How to profit from retroactive airdrops?

What are retroactive airdrops?

A retrodrop is a retroactive airdrop distributed in a project’s native token. It is a way to reward people for using a crypto application, testing it or engaging in other project-related activity at an early stage.

One of the first retrodrops was carried out by the decentralised exchange (DEX) Uniswap in September 2020, handing out 400 UNI to every blockchain address that had ever interacted with the platform’s smart contracts.

The tokens of popular L2 solutions Optimism and Arbitrum were also distributed as retrospective rewards—that is, for actions the projects deemed useful in the past.

What actions earn retrodrops?

In most cases, eligibility hinges on actions that led to user spending over a defined period.

Such criteria are known as multipliers. The most common include:

Deposits into the network or an application. The more assets in circulation, the better for the ecosystem. This also covers productive liquidity related to individual applications: locking assets for staking, farming, lending and in liquidity pools.

Network IDs and domains. Assigning identity to addresses by registering domains or obtaining special IDs. 

Voting in DAO. A fundamentally important activity in which users keep tokens on balance, refrain from selling them and vote on ecosystem upgrades, including proposing their own ideas.

Writing and deploying smart contracts. Experiments and new development in the ecosystem are welcomed. Attracting and rewarding developers is among the hardest tasks. 

Creating multisig addresses. Such operations are typically undertaken by professional teams, funds and investor groups—a valuable cohort for the ecosystem.

Transaction volume in dollar terms. The higher the dollar value flowing through the network, the better for statistics and other on-chain metrics.

Number of transactions. More transactions mean more fees paid in aggregate. This is a revenue source for validators and individual projects in the network.

Time spent using the network or an application. The longer and more frequently a user engages, the more valuable they are to the project. 

Interacting with a wide range of applications. Projects value explorers and engaged users. For example, Optimism assessed and rewarded interactions even outside its own network.

Donations. Projects encourage no-strings support at an early stage, when instead of venture rounds teams turn to community contributions. 

Who are drop hunters, and what is multi-accounting?

Drop hunters are airdrop chasers. In the context of retrodrops, they try to predict which projects will later reward their active communities by distributing native tokens.

This cohort assumes that active use of certain applications in ecosystems such as Base, Linea, zkSync and Starknet will align with potential multipliers for a retrodrop.

To maximise profits, users create numerous blockchain addresses—so-called Sybil accounts; the practice is known as multi-accounting. The idea is that one person or a group controls a web of seemingly unrelated addresses that may all qualify for a future airdrop. In 2023, for instance, an unknown actor created 21,877 addresses on zkSync, an Ethereum layer-2 network.

Teams behind airdrops consider multi-accounting harmful. To combat Sybil accounts, projects analyse on-chain activity and deny such users rewards. For example, the Optimism developers excluded about 17,000 ETH addresses from the OP retrodrop list. 

What strategies do drop hunters use?

Large retrodrops by Uniswap, Optimism and Arbitrum show that reward hunting has become a professional pursuit aimed at profit. As in trading and investing, strategies abound. In retro-hunting, the main trends include:

Using specialised software. In a Binance report this is dubbed “airdrop farming”—automating actions in blockchain networks and individual decentralised applications to improve the odds of receiving an airdrop. 

Such tools range from installable software to Web2 services and even Telegram bots. This approach enables the creation of dozens, hundreds or even thousands of addresses that potentially meet retrodrop criteria. For example, two market participants consolidated $3.3m of ARB tokens to two addresses, collected from 1,496 wallets—numbers that are hard to achieve manually.

Manual airdrop farming. This approach is limited by human capacity: creating hundreds of addresses demands enormous time. It is considered relatively safe, though, because such accounts may be harder to detect.

Hybrid. A way to diversify risk. Hunters split their accounts between manual and automated strategies at once. This can reduce risks while increasing potential returns thanks to the number of accounts and time saved.