An airdrop in the cryptocurrency business is a marketing ploy that involves sending coins or tokens to wallet addresses to raise awareness of a new virtual currency. Small amounts of the new virtual currency are sent to the wallets of active members of the blockchain community for free or in exchange for a small favor, such as retweeting a message sent by a currency issuing company.
Airdrop is a promotional activity usually performed by blockchain-based startups to help launch a virtual currency project. Its goal is to spread the word about the cryptocurrency project and get more people trading it when it is listed on the exchange as an Initial Coin Offering (ICO).
Airdrops are usually advertised on the company’s website as well as on cryptocurrency forums, and coins or tokens are only sent to current owners of crypto wallets, typically Bitcoin or Ethereum.
To qualify for a free gift, the recipient may be required to have a minimum amount of cryptocurrencies in their wallet. Alternatively, they may need to complete a specific task, such as posting information about the currency on a social media forum, contacting a particular blockchain project contributor, or writing a blog post.
A legitimate crypto airdrop never requires a capital investment in the currency. Its purpose is purely promotional. On the other hand, some crypto scams involve sending micro-values of bitcoins or other cryptocurrencies to unsuspecting recipients, which is known as a scam. Users should always be vigilant about unwanted deposits into their crypto wallets.
Crypto Airdrop is a marketing strategy adopted by crypto startups to promote the project and their new token. This involves the free distribution of their own cryptocurrency to current or potential users. Sometimes users need to complete simple promotional steps before they can apply, such as following a project’s social media account and sharing their posts.
There are different types of airdrops, and each crypto project has its own requirements. But most airdrops have the same goal: to raise awareness and general interest in the project. Some of them are executed directly in users’ wallets, while others require a manual request.
Anyone with a cryptocurrency wallet can receive or request an airdrop, but you should always be careful of scammers. There are many scam airdrops out there that can steal your wallet funds when you request or transfer free tokens. Be sure to confirm the legitimacy of the project before applying for an airdrop. You must be especially careful when you need to connect your wallet to a seeding website.
What is a crypto airdrop?
Cryptocurrency distribution refers to the transfer of digital assets from a crypto project to multiple wallets. The idea is to distribute coins or tokens to current or potential users to raise awareness of the project. These tokens are given out for free, but some airdrops require users to complete certain tasks before being eligible. Cryptocurrency airdrops became popular during the Initial Coin Offering (ICO) boom in 2017, but are still used by many crypto projects as a marketing strategy.
How do crypto airdrops work?
There are various types of crypto airdrops, but they usually consist of a small amount of cryptocurrency spread across multiple wallets (usually on Ethereum or Binance Smart Chain). Although it is less common, there are also projects that are giving away NFTs instead of the regular cryptocurrency.
Some projects will give away without asking anything, while others will ask you to complete certain tasks before claiming. These tasks often include following social media accounts, signing up for a newsletter, or keeping a minimum amount of coins in your wallet. However, you are not always guaranteed to receive tokens scattered through the air.
In some cases, airdrops are only issued to wallets that interacted with the project platform before a certain date. 1INCH and Uniswap are popular examples that have used this method to support early adopters. But unlike conventional airdrops, they cost thousands of dollars.
Why do crypto projects carry out airdrops?
As mentioned, blockchain projects are giving away free tokens in an attempt to gain wider adoption and expand their network. More holders are often seen as a positive indicator, which also makes the project more decentralized in terms of token ownership. Crypto airdrop also motivates recipients to use and promote the project. This can help build an initial user base before the project appears on crypto exchanges.
On the other hand, airdrops can also create a false impression of growth. Thus, it is important to consider other factors when evaluating an adoption. For example, if a certain token is stored on hundreds of thousands of addresses, but no one actually uses it, then the project is either a scam or simply failed to interest the community.
Are crypto airdrops and ICOs the same thing?
Crypto airdrops and ICOs are different concepts, although both are related to new cryptocurrency projects. Although airdrops do not require any investment from participants, ICO is a crowdfunding method.
In ICO, the project team conducts a token sale to raise funds from investors. ICOs started to become popular in 2014 when Ethereum held a crowdfunding event to support its development. In 2017, there was an ICO boom in the crypto space with hundreds of new projects adopting this method. If you want to learn more about ICOs, check out What is an ICO (Initial Coin Offering)?
