What is a Snapshot? Understanding the Role of Snapshots in the Crypto Market

1. What is Snapshot?

In the field of information technology, a snapshot refers to creating a copy of a system, data, or software at a specific point in time. This copy includes all existing data, tables, indices, and access permissions. Snapshots of databases play a crucial role in protecting and recovering data to a previous state when necessary.

In the context of blockchain, a snapshot refers to recording the entire state of a blockchain at a specific block. The recorded information includes all blockchain data up to that block, such as wallet addresses, transaction counts, account balances, and other relevant network data.

Additionally, snapshots are often used in crypto projects to record user activity when interacting with the project, forming the basis for future airdrop distributions. There may be multiple snapshots, and users who interact with the project before the snapshot time may have the chance to receive airdrop from the project.

2. Why is a Snapshot Important?

Snapshots play a significant role in maintaining the integrity and security of blockchains. Here are some reasons why snapshots are important in the crypto world:

Historical Record: They preserve a record of the blockchain at a fixed point, allowing users to review transactions and account states.
Accelerated Synchronization: Snapshots help new nodes quickly update data from the snapshot point, reducing the time and resources needed for full blockchain history synchronization.
Recovery Point: In case of an incident, snapshots provide a recovery point to restore the blockchain to a previous state, ensuring system integrity and recoverability.
Data Protection: Snapshots protect data by storing a copy of the blockchain at a specific time, preventing data loss in the event of an issue.

3. Applications of Snapshots

3.1. Identifying Participants for IDOs

IDO is a process where projects sell tokens early to the community through a DEX platform. IDOs usually determine participants through two methods:

Whitelist: To select participants for an IDO, the project takes a snapshot of the number of tokens users hold at a fixed time. Those with a sufficient number of tokens are added to the whitelist.
Financial Commitment: Unlike the whitelist method, at the end of the IDO, the project records the amount users have committed to investing. Tokens are then distributed based on each person’s commitment ratio.

3.2. Determining Eligibility for Airdrops

Airdrops, similar to IDOs, are methods of distributing tokens to individuals who have previously contributed to a project. This may include early contributors, users of the project’s products, or holders of old tokens related to the project.

Projects often select eligible recipients for airdrops in the following ways:

Token Holders Airdrop: Similar to IDO whitelist, the project takes a snapshot of the number of tokens users hold at a specific block to conduct the airdrop.
Retroactive: In this method, the project identifies early users by taking a snapshot of addresses that interacted with the project's smart contract before.

3.3. Project Governance

To decentralize decision-making, blockchain projects often allow users to vote on important decisions through third-party platforms like Snapshot.org. This platform captures user token balances at a specific block before making a proposal.

Không gian trên website Snapshot.org — *website Snapshot.org*

3.4. Supporting Hard Forks

A Hard Fork is the process of creating a new blockchain from the data of an old blockchain. There are two main cases:

Hard Fork for Network Upgrade: For example, Ethereum's The Merge upgrade, which transitioned from PoW to PoS and created a new chain at the block where The Merge occurred.
Hard Fork After a Hack: As in the case of The DAO Hard Fork, splitting Ethereum into Ethereum and Ethereum Classic to protect user assets following a hack.

4. Notable Projects Using Snapshots

Bitcoin (BTC): The first and most well-known blockchain, Bitcoin, also uses snapshots in the hard fork process. When Bitcoin Cash (BCH) split from Bitcoin in 2017, a snapshot was taken to record Bitcoin's blockchain state before the split. This ensured both new blockchain versions started with the same transaction history.
Ethereum (ETH): One of the most popular blockchains, Ethereum also uses snapshots for various purposes. A notable example is the Ethereum 2.0 upgrade. To transition from Proof of Work (PoW) to Proof of Stake (PoS), a snapshot was taken to record Ethereum’s blockchain state before the transition.
LayerZero: LayerZero, a cross-chain interaction protocol, completed its first snapshot for an airdrop on May 1, 2024. This was a significant step marking the development of the ZRO token, with the official launch planned for the first half of 2024.

Snapshots often precede withdrawals, as airdrop participants may transfer funds to other projects without losing future claims. LayerZero has announced a token release plan for December and confirmed a series of airdrop events. This is notable news for the blockchain and DeFi communities.

More information coming soon. pic.twitter.com/NyMpJFVg9S
— LayerZero Labs (@LayerZero_Labs) May 2, 2024

5. Conclusion

Snapshots are a crucial concept in the cryptocurrency world, playing a key role in data protection, supporting hard forks, fair token distribution, and effective asset management. Understanding snapshots and how they work will give you deeper insights into how blockchains operate and maintain their integrity. Whether you're an investor, a developer, or just someone interested in blockchain technology, having a solid grasp of snapshots will help you better participate in and take advantage of the opportunities in the crypto world.

Read more: