7 O’Clock Capital: Research and Prediction of Airdrop Patterns in Crypto Projects

Author: Eric, 7 O'Clock Capital

01 Introduction

Every bull market in the crypto market generates many wealth myths for investors. Although we have now entered a bear market, the crypto market is still at a critical juncture, and we believe that more wealth myths will emerge in the future.

There are many ways to achieve high returns in the crypto market, one of which is to position oneself for future airdrops before the project Token is issued. The sustainability of this investment method hinges on understanding the significance of project airdrops.

Users are extremely important for all projects, and there is a positive feedback loop between users and Tokens.

For early users of a project, the expectation of future airdrops is a crucial means of attracting them in the early stages. As the accumulation and development of early users reach a certain level, it becomes necessary to increase the user base through viral growth, which requires enhancing visibility and generating a significant dissemination effect. At this point, rewarding past users through airdrops to create a wealth effect may lead to a qualitative increase in the user base.

Additionally, as blockchain projects develop, various applications present certain barriers for ordinary users, making it essential to enhance user awareness as a key condition for user growth. The expectation of airdrops can encourage users to explore and participate in the project deeply, which helps to enhance public awareness and interest in the project. Curiosity may kill the cat, but it can also feed a fat cat.

02 Table of Contents

1. History and Patterns of Top Project Airdrops

2. Trends in Project Airdrops and How to Participate in the Future

3. Analysis of Future Top Airdrop Projects

03 Main Text 1. History and Patterns of Top Project Airdrops

7 O'Clock Capital has identified during its research process that in the recently concluded bull market, the four most phenomenal airdrops were Uniswap, dYdX, ENS, and Optimism, all of which were unprecedented in terms of airdrop scope, amount, and impact. Next, we will analyze the patterns of these project airdrops to attempt to predict future airdrop opportunities.

(1) In the early explosion of DeFi, the liquidity competition between the two DEX giants gave birth to the milestone airdrop of UNI

On November 2, 2018, Uniswap, a foundational application that would profoundly impact the future of DeFi, was launched. By mid-2020, during a period of market activity, Uniswap was generating millions of dollars in fees daily to distribute to liquidity providers. However, at that time, Uniswap did not have its own Token.

In late August 2020, a group of anonymous developers suddenly released Sushiswap, which had a codebase almost identical to Uniswap but featured two key new characteristics: "governance Token and updated staking rewards." A protocol war began. Sushiswap successfully migrated $810 million in TVL from Uniswap, accounting for about 55% of Uniswap's liquidity, by distributing its governance Token to users who staked Uniswap's LP.

On September 17, 2020, Uniswap, needing to counter Sushiswap externally and requiring DAO governance internally, released its governance Token UNI and airdropped 110 million UNI to 251,754 addresses based on a snapshot taken on September 1. Among these, 10.06% of the total supply was airdropped to the first 250,000 users, 4.92% to 49,192 early LPs (liquidity providers), and 0.02% to 220 SOCKS holders. Each address that had previously interacted with Uniswap v1 or v2 contracts could claim 400 UNI as a reward for their past contributions.

The method of the UNI airdrop was relatively crude, with few restrictions on interactions. This was because, on one hand, the number of DeFi users was small at that time, and on the other hand, the awareness of the need for bulk address interactions to qualify for airdrops had not yet formed.

The UNI airdrop occurred in the early days of DeFi and was milestone in nature, first solidifying its position as the leading DEX and secondly attracting more crypto market users to focus on DeFi through its massive dissemination effect. Additionally, the airdrop rewarded the exploratory spirit of early DeFi users, providing motivation for more people to participate in the new developments of DeFi.

(2) During the peak of DeFi, the futures derivatives leader dYdX, having completed Layer 2 deployment, initiated an epic airdrop

From 2020 to 2021, DeFi experienced rapid development, with dApps in the application layer exploding, and the leaders in various sectors becoming established. Decentralized stablecoins, trading platforms, and lending applications gradually became familiar and utilized by users. At this time, the demand for decentralized futures derivatives was increasing, but the high gas fees that arose after the rise of DeFi severely limited its development.

In February 2021, dYdX launched a cross-margin perpetual contract platform on Ethereum's Layer 2, based on the StarkEx scalability engine and its own Perpetuals smart contracts. This allowed it to provide higher trading throughput and lower minimum order sizes while significantly reducing user costs. At this point, its trading performance was nearly comparable to centralized trading platforms and could accommodate more trading users. dYdX needed to attract more attention and users, and an epic airdrop was about to unfold.

