There is a good chance that cryptocurrency users who often utilize new and established sites may get an airdrop. As part of a marketing campaign, some blockchain projects and developers may give away their tokens to members of their communities.

Essentially, the goal is to distribute freshly created tokens to many different wallet addresses in the hopes that those who get them would be more likely to become involved with the relevant project, even if it is merely to learn how to exchange the free tokens for something else.

An analogy for this would be to get a free discount card in the mail from a new shop in the neighbourhood. However, the primary goal of a crypto airdrop isn’t to make the receiver spend money but rather to raise awareness about recent projects and services. Users often get a crypto airdrop in return for performing some assignment.

So, what exactly is an airdrop? Airdrops are precisely what you’ve seen in the numerous online games you’ve played, a promotional freebie to keep gamers interested. For this, crypto airdrops provide free cryptocurrencies or tokens linked to the service. In exchange, they want the participants to help spread the word about their service via different social media channels.

Many airdrops have already taken place, and many more are scheduled for the foreseeable future. If you’ve ever been a bitcoin user, you’ve likely encountered an airdrop. What are crypto airdrops, and how do they work? 

Brief Introduction to Crypto Airdrop

Blockchain-based firms are using airdrops to promote their products and services. Imagine, for the sake of illustration, that a new cryptocurrency exchange, such as Binance or WazirX, is about to go live. WazirX has WazirX Token, and Binance has Binance Coin to get the most attention in the cryptocurrency market, which is a common practice.

There is an announcement that part of the money would be given out for free to early users via the platform’s web channels. However, it may encourage people to sign up for the forum, post its updates on social media, or accomplish other duties to join.

The participants of the airdrop are those who successfully perform these activities. When the airdrop date approaches, the platform distributes its own virtual currency’s promised quantity to a select group of people who have won the drawing. Also, keep in mind that participation in an airdrop may not be guaranteed even if you complete all of the activities on the list. Because there are so many individuals actively partaking in these trades, the number of participants is just too large.

How Do Airdrops Work?

To take advantage of the airdrop, you’ll need a bitcoin wallet on your device. Bitcoin, Ethereum, or any other cryptocurrency you may already own may be stored in these wallets as well. When registering for an airdrop, platforms often ask for this wallet address.

If you are one of the winners of the airdrop, the firm will send the guaranteed amount to your wallet address after the due date for the airdrop has passed. It’s essential to keep in mind that various services may demand you to have a blockchain-based wallet. For example, tokens established on the Ethereum blockchain utilize MyEtherWallet, whereas XLM and Stellar-based tokens, for example, use StellarPort. There are a large number of blockchain projects based on the Ethereum network.

To participate in the platform’s airdrop, you must be aware of the blockchain it is based on. For this reason, you will require a wallet that is subsidizing the tokens you expect to get for free.

How to Claim Airdrops

The airdrop is a promotional activity often used by blockchain-based entrepreneurs to get a virtual currency project off the ground. When an ICO (initial coin offering) is listed on an exchange, this campaign aims to raise interest in the project and increase trading volume.

A company’s website and cryptocurrency forums are often used to publicize airdrops distributions of digital money to existing crypto wallet holders.

This free gift may need a certain amount of cryptocurrency in the receiver’s wallet to be eligible. There are many ways people may do this, like posting about the money on a social networking platform, interacting with a member of the blockchain project, or publishing a blog article. Pump-and-dump systems should be avoided at all costs.

The currency does not require capital investments to be a good crypto airdrop. Its only purpose is to serve as a promotional tool. One of the most common types of crypto scams, known as “dusting scams,” involves delivering a small quantity of bitcoin or another cryptocurrency to unsuspecting victims. Unauthorized crypto wallet deposits should never be accepted; therefore, be on the lookout for them at all times.

Purpose of Crypto Airdrops

Promoting a blockchain firm, project, or service is the primary goal of a crypto airdrop. Token issuance allows the team to jumpstart their product and guarantee a fair distribution of tokens from the outset. The recipients of these tokens are also given incentives to help spread the word about the project once the token is listed on an exchange. The more attention the token receives, the more probable it is to gain in value.

