- It is an effective marketing strategy
- New platforms and products are introduced into the crypto world
- Users can gain huge profits, e.g., the Uniswarp tokens were worth about $7000
- Users can end up wasting resources
- Chances of being scammed are high
As the world of cryptocurrency continues to grow, developers across the world continue to create new currencies and tokens. If anything, the industry has taught us that early adoption of new decentralized finance (DeFi) can have numerous perks, including reaping huge profits. One of the major ways used to launch a DeFi is an airdrop. In this article, we will take a closer look at what a retroactive airdrop is, why it is popular, and whether it is worth your time.
What is a Retroactive Airdrop?
An airdrop is a promotional activity where a series of tokens are granted to its early users after a project launches its native tokens. The move is aimed at helping the blockchain startup gain traction and attract users who will trade in it when it gets listed as an initial coin offering (ICO).
For example, a retroactive airdrop might occur when a new blockchain platform is launched and the founding team distributes a percentage of the total coin supply to early supporters.
Crypto enthusiasts can find out about these coins on their social media, on the company’s website, or through crypto forums. In order to make them popular, the tokens are only sent to a specific and limited number of wallets.
In the case of retroactive airdrops, the tokens are sent to a specific number of the earliest users: the Uniswap airdrop, one of the most recently closed, distributed 400 UNI to 12619 accounts. The 400 UNI was valued at about $1000 then but is now worth more than $7400.
Why is Retroactive Airdrop Popular?
The “retroactive” part of this is important because for users to be eligible for the airdrop, they have to be on the platform before the airdrop is announced. Retroactive airdrops have become a popular way to launch something because they bet on some marketing aspects, including:
It Creates FOMO
“Fear of Missing Out” (FOMO) is a marketing phenomenon that utilizes the aspect of limitations. In the fashion industry, for instance, “drops” are done to launch limited clothing items that only a few people can access, which creates a demand for the specific item.
The same case applies to crypto tokens. When the retroactive airdrop happens, only a limited number of people have them, and this drives up the demand, creating a market for the project. This gives the tokens a value that makes trading in them worthwhile and gives it a place in the industry.
It Rewards Early Users
One of the best ways to respond to launching or promoting a product is by offering rewards. Retroactive airdrops offer rewards because they give out free tokens; later, when their value rises, the benefactors can trade them for a profit. This way, loyal and early users who believe in the company can reap benefits.
It Builds a Culture
Retroactive airdrops build a culture in the cryptocurrency space where people are now actively “farming” for these airdrops. This culture has come to be known as “retroactive farming.”
The idea behind it is that if a user detects a DeFi protocol early enough and begins to use it, there is a high chance of being rewarded for it.
However, the catch with retroactive farming is that not all DeFi protocols use airdrops, so you can end up spending money and getting no rewards.
It Attracts Users from Other Projects
Using a retroactive airdrop, a token can attract users from different projects to theirs. Some users might choose one token over the other due to better designs, usability, or adding the token to their portfolio.
This incentive program is a great strategy and is essentially free marketing since almost everyone likes free things.
Best Retroactive Airdrops
Uniswap is the largest decentralized exchange (DEX) that operates on the Ethereum blockchain. Through the platform, people can trade crypto around the world. The platform uses UNI, its native token, to govern fundamental protocol changes. The project used a retroactive airdrop when launching UNI on September 17, 2021.
Through the airdrop, any wallet that had even tried to use Uniswap got 400 UNI, which was worth about $1000. The airdrop used 5,047,600 tokens in total. After that, the coin was listed on crypto markets and experienced a price increase, giving the users of the tokens a hefty profit.
1Inch is Uniswap’s competitor, and between 2020 and 2021, they released a retroactive program. On Christmas 2020, the platform released 6% of the 1.51INCH to 9000 Mooniswap users. The users would receive 500 1INCH, which was worth $3000. They also scheduled 14.5% to be released gradually over the next four years for users who interacted with Argent, Authereum, Gnosis, and Pilnar sites. In total, the program released over 15M tokens.
dYdX is a trading margin protocol that is popular in the crypto industry. The platform is responsible for the largest retroactive airdrop that distributed 7.5% of its total token supply, valued at nearly $1B. The program issued tokens based on a user’s trading volume. Users who contributed to $1 trading volume were issued 310 dYdX, while that 9529 dYdX was issued to users with more than $1M trading volume.