On August 4, 2021, dYdX announced the minting of 1 billion governance Tokens, with 7.5% (75 million DYDX) airdropped to 64,306 eligible addresses that had previously used the protocol.

Each account could claim a minimum of 310 DYDX, with a maximum of 9,529 DYDX. To qualify for the airdrop, users needed to complete a certain trading volume on dYdX's Layer 2 protocol.

The dYdX airdrop was no longer indiscriminate; it introduced tiered airdrops based on trading volume. This better aligned with the project's developmental needs, rewarding all users with basic incentives to enhance its reputation and dissemination effect, while also providing greater rewards to traders who made larger contributions, as these users were the core of dYdX.

The amount of the dYdX airdrop was unprecedented, creating a wealth effect that reverberated throughout the crypto market and significantly increasing the project's visibility. Meanwhile, the launch of trading mining led to a rapid increase in dYdX's trading volume, solidifying its position as the leader in the decentralized futures derivatives sector, while DeFi entered its most prosperous phase of the previous cycle.

(3) As Web3.0 narratives gradually unfold, the domain system ENS, as an important carrier of DID, took the lead in airdropping

In Q4 2021, the market began to weaken, while the future direction of the crypto industry gradually shifted from DeFi to the broader Web3.0 development. To popularize Web3.0, which is based on blockchain, on-chain addresses urgently needed optimization to transform into user-friendly language forms. ENS can correspondingly resolve Ethereum addresses composed of random numbers and letters with domain names ending in ".eth," greatly enhancing the user experience.

On November 3, 2021, ENS Operations Director Brantly Millegan announced that a governance Token would be issued, with 25% of the total supply airdropped to users and another 25% to ENS contributors, with over 137,000 eligible addresses. The specific airdrop rules were:

• Airdrops were allocated to addresses that had previously registered or currently held valid ".eth" second-level domain names.

• Airdrop weights were primarily calculated by account rather than by the number of domain names.

• The formula was 0.27 multiplied by the number of days holding at least one ENS domain, plus 0.067 multiplied by the number of days until the domain's expiration; if the account additionally set up reverse resolution, the above result would be multiplied by 2!

The ENS airdrop was more reasonable, aiming to distribute tokens to genuine users of the domain rather than speculators hoarding domain names. It was based on addresses rather than the number of domain names, effectively preventing opportunistic users from gaming the system. Moreover, the holding duration as a parameter benefited early participants and OGs, who had longer holding periods, while also favoring currently valid domains, especially long-term purchased ones. Reverse resolution provided double incentives for genuine users.

The large-scale airdrop, fair airdrop mechanism, and skyrocketing token prices made ENS domain services instantly popular, enhancing brand effects alongside increased attention and prompting crypto market investors to focus on Web3.0. As a foundational application of Web3.0, DID must develop first, and ENS, as a key carrier of user DID, inevitably leads the way.

(4) As Web3.0 enters the public chain development phase, Optimism fired the first shot in the Rollups war with its airdrop

In the last bull market, congestion and high gas fees became bottlenecks limiting the ecological development of Ethereum. If Ethereum hopes to continue as the leading ecological public chain in the Web3.0 era, accommodating a larger user base, scalability must be urgently addressed. With technological advancements, Ethereum gradually established the Merge and introduced sharding in the Surge phase, with rollup projects becoming the core of scalability enhancement.

Currently, Optimistic Rollups and ZK Rollups are the two most popular methods, with ZK Rollups still in the early stages due to the high difficulty of technological development. Optimistic Rollups, with relatively mature technology, have seen a flourishing ecosystem. Optimism is the first Ethereum Layer 2 project, leading the development of the Ethereum Virtual Machine (EVM) compatible Optimistic Rollup solution, and it took the lead in airdropping to seize market share.

On April 27, 2022, Optimism announced the issuance of its native Token and conducted the first wave of airdrops on June 1, 2022. The official plan allocated 19% of the total issuance for airdrops, with only 5% distributed in the June 1 airdrop, while the remaining 14% would be airdropped in subsequent rounds. This was the first instance of a large-scale airdrop being conducted in batches.

