eToro Hard Fork and Airdrop Policy

The underlying blockchain technology of cryptoassets is ever-changing. Blockchain networks routinely undergo updates and upgrades to improve their existing infrastructure. While many of these changes go unnoticed by most, some changes have major implications that can go as far as splitting the blockchain into two parallel cryptoassets. Usually, such a split is the result of a hard fork. Here at eToro, we take note of hard forks and airdrops carried out on blockchain networks. Below you will find our policy regarding these matters.

What is a hard fork?

Major changes in a blockchain’s code can be divided generally into two types of forks: Hard forks and soft forks. Both fork types represent a change in the code, however, a hard fork makes the network “backwards incompatible,” meaning that all members of the network must align with the new code – or be left out of the updated version.

Since blockchain operates in a decentralised manner, it requires enough members of the network to authorise any change. If a consensus is achieved, the hard fork usually goes forward smoothly, as the majority of network members (often referred to as “miners” or “nodes”) accept the transition.

However, due to the architecture of blockchain networks, if a consensus is not reached, the blockchain could split, resulting in the creation of a parallel version. This has occurred several times in the short history of cryptoassets, giving birth to such popular tokens as Bitcoin Cash.

What happens when a blockchain splits?

Members of the blockchain network with direct ownership of cryptoassets are usually given an equal amount of the new cryptoasset when it is formed. Therefore, several times in the past, the new cryptoasset had a substantial market cap instantly.

What is an airdrop?

An airdrop is a way for cryptocurrency blockchain networks to gain attention among new users and/or to adjust circulating supply numbers, by handing out tokens to members of the blockchain network.

Does eToro support hard forks?

Here at eToro, we understand the importance of forks as a means of maintaining and improving cryptoasset blockchain networks. We continuously monitor protocol developments and work hard to ensure our customer funds are safe during these events.

If a hard fork on a certain blockchain goes through with consensus, the change will go unnoticed by eToro clients holding that cryptoasset. However, if an upcoming hard fork has the potential of splitting the specific blockchain, eToro will impose a trading halt until the applicable coins are stable.

When a hard fork splits the blockchain, this results in lower liquidity and sometimes extreme volatility. Therefore, halting trading is essential to keeping eToro clients’ funds secure. After the hard fork takes place, the eToro team will evaluate the safety of the new coin and its liquidity, and examine security vulnerabilities in the protocol or client software.

As soon as conditions allow, and if the value of the new coin is a substantial amount of the value of the original coin, the team will evaluate if it’s possible to add the new coin into eToro’s offerings. Our first priority will always be to add the new coin (given it has substantial value) to our offerings, however, if this is not possible, eToro will compensate owners for the dollar value of the new coin as soon as practicable following eToro’s collection of the new crypto asset.

Our criteria to support the forked cryptoasset are as follows:

  1. Security: We will not support coins which have the potential to put our users’ security at risk.
  2. Technology: The technological infrastructure of the new coin must be compatible with our own technological restrictions.
  3. Liquidity: In order to support a new coin, it must offer sufficient liquidity in the market.
  4. Compliance: We must ensure that the new cryptoasset is in line with the regulatory restrictions under which eToro operates.

The same considerations will be applied when an airdrop takes place on a cryptocurrency blockchain network that is supported by eToro.

The safety of our clients’ funds is paramount and is always the main factor in our assessment. If we decide that we are able to support the new cryptoasset safely, we will notify our clients accordingly.

eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFD assets.

Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Cryptoassets are volatile instruments which can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading cryptoassets is unregulated and therefore is not supervised by any EU regulatory framework.