DeFi
Godfather of DeFi Andre Cronje Inspired This Protocol’s Tactics to Thwart Skydiving Attackers – DL News
- Tapioca DAO is using call options for its next airdrop.
- The idea was first floated by prolific DeFi developer Andre Cronje in 2021.
- The hope is that the airdrop will address Sybil attackers and help the protocol remain competitive.
As crypto airdrops become more and more common, the projects behind them have encountered a big problem: Sybil attackers.
These buccaneer DeFi players create multiple wallet addresses to spoof airdrops by pretending to be running legitimate activity, costing crypto projects. millions.
They siphon rewards from legitimate users and compromise the integrity of the projects they target.
Tapioca DAO, a new money market protocol built on LayerZero, claims to have a solution. Instead of giving away free tokens, its airdrop will give users the opportunity to purchase its native TAP token at a discounted price.
“If someone wants Sybil, there is a capital expenditure,” said Matt Marino, co-founder of Tapioca DAO. DL News. “It’s kind of the same result. If you widen 1,000 tokens at a 50% discount, that person ends up with 500 free tokens.
Marino says Tapioca’s approach ensures that even if users attack Sybil, they won’t just extract value: they’ll have to give something back.
Tapioca DAO is building a DeFi money market and stablecoin. It is built on LayerZero, a cross-chain bridge.
This allows Tapioca to connect borrowers and lenders across different blockchains.
Join the community to receive our latest stories and updates
Inspiration from the DeFi godfather
The inspiration for the airdrop, Marino said, came from Andre Cronjethe so-called DeFi godfather behind the Yearn Finance, Keeper Network and Solidly protocols.
“He talked about call options and I was a big fan of Keeper Network,” he said. “I really agreed with the principle of what he was talking about, and we followed it.”
Cronje was the first to introduce the idea of incentivizing using calls, derivative bets that pay off if the price of a token increases, in 2021.
Tapioca’s plan, however, carries risks.
Marino said Tapioca is likely the first protocol to attempt an options airdrop. It is possible that Sybil attackers will find a loophole to exploit the untested mechanism.
This wouldn’t be the first time one of Cronje’s ideas has gone awry. When it launched Solidly in 2022, users I played with the protocol by voting on their own tokenized liquidity pools.
Airdrop options
Tapioca DAO said its airdrop options “will create the most survivable, aligned, and cost-effective airdrop ever conducted on Sybil.”
It is scheduled to launch on June 14 and will offer options to purchase TAP tokens to those who participated in the protocol’s launch auction, Pearl Club ONFT holders, and select community members.
The first round of the airdrop will distribute options with a redemption price 50% lower than the final APR introductory auction price of $2.07 and will expire in a week. Subsequent rounds will offer options with a 25-50% discount.
If the APR price falls below the redemption price of the options, the options become worthless, potentially excluding some users.
Marino said this situation was intentional.
“We created a protection mechanism whereby if there is not enough demand and the token goes down, inflation stops,” he said.
However, Marino added, the protocol was designed to incentivize holding TAP to avoid this problem.
Holders who lock TAP into the protocol will receive the fees it generates. They will also be able to use their locked tokens as collateral to borrow.
“Room supervisors”
Marino criticized the popular airdrop approach, where projects distribute free tokens to users who meet certain criteria.
“You always end up losing a huge amount of value to people who are Sybiling,” he said.
Some projects spent a lot of time time and effort identify and exclude Sybil attackers, with limited success.
Some even put bonuses on them, and promise to give more tokens to users who can identify them.
This incentivizes users to falsely report legitimate users to projects in hopes of obtaining more tokens for themselves.
“They put monitors in the hallways to monitor,” Marino said. “It just doesn’t work.”
Tapioca’s Endgame
Besides thwarting Sybil’s attackers, airdrop options serve another function.
Tapioca will use the money raised from the options airdrop to provide liquidity, a system known as protocol-specific liquidity – or PoL.
Marino said that many DeFi money markets and stablecoins end up being very illiquid.
“The way you earn fees and profit from a CDP stablecoin as a platform is based on leverage. And if you don’t have liquidity, no one can take advantage of it and then you have no fees,” Marino said.
CDP stands for Collateralized Debt Position – in essence, it is creating tokens worth dollars by locking up other tokens with greater value as collateral.
MakerDAO DAI stablecoin uses a CDP model.
The hope is that if Tapioca can generate enough PoL, it will not rely on mercenary liquidity providers and will be able to offer competitive rates.
It is not certain that Tapioca can achieve this.
Other protocols that have attempted to generate PoL, such as Olympus DAO and Tokemak, have struggled to remain relevant.
Tim Craig is a DeFi correspondent at DL News. Do you have any advice? Send him an email to tim@dlnews.com.