Optimism's airdrop differed significantly from previous application layer projects, increasing airdrop rewards for active ecosystem users and broadening the scope of airdrop recipients. This included early and active users of Optimism, major DAO participants in Ethereum, users of Ethereum multi-signature wallets, Gitcoin donors, and core Ethereum users who had used bridging functions. Additionally, those meeting more than four criteria could receive extra "stacking rewards." Furthermore, Optimism utilized blockchain analysis tools and ENS bots to capture proposals, filtering out some addresses that sought to game the system, thereby narrowing the airdrop to genuine users and honest participants.

As the first large-scale airdrop among public chain projects, Optimism not only diversified the types of airdrop recipients but also employed batch airdrops, preserving incentives for later users. It also implemented detection mechanisms to prevent witch-hunting attacks. This has important reference implications for future project airdrops, as airdrops will no longer simply target bulk interactions but will encompass a series of behaviors such as interactions, governance, donations, and cross-chain activities, with batch interactions from related addresses being excluded from the airdrop list. Airdrops will no longer merely incentivize transient interactions but will require genuine users who accompany the ecological development over the long term.

7 O'Clock Capital has achieved good returns from the aforementioned four phenomenal airdrops. We believe that from Uniswap's unrestricted airdrop to dYdX's tiered airdrop, to ENS's incorporation of time factors, and finally to Optimism's comprehensive cross-temporal airdrop, the requirements for interaction duration and breadth are continuously increasing. In the future, projects will intensify airdrop efforts for users who engage deeply over the long term. Those who accompany the project's growth and genuinely use the products will receive greater rewards.

2. Trends in Project Airdrops and How to Participate in the Future

(1) Analysis of Project Airdrop Trends

1. Characteristics of Phenomenal Airdrops

In the future, when searching for large-scale airdrops with wealth-generating effects, we can utilize the following characteristics based on the analysis above:

• First, from the airdrop timelines of the four projects, as the crypto industry develops, when a particular sector reaches an important stage of development, the user base and market awareness require significant enhancement, the probability of airdrops from the top projects in that sector increases.

• Second, from the returns of the four projects, if there are substantial positive returns daily, then the scale of airdrops from similar high-return projects may be very large.

• Finally, from the investment institutions behind the four projects, Uniswap received investments from a16z and other institutions, dYdX received backing from a16z and Coinbase, ENS was funded by the Ethereum Foundation, and Optimism secured investments from a16z and Paradigm. These projects with significant institutional investment and endorsement tend to have relatively high Token values and substantial airdrop revenues.

In summary, when the crypto industry reaches an important stage in a particular sector, if that sector has considerable positive returns and top projects backed by major institutional investments, they are likely to conduct large-scale airdrops with wealth-generating effects.

2. Increased Recognition of Witch-Hunting Attacks

When analyzing future airdrop rules, one project must be mentioned—cross-chain bridge hop protocol, which has elevated the prevention of witch-hunting attacks and anti-cheating measures to a new level. The following operations are defined as witch-hunting attacks:

1. Multiple addresses with associated funds: Multiple addresses have a unified fund distribution or collection address, and there is a clear correlation in transaction records among these addresses.

2. Batch operation traces and behavioral similarity: Bulk transfers within a short time, identical gas values, similar interaction amounts, etc.

3. Interaction history with previous attack records from other projects.

In the future, projects will impose stricter limitations on witch-hunting-style bulk airdrop claims to prevent these situations from occurring.

(2) How Investors Can Capture High Returns in Future Airdrops

First, we believe that more top projects with wealth-generating effects will emerge in the future, as the analysis above indicates that this is the best choice for certain top projects in specific sectors to enhance their recognition and participation during particular stages of development.

Second, we need to grasp the trends in the development of the crypto market, identify sectors that are about to explode, and capture top projects with considerable positive returns and significant institutional investments and endorsements within those sectors.

Finally, we must become long-term participants in these top projects, not merely engaging in simple interactions or superficial involvement. We should deeply experience the projects over a long period, participate in governance, donations, interactions, and various aspects, while also avoiding being classified as witch-hunters.

3. Analysis of Future Top Airdrop Projects

Based on the analysis above, which projects might be the next top airdrops?

First, from the timeline perspective, the crypto industry is still in the public chain development phase, and key airdrop projects should focus on public chains. With Ethereum's Merge and Surge underway, projects within Layer 2 that are gaining traction and have significant institutional investments are undoubtedly the ones to participate in. Next, we will analyze four of the most promising Layer 2 projects:

• Optimistic Rollups series: Optimism, Arbitrum

• ZK Rollups series: StarkNet, zkSync

(1) Optimism

Although Optimism has completed one round of airdrops, only 5% has been distributed, and the remaining 14% is confirmed to be airdropped later. This clear airdrop should not be easily overlooked.