Promoting airdrops on a project’s website, cryptocurrency forums, and social media is common to generate attention. Similar to getting a HelloFresh coupon with a discount code in your email, this campaign serves the same purpose of enticing new users to the site by offering them a financial incentive.

Users that participate in legitimate crypto airdrops will never be asked to make an investment. So instead of trying to blend in with the crowd, this is a technique to stand out from the crowd.

Popularity of Airdrops Among Crypto Supporters

Airdrops are popular among crypto fans, particularly those with little or no crypto holdings. You never need to put any money upfront to get the benefits of these unrestricted funds.

Initially, airdrops tend to benefit the issuing corporation more, but later on, the beneficiaries of the free coins may be in for a surprise. It’s a win-win scenario for all parties involved. Here are three excellent cases of airdrops that were a complete success.

Is It Safe to Use Crypto Airdrops?

Airdrops may be done in a variety of ways. Some projects allow users to qualify for an airdrop later by completing one or more modest social chores.

Automate the airdrop of tokens to the holders of a certain asset or balance on the blockchain at the time of the airdrop. Airdrops are given to addresses having a balance of at least 0.01 ether.

Many projects use smart contract to allow consumers to collect airdrop tokens from the project’s website at a certain period in the past.

Many airdrops will be nothing more than pump and dump operations since receivers get “free money” in their wallets. To put it another way, the developer produces a token hoping that it will generate enough interest to be listed on an exchange platform. Prices plummet when the creator dumps many tokens once trade begins.

The so-called dusting assault is another possible attack vector to be considered. Small amounts of bitcoin will be sent by scammers to unwitting victims, compromising their privacy. As a further step, the attacker will hunt down the wallet tokens released and de-anonymize the wallet owner or firm.

Because airdrops are considered income by the U.S. Internal Revenue Service, you’ll have to pay tax on whatever quantity of “free tokens” you get, regardless of whether you desired the airdrop or not.

Significance of Airdrops

Promoting a new platform or service within the crypto community is an obvious purpose for airdrops. The likelihood of individuals flocking to the benefit increases dramatically as news of the participation spreads around the crypto community. This is similar to how a conventional firm does digital marketing.

The primary rationale is that the platform’s virtual currency must remain stable and only rise in value over time. A platform’s growth in the crypto realm may be measured by the number of tokens in circulation. For example, Sandbox’s virtual currency, Sand, began trading at roughly USD 0.05 before soaring to a record high of almost $7. This is a 140-fold increase over January of last year.

Individuals who put money into the currency determine a significant portion of its value. The value of a currency increases as the volume of transactions and the number of currency holders increases. As a result, an airdrop is an excellent means of getting the word out to many people.

Scammers have taken advantage of the growing interest in airdrops as a tactic to deceive unsuspecting victims. An airdrop fraud in which threat actors issued harmful tokens to unwitting crypto wallet owners was discovered by Metamask late last year. A lot of the time, account holders would go online in quest of information about the token. Eventually, the search would lead them to a malicious website run by the threat actor, where they would be swindled out of their personal information.

To avoid falling victim to such frauds, it is recommended that users only participate in airdrops of legitimate platforms that are previously published on reputable websites. Second, if users are requested to transfer cryptocurrency to participate in an airdrop, this is a red flag. Alternatively, if the promised airdrop quantity is too high. In these situations, the best course of action is to avoid engaging in any possibly harmful activity and instead do an in-depth study on the project’s objectives.

Airdrop vs. ICO

Both crypto ICOs and airdrops are new cryptocurrency initiatives but distinct ideas. In contrast to an airdrop, an ICO requires a financial commitment from participants.

A project’s team holds an initial coin offering (ICO) and sells digital tokens to potential backers to raise money. In 2014, Ethereum had a crowdfunding campaign to help finance its development, which sparked a wave of interest in ICOs. ICOs saw a surge in popularity in 2017, with hundreds of new enterprises using the model.

Types of Airdrops

A crypto airdrop may be done in a variety of ways. Besides the traditional airdrop, we have a few more sorts of crypto airdrops. Airdrops like bounty, exclusive, and holder are common types.

