Monday, December 17, 2018

Digging into the biggest crypto airdrop ever


Anyone following BINA, Inc. knows that we are big believers in Stellar Distributed Ledger Technology and Stellar Lumens (XLM) cryptocurrency acting as the bridge asset on Stellar public network. After all, Stellar Consensus Protocol (SCP) provides lightning fast transactions at extremely low cost as well as native crypto assets issuance with integrated Decentralized Exchange - everything Ethereum is still sorely missing, not even talking about the Ethereum mainnet scalability issues. Even though Turing-complete Ethereum Virtual Machine (EVM) sounded great in theory, the reality is that even the simplest smart contracts turned out to be vulnerable to hacks and exploits, as the DAO debacle and the Parity multisig wallet hack have shown. ERC-20 and the newer token standards only define smart contract interfaces while the actual implementation code could still be vulnerable. To the contrary, Stellar assets don't require any potentially exploitable code deployed on the public network.

That's why we were so excited when in the beginning of November we found out about Blockchain wallet airdrop of $125 million worth of XLM (https://blog.blockchain.com/2018/11/06/we-always-put-users-first-and-now-we-have-125m-ways-to-show-it/). That seemed like the right move to jumpstart wider network adoption on the backdrop of Ethereum's troubles. So we all registered for that XLM giveaway because, well, who doesn't like a free $25, which could also multiply dramatically down the road? However, a month has passed without any of us receiving any XLM or even email notifications about the airdrop. I was extremely curious to find out if that big announcement was just one of the many cryptocurrency scams proliferating these days, despite having Stellar Development Foundation (SDF) and a popular crypto wallet software vendor involved. It also seemed like a good exercise in Stellar ledger forensics.

The idea was simple: find a wallet or wallets routinely creating many new accounts funded with the same amount of XLM valued at $25, which was mentioned in the airdrop announcements. For example, when XLM/USD exchange rate is $0.10 the transactions of interest would be all wallet creations with 250 XLM balance. As predicted, it wasn't hard to find the originating wallet address using BINA's Stellar transactions analysis tools - it turned out to be GARAR5QR7WRL24MQMSO4INWV7C5SE4EE2YVXTLD6ORONYFHSUAGZYSLN. You can check that account activity here https://stellar.expert/explorer/public/account/GARAR5QR7WRL24MQMSO4INWV7C5SE4EE2YVXTLD6ORONYFHSUAGZYSLN



Here are some outtakes from that activity:
  1. The airdrop wallet itself was created on 11/02/2018 right before Blockchain giveaway announcement and was funded with over 8 million XLM on 11/05/2018 after the announcement was made. Funding came from account address GB76DZDZQRUGK3KEINZM6YDZI5OPVAP6UTIZKZIFNTRMG5T7UC5IRVRE, which was created by an SDF "Hot" wallet.
  2. Between 11/05/2018 and 11/26/2018 over 7 million XLM have been distributed, which even at $0.25 XLM exchange rate at the time of announcement is less than $2 million - a far cry from $125 million announced
  3. On 11/27/2018 airdrop wallet balance was replenished with XLM 3,199,000. That seems to be a trend now with another XLM 3,000,000 deposited to airdrop wallet on 12/13/2018 after its balance has breached 1 million XLM
  4. Still, less than 13 million XLM has been distributed so far, which even at top market price of $0.25 is no more than $3 million
  5. Nevertheless, it seems like the airdrop continues and the decelerating pace of it could be explained by the decreasing number of people willing to go through Blockchain app KYC process

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