Is airdrop farming allowed? • Letter #93

Hedgehog Admin -

Hi, this is Colton Dillion, the Hedgehog cofounder who is CTO, Chief Compliance Officer, CFO, and the company's Registered Investment Adviser Representative. Quite a mouthful of job titles, I know; I certainly wish I could easily summarize all four roles with one simple phrase. I asked GPT-4 and the AI suggested "tech-savvy compliance-focused financial strategist," which isn't wrong, but isn't quite right either… Maybe the giveaway question can help me out where large language models have failed me.

By the way, we started onboarding beta testers to the mobile app, which is very exciting. The team has worked so hard to get to this point, and it's gratifying to finally share what we've created. If you're interested in an early tour, reply to this email and we'll hook you up!

Stacks on Stacks

Last week I explained what it means for Hedgehog to offer investment advice:

We designed the Hedgehog roboadviser to bring modern portfolio theory to crypto, without the hassle of cumbersome and tedious spreadsheets. Bonus: instead of getting a piece of something like an exchange-traded fund (commonly just "ETF"), we help you automate the balance of your portfolio so that you still own the underlying assets directly. In other words, you have your own BTC, ETH, or [insert latest DeFi hotness here], that you can withdraw at any time to a wallet you own, rather than getting it stuck in some fund of which you own a fraction.

And in the email before that, I mentioned Stacks, the centerpiece of the Hedgehog app:

Our hero feature is called Stacks, and it evolved from the 1.0 feature with the same name. The mobile app will launch with six improved and streamlined Stacks:

• Total Crypto: More than 85% of the entire crypto market cap
• Satoshi: Bitcoin, where it all started
• DeFi: Peer-to-peer financial services on the blockchain
• ETH Network: Assets built with Ethereum
• Layer One: Core networks powering the crypto ecosystem
• Yield Farming: Tokens that pool staked funds to generate rewards

Let's put all the pieces together. Here is how Stacks work to implement modern portfolio theory:

  • As you can tell from the descriptions, each Stack is focused on a particular sector of the crypto industry. Except for the Total Crypto Stack, the most holistic option, which includes every asset that Hedgehog can currently support (through our custody partnership with Gemini).
  • The default investment strategy for a Stack is based on market cap. Each asset is ranked by the total value of its circulating supply. Hedgehog allocates the funds that you invest in a Stack according to that ranking. Basically, it works the same as an S&P 500 index fund — although I hasten to clarify that a Stack is not an index fund.
  • Why, how are they different? You own the assets in your Stack directly, versus owning shares of a mutual fund or unit investment trust. For example, you can withdraw BTC from a Stack, whereas you can't withdraw Apple stock from an index fund. The fund owns the stock, and you own a piece of the fund. By contrast, Stacks don't have that middle layer — you own every single cryptocurrency in the Stack. Hedgehog manages the Stack on your behalf, through an individual account that legally belongs to you.
  • The most exciting part: Stacks can be automatically rebalanced, according to the schedule of your choice, and/or rebalanced on demand (with a single swipe). When crypto prices change, your holdings may no longer be aligned with the market — that triggers a rebalance.
  • If you want to invest more or less into a particular cryptocurrency, you can customize the allocation percentage. And in the near future, we'll offer additional allocation strategies alongside the market cap option, such as daily active users or gross transaction volume.

That's enough about Hedgehog, at least for today. What's everybody else up to…

Sushi Snafu

Popular DEX SushiSwap got hacked, for basically the same reason as always in DeFi: sometimes smart contracts are too smart for their own good. Now the project team is trying to make users whole, which is admirable.

What's interesting is the two-tier recovery process: "Funds residing in the whitehat contract will be claimable via a Merkle Claim contract that the SushiSwap team is currently building," The Block reported. In other words, some of the "yoinked" funds were actually claimed by whitehat hackers who are coordinating with SushiSwap to return the money.

However: "Recovering funds stolen by bad actors will be more complicated. Users whose funds reside with the blackhat exploiter must send an email to security@sushi.com that includes transaction IDs and blockchain data. (Alternatively, they may open a ticket in SushiSwap's official Discord.)"

Taylor has said many times in past newsletters that DeFi is the roughest rodeo in the Wild West of crypto — you might make a fortune, but you also might lose it. High reward and high risk go together.

$MANNA from Heaven

(That's a Biblical joke for ya, $MANNA isn't a real token. Oh wait… well, depends on your definition of "real" but it does putatively exist.)

Most so-called "airdrops" are actually just scams, but the genuine ones offer a unique opportunity. Collecting the usage rewards offered by new-to-market crypto projects can be lucrative:

These so-called "airdrop farmers" try to speculate which projects might conduct airdrops and make themselves eligible for as many tokens as possible. Such communities have picked up steam in the past year, with some hardcore players managing hundreds of wallets or more.

The rewards can be shockingly good to those who play the game right.

"We made close to $1 million," said a pseudonymous Russian individual known as LEOresearch, referring to the total amount their team generated. "Blur gave us something like $300,000, Arbitrum gave us around $180,000, Aptos gave us $125,000 and Optimism, $120,000."

The story goes on to give examples of how people game the system to maximize their chance of receiving a valuable airdrop. Is this cheating? The point of airdrops is to reward sincere early adopters, not opportunistic mercenaries. But does that matter? As long as airdrop farming works, people will keep doing it. Incentives are powerful.

Boiling the Ocean

Competition heats up between NFT trading platforms:

OpenSea, the leading NFT marketplace by active users, has launched OpenSea Pro, an aggregator geared toward active traders, bringing together sale listings from 170 other NFT marketplaces onto one platform.

Users can sell NFTs on OpenSea Pro with no fees for a limited time. Trading fees on OpenSea's regular marketplace, which the company slashed to zero in February, have been restored to 2.5% with the launch of Pro.

The launch comes at a time when Blur, a competing marketplace and aggregator, has been dominating the NFT trading space, continually eating away at OpenSea's market share since its launch in October 2022.

If this Dune dashboard is any indication, OpenSea will have a tough time tearing volume back from its main rival Blur. Meanwhile, LooksRare and Genie (subsumed by Uniswap) are also swimming in these waters. Ah, who doesn't love a good shark fight?

Giveaway

A reminder of the cool stuff we give out:

  • insulated stainless steel water bottle with Hedgehog logo
  • official Hedgehog team baseball cap
  • snazzy Hedgehog socks
  • cozy Hedgehog hoodie
  • comfy Hedgehog baseball tee

The winner gets to pick three of those prizes.

Question of the week: Given that GPT is having trouble summarizing my job with a pithy one-liner, what's the best way to describe someone who writes code, fills out a lot of legal forms, and also makes sure the company is spending money wisely?

Reply to this email with your answer for a chance to win some Hedgehog swag. I know it's a hard question, so don't worry, you're still eligible if your answer is wacky… or even straight-up terrible. But a good one would definitely be appreciated!

Keep hedging,
— Colton

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