and also has airdrop potential. On the other hand if you are not interested in NFTs, but want to interact with the protocol make sure that you are comfortable with whatever interaction/allocation you have. Do not lose the forest for the trees.
Disclaimer: NOT FINANCIAL NOR INVESTMENT ADVICE. Only you are responsible for any capital-related decisions you make and only you are accountable for the results.