You may have heard the term “crypto airdrop” mentioned in conversations, especially among crypto-enthusiasts or investors. And while you were nodding along, inside you might have been asking yourself, “What is a crypto airdrop?”.
Airdrops became popular in 2010 as a marketing tactic for new cryptocurrency projects, and remain a common strategy today to raise awareness and create excitement. Read on to discover everything you need to know about these airdrops, including what they are, how they work, the different types, and scams you need to be aware of.
What Is A Crypto Airdrop?
A crypto airdrop is a type of marketing tactic used by token creators whereby they send free tokens or coins to wallet addresses. The value of the tokens sent is always small, and they specifically target active members of the crypto community.
Usually, in exchange for the airdrop, they ask for a small favor, like resharing a social media post by the company doing the airdrop. The aim of an airdrop is to promote a new cryptocurrency or project, while it also benefits investors who can hold or trade the free tokens.
How Do Airdrops Work?
Each company will follow a specific process, depending on their marketing strategy and the airdrop type. But usually, an airdrop will follow these steps:
- Announcement: The project team will announce the upcoming airdrop and its requirements on their official social media platforms, newsletter, or via a cryptocurrency community forum.
- Registration: Those interested in the airdrop will register by giving their crypto wallet address and any information needed to meet the requirements.
- User action and verification: The users will perform the required actions, like sharing a post or signing up for the newsletter. The project team will verify their eligibility and make sure the users followed the rules.
- Distribution: The users who participated in the airdrop receive the tokens in their wallets. They can then do with the tokens as they please, as long as they meet the T’s and C’s of the airdrop.
Participating in an airdrop
Most airdrops are easy to participate in, as long as you stay updated with the latest crypto announcements.
The first step to participating is to follow your favorite crypto creators on social media, join community forums, and subscribe to newsletters. Sometimes as part of the airdrop requirements, the project team will want to verify that you hold some of their currency. So, it is a good idea to hold a wide range of cryptocurrencies, just in case. Stay up to date with the best crypto to buy now so you don’t miss out on any future airdrops.
If you do see an announcement for an airdrop, make sure to compare the tasks and complete all the steps. You can then check the leaderboard status that the project team will post to see if you got lucky.
After you receive an airdrop
Once you receive your tokens, you can either hold, trade or do some more research into the token:
- Hold: Keep the tokens in your wallet and wait to see if their value increases.
- Trade: Access a cryptocurrency exchange to trade the tokens.
- Research: Do further in-depth research into the project to decide whether you should trade or invest more.
Different Types Of Crypto Airdrops
There are several different types of crypto airdrops that companies use as part of their marketing strategies, each with distinct features. Airdrops are also just one way in which individuals can acquire crypto, giving them access to free coins or tokens.
Standard airdrop
This is the most common type and it is easy to receive this type of airdrop, users simply have to express their interest and provide their wallet address.
With a standard airdrop, there is usually a limited amount of tokens, however, nothing is stopping participants from opening several wallets and getting rewarded a lot of tokens. Because of that, it can be difficult to receive these tokens due to high demand and limited numbers.
Holder airdrop
This airdrop rewards people who already hold a specific cryptocurrency and how many tokens they hold. Because of the nature of blockchain info that’s stored on a public ledger, it is possible to see who holds which tokens. These airdrops happen automatically based on who is holding the specified tokens.
There is a downside to this type of airdrop, though. It usually rewards those who hold the most tokens, and sometimes you might not even want to receive the airdrop but you don’t have a say.
Exclusive airdrop
This type of airdrop is only available to a specific group or individuals that have been chosen for the airdrop. These groups or individuals are not necessarily selected because of how many tokens they old, but instead on other factors, like money spent on the project, posts about the project on a forum, or social media reshares.
Bounty airdrop
Bounty airdrops award users for completing tasks as required by the airdrop. These tasks could be signing up for a newsletter, referring a friend, retweeting something, tagging the company in your stories, or even looking for bugs in the company’s software.
Once the user has completed the task, they will receive points that correspond with the amount of tokens they’ll receive.
Raffle airdrop
This is a fun type of airdrop, where users are encouraged to earn raffle tickets by holding tokens or showing their interest in a project. The number of people interested in the airdrop will eventually exceed how many airdrops the company is planning, so a raffle happens where wallets are randomly chosen to win coins.
Pros and Cons of Crypto Airdrops
Airdrops may sound like an easy way to get tokens, and they are, but they also have some disadvantages. Here are the typical risks and opportunities of airdrops:
Pros
- Individuals who are engaged with the project will receive free tokens, allowing them to expand their portfolio or trade the tokens.
- Crypto enthusiasts get to discover new blockchain projects.
- Those who receive the tokens can profit if their value increases.
- Distributes tokens in a way that would not have been normal for the open market.
Cons
- Some airdrops are created by scammers looking to gather personal information and private keys.
- Airdropped tokens may be considered income in some countries and therefore will be taxed.
- Not all airdropped tokens are valuable, so they will remain worthless in your wallet.
- Can pose a security threat if users have to log into suspicious websites to claim an airdrop.
Potential Airdrop Scams
Airdrops will never require users to invest in the currency, they are marketing strategies that aim to promote a project. So, if someone is asking you to invest capital, it is almost 100% a scam.
Some scams also require a participant to add their wallet info to a suspicious site to claim the airdrop. Once the user connects their wallet, the scammers steal their private information and keys.
Scams may also require investors to financially invest in a specific security with the promise of a future airdrop, which never happens.
How to avoid airdrop scams
Scams are becoming common as airdrops grow in popularity, but there are some steps that crypto holders can take to protect themselves:
- Never share your private key: This key gives you unlimited access to your crypto wallet, and no legitimate airdrop will ever ask for this information. If they do, you’re dealing with a scam.
- Verify the project: Always do your research and confirm that the airdrop source is from a reputable source. Scammers often present themselves as a popular project. If the airdrop announcement seems more generous than what is normal, it is likely a scam.
- Do your research: Check who is the team behind the project, whether they have a whitepaper, and ask around on community forums to get as much information as you can. Know which are the top airdrop websites so you can know which projects to trust.
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Disclaimer: Information provided on AlexaBlockchain is for informational purposes only and not financial advice. Crypto investments, including ICOs, IDOs, presales, and other token offerings, are highly risky. You are responsible for conducting your own research (DYOR) before making any financial commitments. Take professional advice before making any investment. Read complete disclaimer here.