What Sybil Attack Are, How Crypto Projects Deter Them and Why Airdrop Farmers Do It

What are Sybil Attacks?

In crypto, a Sybil attack occurs when a single entity creates multiple identities or nodes to manipulate the network. By setting up numerous pseudonymous wallet addresses and blockchain nodes, an attacker can appear as multiple users. If successful in establishing enough of these malicious nodes, the attacker may execute a covert 51% attack, gaining control of the majority of the network without detection. This could undermine community governance and consensus mechanisms, allowing the attacker to propose and approve harmful smart contracts, leading to potential loss of user funds and network disruption.

Sybil Attack Prevention

To deter Sybil attacks, many projects implement measures like KYC (Know Your Customer) processes, which often require users to verify personal information such as phone numbers, credit card details, or IP addresses. While effective in identifying unique users, these methods compromise some degree of anonymity that is fundamental to decentralized networks. As a result, they can deter participation from users who value privacy.

In addition to KYC, projects may adopt several alternative strategies to balance security and decentralization:

Reputation Systems

Users earn reputation points based on their behavior and contributions to the network. This can help identify genuine participants while discouraging malicious actors.

Staking Requirements

Some projects require users to lock up a certain amount of cryptocurrency as collateral to participate. This creates a financial incentive for honest behavior, as malicious actions such as setting up Sybil nodes could lead to the loss of staked funds.

Behavioral Analysis

Advanced algorithms can analyze user behavior and transaction patterns to detect suspicious activity indicative of Sybil attacks.

Sybil Attacks in Airdrop Farming

In airdrop farming, Sybil attackers aim to exploit the system for additional rewards rather than manipulating the blockchain directly. Many airdrop programs use tiered reward systems, where a single wallet with 100 transactions may receive fewer tokens than 10 wallets with 10 transactions each. These tiered airdrops aim to distribute rewards more evenly among users rather than prioritizing power users in a linear reward system.

However, this structure incentivizes opportunistic airdrop farmers to create multiple wallet addresses to farm the airdrop, allowing them to receive more rewards than they would with a single wallet. This practice can lead to artificial inflation of participant numbers, potentially undermining the integrity of the airdrop and affecting token distribution efficiency.

To combat this, many projects implement Sybil filtering — an effort to identify and exclude sybil airdrop farmers before distributing rewards. A notable example is LayerZero, which partnered with the blockchain analytics firm Nansen to identify and disqualify linked wallet clusters. The team also introduced a controversial bounty-hunting program that incentivized community members to identify and report sybil wallets.

The dynamic between sybil airdrop farmers and projects employing sybil filtering resembles a game of cat and mouse. As airdrop farmers develop new tactics to evade detection, projects continually innovate their methods to identify and deter such users, striving to maintain the integrity of their airdrop distributions.

Fun Fact — Sybil airdrop farmers are sometimes comedically referred to as Sybillio.