A look at the fees.wtf airdrop and what went wrong

On Thursday evening, crypto information site fees.wtf launched an airdrop for members of the crypto community. Only, it didn’t go so well.

The website became popular because it enabled anyone to see how much they’ve spent in transaction fees on the Ethereum blockchain over the years. In some cases, people who spent a lot on transaction fees when ether (ETH) was cheaper could find out that those tokens would now be worth a lot more — sometimes even millions of dollars.

In accordance with this, the airdrop of WTF tokens was handed out proportionally, with more tokens given to those who had spent more in fees. The idea was that it was some kind of commiseration for the amounts spent.

Wallets with a minimum of 0.05 ETH spent on gas fees before the snapshot date of January 1, 2022, were eligible to claim the token. Someone claiming the minimum amount would receive around 30 WTF tokens.

The launch, however, did not go as planned as liquidity problems on exchanges caused significant headaches — and losses of funds. Plus, there were a number of additional elements that made the airdrop more costly than others.

Botched liquidity

When the token went live, it was available to trade on decentralized exchange Uniswap. Typically in these situations, the team will use some of its reserved tokens to provide liquidity on the exchange. This means that there are enough tokens on the exchange so traders can buy and sell without incurring large amounts of slippage (when the actual sale price is different from what was expected).

Yet the team failed to provide enough liquidity on Uniswap. It only had 2,211.455 WTF and 0.000001 ETH ($0.003). This meant that 1 ETH was equivalent to 2.211 billion WTF as of the time the pool was seeded.

This led to competition between a few trading bots in the first hours of trading that resulted in big winners and losers in the early minutes of trading. The first entity to buy WTF was able to acquire 2,211.45 WTF for 2 ETH ($6,400), which left only 0.01 WTF in the pool — according to an analysis by a crypto user known as meows.

This action caused the token price to spike, a situation that continued as more bots spent increasingly larger sums of ETH to acquire progressively smaller fractions of the remaining 0.01 WTF tokens in the pool. One buyer even spent 42 ETH ($138,600) to acquire just 0.00004 WTF, worth almost nothing as the coin’s price plummeted.

Then, when one bot purchased a small fraction of WTF for 10 ETH — followed by an instantaneous sale of the same tokens for 87 ETH — the price crashed. All of this happened within the first five minutes of the pool going live.

A few minutes later, one bot managed to swap a little over 2,200 tokens for 851 ETH ($2.8 million). They even paid a hefty $1,300 in transaction fees to do so.

The token’s price tanked over 96% from a temporary high of $2.96 to $0.13 following the bot action. Some users also reported being unable to sell the token on the Uniswap v3.

Addressing the issue, the WTF developers stated on the project’s Discord server that the problem was due to a one-sided LP on Uniswap v3. The action of the bot wars had drained liquidity from the pool but the WTF team stated that they were in contact with Uniswap to fix the problem.

Data from Dextools shows that buying and selling is currently ongoing on the WTF/ETH trading pair on Uniswap, so it appears the problem has been fixed. Some users, however, are still unable to load the project’s website.

Fees.wtf won the biggest airdrop

There was one big winner from the airdrop: fees.wtf itself. Despite the token launch not going smoothly, the website received more than a million dollars from fees and transaction levies.

To receive the airdrop, users had to “unlock” their wallets by paying 0.01 ETH ($34) to the project’s coffers, separate from the gas cost of the actual token claim transaction. Part of this could be returned to individuals via a referral scheme, although to get half of the fee as a reward, the referrer needed to burn thousands of WTF tokens. The WTF team earned over 147 ETH ($483,000) from “unlock fees” as of the time of writing, according to data from Etherscan. 

These payments to unlock wallet addresses are still ongoing as of the time of writing, even though the WTF token has lost 96% of its value since trading began. 

Beyond this, the team levied a 4% tax on any transfers of WTF, including trades made by users. Thus far, the project has made over 7.6 million WTF ($1 million) from this transaction tax.

In total, the WTF team is sitting on more than $1.48 million in both ETH and WTF tokens.

WTF’s seemingly botched launch is the latest in a series of airdrops to hit the market in the last three months that have left some users disappointed. OpenDAO’s SOS and GasDAO’s GAS tokens have failed to deliver high-value tokens, unlike the first big airdrops. Plus other airdrops have had quite restrictive eligibility requirements, such as Paraswap, excluding many people. At this rate, projects my question whether running an airdrop is a net positive — or if it might not be worth the hassle.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.