#9: Airdrop it Like it's Hot 🪂
Newsletter Content:
📰 Main Topic: What is an Airdrop?
📈 Quote + Weekly Price Recap: See Below
🚨 Top Stories: SEC Goes After Do Kwon + Luna / Binance Pays Settlement / SBF Backers Revealed / Blur vs. Opensea / Hong Kong Allows Retail Buyers
📖 Thread / Read of the Week: Polygon’s Business Development
📊 Visual of the Week: Blockchain Transactions 101
🔭 This Week: Busy Macro Week
In the world of traditional finance, not every investor can partake in a private investment, IPO or security offering. In addition to the large cash investment that is required, there are rules and requirements around these events:
Accredited Investor Status (Net worth / income requirement)
Investment Limitations (max amount of shares)
Lock Up Period (share vesting)
Oversubscribed Allotments
Having to “Know the Right Person”
While many of the rules and regulations in place are necessary to protect investors and avoid fraud, crypto companies have taken a different approach to expansion.
Initially ICOs emerged, which are essentially IPOs with two main differences:
Launching tokens instead of stock offerings
No regulatory requirements, open to everyone, often anonymous team
You can guess how this went… Only around 10% of the tokens from the ICO boom in 2018 are still around.
A study by the States Group showed 80% of ICOs were scams, and half of the ones that weren’t have since failed.
More recently, Airdrops have become an increasingly popular way for crypto projects to increase their user base and distribute tokens to early adopters (often beta testers).
This occurs through retroactive qualifications, such as using a blockchain before a certain date, or paying a certain amount of transaction fees on a network over time.
As all data remains available and transparent on the blockchain forever, network users activity can be tracked at any point in time and rewarded accordingly.
The most recent to make a splash came this week from Blur, an NFT marketplace that airdropped users tokens based on their past trading activity. The outcomes of this were positive for Blur and its community:
While initially incentivizing users to come over, many traders have made Blur their main place to trade due to its unique user experience and advanced trading tools.
This adoption and formed community allowed Blur to go raise money at a Billon dollar valuation, giving them the runway to be a serious Opensea competitor.
The hype around the token made Blur an attractive investment for people wanting to invest in the NFT space without having much knowledge or wanting to purchase an illiquid JPEG themselves.
Many traders and network users received a nice payday - with the top 23 users receiving over 1 million Blur tokens each (Blur trades over $1/token at this time…)
Note: Airdrops aren’t perfect…
Analyzing the UNI token airdrop in 2020, only 3% of the airdropped funds have been held until now and not sold. This shows the collective motive of the holders here was to cash out quickly.
Note: UNI is the token that powers Uniswap, arguably one of the most important protocols in DeFi - This is NOT an example illustrating a “useless token”
Risk of Sybil Attacks: A Sybil attack is when a single user creates multiple fake identities to manipulate the network. An attacker might create several fake social media accounts or wallets in order to claim the airdrop multiple times.
In the recent case of Blur, some of the top airdrop recipients had been found wash-trading and inflating their trading volume.
Quote of the Week:
“In investing, what is comfortable is rarely profitable." - Robert Arnott
Price Performance:
Top Stories:
SEC Announces Lawsuit Against Terra/Luna and Founder, Do Kwon (Decrypt)
Terra was once an admired stable coin pegged to the US dollar and backed by Luna, which was one of the most popular Layer 1 blockchains at the time. Crypto investors all over the world trusted its founder, Do Kwon, for being a leader in legitimizing the industry… or so they thought.
Ultimately, the mechanics that were keeping UST stable were flawed and dependent on their other native token. Once this system broke, it led to a quick and monumental crash for the Luna token and UST (which was meant to keep $1 of value).
At the time, people weren’t sure if this was a case of fraud or simply a terribly designed protocol that was destined to fail. New details emerging with this lawsuit are pointing towards fraud…
This story of a de-fi savant, is now more similar to the Wolf on Wall Street.
Crypto Giant Binance Expects to Pay Penalties to Resolve U.S. Investigations (WSJ)
Binance is an exchange, like the NASDAQ or the New York Stock Exchange, which are heavily regulated. The SEC is currently looking at everything that happened these last few years and making players who didn’t take all the precautionary measures pay for their mishaps. The punishment for Binance is most likely going to be a (hefty) fine, however all possibilities are on the table.
Hong Kong Plans to Let Retail Sector Trade Larger Crypto Tokens Like Bitcoin (Bloomberg)
Unlike the US’s crack down on digital assets, Hong Kong is opening its arms to the idea of its citizens being able to invest in digital currency.
With a more open-minded approach starting to take over in the Eastern Hemisphere, many think that the next “bull-run” will be triggered by those investors, especially if the US continues to pose sanctions and penalties on crypto activity.
Blur Airdrops Their Token, Opensea Makes Changes to Compete
The emergence and initial success of the Blur marketplace has caused Opensea to feel threatened for the first time. Opensea has been the marketplace of choice for collectors and traders since NFTs first appeared.
Blur has targeted advanced traders with their user design and dropped a token to incentivize community governance and reward their active users.
In response, Opensea has temporarily removed their marketplace fees and changed direction on their creator royalties stance.
Identities of SBF Bond Backers revealed, Stanford professors (NY Post)
SBF got the funds needed for bail through a combination of collateral assets (his parents' houses) and some old friends (Stanford connections).
The future Netflix documentary on this is going to be so good…
Thread / Read(s) of the Week:
An introduction to the scalability problems that Ethereum and other blockchains face, as well as the solution of Layer 2 networks:
Visual of the Week:
This Week:
Monday (1/20): Stock Market Closed - President’s Day
Tuesday (1/21): Coinbase Earnings Released
Wednesday (1/22): FOMC Minutes Released (monetary policy stance)
Friday (1/24): PCE (household good inflation)