Airdrop types
As we have seen, there are different ways to airdrop a cryptocurrency. In addition to the standard airdrop, which simply transfers cryptocurrency to several wallets, we have several other types. Common examples include bounties, exclusives, and holder airdrops.
Bounty giveaway
The bounty airdrop requires users to complete certain tasks, such as posting about the project on Twitter, joining the official Telegram of the project, or creating a post and tagging a few friends on Instagram. In order to receive a giveaway reward, you will most likely be asked to fill out a form with your wallet address and provide proof that you completed the tasks.
Exclusive airdrop
An exclusive airdrop sends cryptocurrency only to specified wallets. Typically, recipients have a well-established history of involvement with the project, such as being active members of the community or early supporters of the project.
In September 2020, decentralized exchange (DEX) Uniswap gave away 400 UNI to every wallet that interacted with their protocol up to a certain date. The governance token gives holders the right to vote on decisions related to the development of the project in the future.
Distribution of the holder
Airdrops distributes free tokens to those who have a certain amount of digital currencies in their wallet. The project team usually takes a snapshot of users’ crypto assets at a specific date and time. If the wallet balance meets the minimum requirements, recipients can claim free tokens according to their holdings at the time the snapshot was taken.
Many new projects are giving away tokens to Bitcoin (BTC), Ethereum (ETH) or BSC wallet holders as they have the largest communities in the space. For example, Stellar Lumens (XLM) gave away 3 billion XLM to BTC holders in 2016, with the giveaway exclusive to users on the Bitcoin network.
How to get an airdrop?
As mentioned, the process will vary from project to project. But the most important thing you need to receive an airdrop is a cryptocurrency wallet. MetaMask is a popular and easy to use crypto wallet. After that, you can check if your wallet has received free tokens. If not, you will likely have to interact with the website in order to receive the airdrop.
How to avoid airdrop scams?
It can be difficult to tell if an airdrop is legitimate or a scam. You should always DYOR before signing up for any airdrop, especially when you need to connect your wallet to a website. Sometimes scammers dump tokens into multiple wallets, but when you try to transfer those tokens to a crypto exchange or another wallet, your wallet is empty.
In other cases, scammers will announce a fake airdrop that leads to a phishing site. They will trick you into connecting your wallet to a website that looks very similar to the original one. Once you connect your wallet and sign the transaction, other tokens will be withdrawn from your wallet. This often happens with fake Twitter and Telegram accounts that are very similar to the official ones.
Some airdrop scams involve asking you to send cryptocurrency to an unknown wallet address in order to unlock your free tokens in return. Legitimate airdrops will never ask for your funds or seed. Be careful with emails or direct messages.
To avoid fraud, be sure to check out the official website of the project and social networks. Bookmark the official links and double check if they are actually airdropping. If you don’t know anything about the project, you should do some more research to see what the crypto community has to say. If you can’t find enough information, it might be best to just ignore the airdrop.
For added protection, you can set up a new wallet and a new airdrop-only email address. This can ensure that the funds in your personal wallet are protected from phishing attempts related to the giveaway. And most importantly, never share your private keys with anyone.
Advantages and disadvantages of cryptocurrency airdrops
Given the extreme competition among cryptocurrency startups, an airdrop is an attempt to stand out from the crowd. Some crypto airdrop companies offer user alerts and listing services for startups, as well as a range of marketing services to fine-tune their airdrops. As always, there are good businesses and bad businesses in this space.
Michael J. Casey, Chairman of the CoinDesk Advisory Board and Advisor to MIT’s Blockchain Research Initiative, stated in his CoinDesk blog post that a certain type of marketing is needed for cryptocurrency to succeed.
“Currency is nothing if it is not widely used. And this cannot be achieved unless people make a costly effort to encourage widespread use,” he wrote.
Conclusion
Crypto airdrops allow crypto projects to stand out and gain momentum in the crypto space. It can also be a good way for crypto enthusiasts to expand their portfolio with promising tokens. However, there are probably more scam airdrops than legitimate ones, so be careful and be sure to do your own research before participating.