Token Airdrops Face Threats from Farm Accounts & 'Sybil Attacks'

Amidst the crypto market's price surge, numerous crypto projects are grappling with the rise of counterfeit farm accounts, known as "Sybil attacks," coined after a book about a woman with multiple personalities.

Source: Degen

Creators of the Degen meme coin project posted on X (previously known as Twitter):

"We've recently taken action by banning approximately 2,000 users whom we suspect were farming Degen…Taking part in Degen farming, such as coordinated posting or artificial engagement, could lead to bans."

These deceptive accounts artificially inflate network activity to capitalise on airdrop events, which have become increasingly profitable over time.

The Degen airdrop, scheduled until 1 August, incentivises users to contribute or curate high-quality content on Farcaster's social channels.

However, it seems a considerable number of users have resorted to posting inferior content solely to garner airdrop rewards.

Degen has warned of consequences for participating in coordinated actions primarily for token rewards and for sharing irrelevant content in promoted channels.

Just One Among Many Victims of Sybil Attacks

The meme coin project is just the latest victim of Sybil attacks, a longstanding challenge in the crypto space.

Earlier this month, Bitget Wallet, a self-custody wallet, announced measures to counteract such attacks by penalising users who exploit emulators and cloud phones to artificially inflate wallet referrals and downloads for BWB token rewards.

Bitget Wallet wrote:

"Upholding fairness and integrity for all participants is paramount to us, and we cannot turn a blind eye to any dishonest behavior that violates the rules of conduct for the event."

The ongoing Bitget Wallet airdrop, running until 27 April, incentivises users to earn rewards through various activities like referring friends, depositing tokens, or engaging in decentralised finance (DeFi) swaps within the self-custody wallet.

While steps are being taken to address the issue, effectively combating Sybil attacks remains an elusive task.

Bitget Wallet explained that:

"To be certain that we do not inadvertently penalise honest users, we have identified and deducted points only for the top 50 users who boosted their referral points through illicit means."

Despite these findings, the Starknet airdrop proceeded, including addresses associated with airdrop farmers.

Following its launch, Starknet briefly reached a fully diluted valuation of over $20 billion.

The airdrop is set to continue until June.

Sybil Attack Explained

A Sybil attack is when someone creates many fake identities to gain control or influence over a network or system.

Imagine if someone made multiple fake social media accounts to sway public opinion or win a contest.

In the digital world, a Sybil attack can distort online activities like voting, earning rewards, or accessing benefits by flooding a system with fake accounts.

It is like someone trying to cheat by pretending to be many different people at once.

In a report published by Gamic HQ in August last year, researchers detailed the mechanics of a Sybil attack, wherein airdrop farmers utilise scripts or bots to generate a multitude of fake accounts on a specific platform.

These automated accounts undertake various tasks, including creating random usernames and emails, completing registration forms, and even bypassing CAPTCHAs for account verification.

Gamic HQ highlighted that Sybil attacks lead to a concentration of a significant portion of airdropped tokens in the hands of these fake accounts, diminishing the share available to genuine users interested in long-term project engagement and support.

Consequently, the project's reputation suffers, its token supply inflates, and price manipulation becomes a risk due to excessive selling by airdrop farmers post-event.

Despite these challenges, the report also identified some positive outcomes resulting from the attacks.

The firm claimed:

"The rise of Sybil attacks has pushed blockchain projects to develop more sophisticated methods for verifying user identities and ensuring fair airdrop distribution.This ongoing battle will hopefully lead to a more robust and secure blockchain ecosystem in the long run."