Based on the analysis above, we should first engage with its ecosystem, interact with projects within the ecosystem, participate in staking, etc. Especially since many projects currently receive official support, participating in specific projects can lead to airdrop eligibility. Additionally, holding some Tokens to participate in project governance is advisable. In summary, we need to be long-term loyal users.

Recently, OP has shown strong rebound momentum, indicating that the market still holds positive expectations for it. After the market improves, the Tokens from the later airdrop could represent a considerable income.

(2) Arbitrum

Arbitrum, another top public chain in the Optimistic Rollups category, meets the conditions for large-scale airdrops in terms of investment institutions and positive returns. Recently, the project held the Arbitrum Odyssey event, where users participated in an 8-week project interaction to receive corresponding NFTs as proof of participation. Future airdrops for event participants may become a new airdrop method.

Due to capacity adjustments, Arbitrum maintains traffic at a moderate level. Like Ethereum, when traffic reaches capacity limits, gas prices automatically rise until the surge in traffic slows. Therefore, as more participants join the event, gas prices may spike, causing the event to pause.

The project is currently deploying Nitro, and once successfully deployed, Arbitrum Odyssey will restart. Before Nitro experiences congestion, Arbitrum will have greater capacity, ensuring that transactions remain at low fee levels and user experience is not compromised even under heavier loads. Once it restarts, this will be an unmissable event.

Additionally, we should reference the Optimism airdrop model by keeping assets on the Arbitrum main chain for the long term, understanding and participating in projects that have completed deployment on Arbitrum, and engaging in voting governance and other comprehensive activities to become a loyal long-term user of Arbitrum.

(3) StarkNet

StarkWare is a company that develops scaling solutions for Ethereum using Starks technology. It has two main chains:

• The main chain named StarkEx, which is used by dYdX / Immutable X / DeversiFi.

• The main chain named StarkNet, which is a decentralized layer.

On March 23 of this year, StarkWare announced the official launch of the StarkNet mainnet Alpha 0.8.0 version. StarkNet is a decentralized, permissionless ZK-Rollup (based on ZKP) that uses ZKSTARK technology to achieve exponential scaling without compromising privacy. Its D round valuation has reached $8 billion.

In July, it announced its Token issuance plan, with 9% already allocated to those who have worked on StarkNet and provided support or development for its underlying technology. If users interacted with public chains based on StarkEx, such as dYdX or Immutable X, before June 1, they may be eligible for this portion of the airdrop.

We also noted that another 9% is designated as StarkNet's refunds to cover some costs incurred when transitioning from Ethereum to StarkNet. To prevent gamification, community refunds only apply to transactions occurring after the refund mechanism was announced. This portion can be understood as an airdrop for future users. Therefore, we should continuously monitor StarkNet's development, especially its compatibility with EVM, and actively participate once the mainnet ecosystem has developed to a certain extent to capture this portion of benefits.

(4) zkSync

zkSync is developed by Matter Labs, which has received funding from top investors such as the Ethereum Foundation and Union Square Ventures. zkSync has been operational since September 2020.

Since zkSync 1.0 is not EVM compatible, there are currently not many projects that support or integrate zkSync, but we still need to participate in them, such as zigzag, Tevaera, Gitcoin donations, etc.

On July 20, zkSync announced that the first zkEVM rollup, zkSync 2.0, would launch on the mainnet in 100 days. After achieving EVM compatibility, its ecosystem will rapidly expand, and Token issuance will be on the agenda, so being a long-term loyal user will likely yield good returns in the future.

In addition to Layer 2, other public chains with development potential also deserve attention, such as the Cosmos series in modular public chains, where staking ATOM can yield new public chain Token airdrops, as seen with the previous Evmos, which provided good returns for stakers. Additionally, Layer 1 public chains backed by capital, such as Aptos, Sui, and Linera, should be actively engaged with after their launch to potentially reap rewards.

04 Conclusion

Blockchain technology is rapidly advancing and will become the underlying support for the new generation of the internet. In the Web3.0 era, more new tracks will emerge, and new applications across different tracks will experience explosive growth. We must be adventurous explorers willing to try new things, continuously learning and exploring, accompanying and participating in the development and construction of quality projects. Wait for the fruits to ripen, and await your wealth legend.