I just realized that some of you are still a bit unclear about what a snapshot is, so I decided to share a bit of knowledge about this concept. A snapshot basically records the entire state of the blockchain at a specific point in time — like taking a photo of the whole system to determine who holds what, how much assets they have, and what rights they possess.

The great thing about snapshots is that they ensure absolute transparency. Once a snapshot is recorded, that data cannot be changed or deleted, making it a solid piece of evidence for all subsequent distribution decisions. I see snapshots being widely used — from airdrops, staking, DAO governance, to hard forks and yield farming in DeFi.

Remember the Uniswap airdrop of UNI on 9/1/2020? They used a snapshot to precisely identify which wallets had interacted with the platform, and each wallet received 400 UNI. That was one of the most historic airdrops in DeFi, and the snapshot was the key to fair distribution. Early participants in the ecosystem benefited greatly.

How snapshots work is also quite interesting. They store all data at a specific block — wallet balances, staked tokens, smart contract states, cross-chain transactions, even activity history. Thanks to this, the system can accurately determine who qualifies for what, without anyone having the chance to cheat or manipulate.

Another example I find quite cool is Wormhole. They took a snapshot on 2/6/2024 to determine who is eligible to receive W tokens. Criteria include those who performed cross-chain transactions, staked PYTH, or own NFTs like DeGods or y00ts. Wormhole Foundation also mentioned they want to reward those who stood by during the toughest market periods, especially in 2022-2023. This shows that snapshots are not just technical tools but also ways for projects to build community loyalty.

In staking, snapshots are also extremely important. Cardano performs snapshots after each epoch to calculate ADA rewards for stakers, ensuring fairness and transparency. Ethereum 2.0 also uses snapshots to determine validator rewards. This helps maintain network security and incentivize stable staking.

When it comes to DAO governance, snapshots are an indispensable foundation. They determine each holder’s voting rights based on their governance tokens, and prevent last-minute token purchases to manipulate voting outcomes. Compound, for example, used snapshots of COMP balances to decide on changes to DAI interest rates, making governance more transparent and fair.

Snapshots also play a key role in hard forks. When Bitcoin Cash was created in 2017, a snapshot of Bitcoin was used to distribute BCH to users. This ensured that everyone holding BTC received equivalent rights on the new chain.

There are some common questions I often see. First, do snapshots delete or alter old data? The answer is no — snapshots only record data at a specific moment; they do not interfere with the blockchain’s history. Second, if I sell tokens right after a snapshot, will I still receive an airdrop? The answer is yes, because the snapshot recorded your balance beforehand.

Snapshots are usually performed automatically at regular intervals or during special events as defined by the project. Many DeFi projects like Uniswap or Sushiswap use snapshots to determine profits from liquidity provision or yield farming, ensuring everyone gets paid fairly based on their actual contributions. Even NFTs can be snapshot to distribute airdrops or other benefits to owners.

Overall, snapshots are a fundamental yet extremely important tool in the blockchain ecosystem. They ensure transparency, fairness, and accurate distribution of benefits to all participants. Understanding what a snapshot is will help you better grasp how projects operate and why events like airdrops are so significant.