How to Find Potential Projects with Retroactive Airdrop Rewards
Being able to find the right retroactive airdrop project ensures that you get both of these from a prospective project. Using these tips reduces the chances of wasting money on gas fees. Some of the tips you can use include;
Find Projects with Token Release
Blockchain ecosystems are created for different purposes, e.g., lending, NFT, and more. When retroactive farming, look into different categories and consider the ones that haven’t released their tokens yet. This is one of the first indicators that a startup could be considering an airdrop.
Once you identify an ecosystem, compare it to others of its class and assess the potential they have. For instance, Uniswap and Sushiswap are two ecosystems that use retroactive airdrops.
You might need to look for upcoming ecosystems that are competing with these two. Some questions to ask yourself while considering this method include:
1. Is there a community, and is it big enough?
2. How long has the project been in existence without releasing tokens?
3. Why is this a better choice than others in the same class?
Projects with Positive Revenue
This is an excellent approach if you want to farm based on profits. Projects with high revenue that remain stable are probably considering a retroactive airdrop to their users.
One example is the 1Inch Exchange, which, even after the 2020 airdrop, continued to announce airdrops in 2021. Retroactive airdrops might happen more than once with a particular DeFi, so be on the lookout. You can use tools such as Earni.
Projects That Have Launched Testnet or Need Feedback
More often than not, projects that have just been launched and are in the beta phase do retroactive airdrops to attract users to the product. The users are rewarded, and in exchange, they have to find bugs or other issues. ICPSwap did one such retroactive airdrop to help the developers make it more user-friendly. You can find some of these projects on sites like Nodes Guru.
Join the Communities
There are numerous communities on different social media platforms, like Reddit and Discord. In these communities, you can find like-minded people with whom you can farm the airdrops together. In addition, there could be people who have more experience and could help you get the most out of the retro airdrops.
Follow the News
Many companies and startups use social media platforms and crypto news outlets. Some companies announce potential airdrops. Some of the sites you can follow are;
- Etherscan Airdrop for news on ETH airdrops
- AirdropAlert.com for social media airdrop scans
- Defillma on potential airdrops backed by blockchain ecosystems
Risks Associated with Retroactive Airdrop Farming
Even though retroactive airdrop farming is a popular activity, there are some associated risks users should be aware of.
Loss of Funds
When using retroactive farming, one of the main features is that gas fees, platform fees, and, in some cases, price slippage must be paid. If you keep investing in a platform and they don’t release tokens, you could end up losing the funds you use to interact on the platform.
In order to interact with the features of the platforms, users need to spend a substantial amount of time on them. Some projects, especially those in the beta phase, can be full of bugs, making the user experience terrible. You could also end up using a platform and waiting for an airdrop that isn’t going to happen.
Falling into Scams
There are a lot of scams in the crypto world, and scammers can use this method to lure investors who don’t know what they’re doing to join their platforms. Before spending money on a platform, run background checks and do research to ensure they are genuine. This way, you can keep your money and, in some instances, your data safe.
Is Retroactive Airdrop Farming Worth Your Time?
Retroactive airdrops are a great marketing strategy, and farming them is an exhilarating experience. From past airdrops, users can enjoy massive returns for just investing resources in the right platform at the right time.
However, retroactive airdrops are not free since you need to spend time and a selection of fees on the platforms, and there is no guarantee that the platforms you farm will have airdrops. You need to acknowledge the risks involved and try to avoid them. That said, retroactive airdrops are worth it, and there will be more in the future, so be on the lookout for them.
1. What are the risks associated with retroactive airdrops?
The risks associated with a retroactive airdrop are mainly financial. If you hold tokens in an exchange or wallet during the time of the airdrop, you will not be able to receive the new tokens because they will be sent to your address automatically. This could lead to losses if the price of the newly issued tokens drops after the airdrop.
Another risk is that a large enough airdrop could overload the blockchain and cause network congestion, resulting in slower transaction speeds and higher fees. Finally, there is always the possibility that projects conducting airdrops may disappear after distributing their tokens, leaving investors with nothing.
2. How much can I earn/get from hunting retroactive airdrop?
There is no definitive figure as each retroactive airdrop depends on the platform doing it. Profits can start from $1000 depending on a project’s offerings.
3. How to avoid being scammed in retroactive farming
There are a number of ways to help you stay away from being scammed when looking for good retroactive projects. These include:
- Check the project’s website and whitepaper for information on the reward program.
- Make sure the project is active and has a working product.
- Do your own research on the project and its team members.
- Make sure you trust the project and its team before investing any money into it.