• Airdrop Bounty

As part of the airdrop, users must accomplish certain activities, such as posting about the initiative on Twitter or joining the official Telegram group. When claiming a bounty airdrop, you can expect to be requested to produce confirmation of completing the required activities, as well as your wallet address.

• Exclusive Airdrop

The only recipients of an exclusive airdrop are those who have agreed to accept it. Typically, the honorees have a long history of involvement with the project, such as being an active member of the community or an early sponsor.

Decentralized exchange Uniswap distributed 400 UNI to any wallets that have interacted with their protocol before to a specific date in September 2020 as a thank you for using their system. Voting rights are granted to holders of the governance token, which allows them to influence the project’s future growth.

• Airdrop for Crypto Holders

If a person has enough digital currency in their wallet to qualify for an airdrop, they will get a free token in exchange. There are times when a snapshot of a user’s cryptocurrency holdings is taken by the project team. A minimum amount of money must be in a user’s wallet before they may claim free tokens.

Because of the enormous communities of Bitcoin (BTC), Ethereum (ETH) and BSC wallet users, many new projects begin by airdropping tokens to these wallet holders. XLM, a cryptocurrency based on the Stellar Lumens protocol, airdropped 3 billion XLM to Bitcoin holders in 2016.

Why Crypto Projects Use Airdrops

Because they stand to gain the most from airdrops, cryptocurrency projects often distribute large sums of free tokens to their supporters. Let’s take a closer look at why crypto companies use airdrops.

Blockchain firms use airdrops to raise awareness of their products. Early in crowdfunding, ICOs were the most prominent. However, several issues had to be dealt with. Many new businesses appeared during this time of opportunity, many of which had a thin white paper that was partly copied. This led to overcrowding the market and discouraged potential investors.

To my surprise, the response was a no-brainer. Distribute free coins to everyone. Many crypto fans have gone on a shilling binge to receive airdrops and “pump their bags” because of the popularity of airdrops. According to anybody involved in the crypto social media landscape, airdrop recipients are some of the most vociferous supporters a project can hope for. A perfect marriage was made in heaven for crypto businesses since it enabled them to organically expand their network with a few tokens.

Unfortunately, many investors in the cryptosphere are simply interested in getting the best possible return on their money, regardless of the long-term viability of a project. The reason for this is because they are constantly switching tasks and generating significant profits off of the backs of small-time investors, dumping their hefty bags after a pump. Actually, this kind of conduct may harm a crypto platform.

Airdrops are a way for companies to reward loyal customers who utilize their platforms or keep a particular quantity of tokens in their wallets for an extended period, such as a year or more.

Wealthy investors can buy a coin at a discount in its early days, enabling them to amass a sizable portion of its circulating quantity. Problems arise when too many coins are concentrated in the hands of a few people, which is now one of Dogecoin’s biggest problems.

Token offers, such as ICOs, CEOs, IDOs, and so on, usually follow a crypto airdrop. Airdrops, which are related to raising awareness, are a brilliant method to improve cash raised without spending a lot of money on marketing.

An airdrop is a great way to get people excited about a new project, and if it’s a success, it may help push the price of a token higher. It’s very uncommon for wealthy investors or “whales” to utilize statistics like trending Google search phrases, social media brand mentions, and community followership counts on Twitter and Telegram as a weathervane for assessing a project’s long-term potential. Airdrops that greatly enhance community involvement may thereby significantly raise total capital for a comparably little quantity of tokens donated to the airdrop, severely improving the company’s overall capital

Additionally, airdrops enable projects to acquire data from the crypto community since some demand recipients to fill out a form offering personal information such as email, social media, and their opinions on crypto projects. You may use this information to target marketing efforts for a project.

As previously said, each project’s method will be unique. However, a bitcoin wallet is essential to claim an airdrop. It’s clear to see why MetaMask is so widely used. Check to see whether you’ve gotten any free tokens after that. The airdrop will not be available if you do not visit a webpage to claim it.

Conclusion

Using crypto airdrops may help a project stand out in the crypto community and achieve popularity. It’s also an excellent approach for crypto investors to diversify their holdings by adding new tokens to their portfolios. Even if scam airdrops may exist, it’s best to conduct your own research and be cautious before joining.