Are you looking to understand why the world is going gaga over crypto airdrop?
Well, a crypto airdrop is a marketing method employed by startups in the cryptocurrency space. It involves delivering tokens to the wallets of current cryptocurrency traders, either for free or in exchange for a small promotional service.
The airdrop is meant to spread awareness and increase ownership of the startup in the cryptocurrency space, but for retail users, it’s a great way to supercharge their crypto investment portfolio at no to low cost.
According to Coindesk, some of the most notable crypto airdrops in history include Stellar Lumens ($125 million), Ontology ($40 million), OmiseGo ($50 million), Decred ($266 million), and Polkadot ($140 million).
In today’s article, we’ll cover everything related to an airdrop ranging from types, risks associated, how to find, what you need to do, and a lot more.
Let’s start by understanding the difference between a token and a coin.
Coin Vs Token
A token is a unit of value created and distributed by a project or organization on top of an existing blockchain, such as Ethereum or Binance Smart Chain.
A token can represent various things, such as a share of ownership, a right to access, or a reward for participation.
A token can also have its functionality and utility within the project’s ecosystem.
A coin, on the other hand, is a native currency of a blockchain that has its own independent network and protocol.
A coin can be used to pay for transactions, secure the network, or store value. Examples of coins are Bitcoin, Ethereum, and Litecoin.
Tokens are usually issued through a process called an initial coin offering (ICO) or initial DEX offering (IDO), where the project sells a portion of its tokens to investors and supporters in exchange for funds.
However, not all tokens are sold through ICOs/IDOs. Some tokens are given away for free through crypto airdrops.
Types of Crypto Airdrops
There are two main types of crypto airdrops:
- Holder Airdrops: These are airdrops that are distributed to the holders of a certain cryptocurrency, such as Bitcoin or Ethereum. The amount of tokens received depends on the amount of the original cryptocurrency held by the user. For example, in 2017, Bitcoin holders received Bitcoin Cash tokens in a 1:1 ratio as part of a holder airdrop. Holder airdrops are usually done to reward loyal users, increase the adoption of the new token, or create a fork of the original blockchain.
- Bounty Airdrops: These are airdrops that require the user to perform some tasks to receive the tokens, such as joining a Telegram group, following a Twitter account, or sharing a post on social media. These tasks are usually simple and easy to complete and are designed to increase the visibility and engagement of the project. Bounty airdrops are usually done to attract new users, generate buzz, or collect feedback.
Benefits of Crypto Airdrops
Crypto airdrops can benefit both the project and the users in various ways:
- For the project, airdrops can help to attract attention, build community, and increase the liquidity of their tokens. Airdrops can also create a network effect, where more users adopt the token and increase its value and utility. Airdrops can also be used as an alternative or complementary way to raise funds, as some projects may choose to sell some of their tokens after distributing them for free.
- For the users, airdrops can provide an opportunity to discover new projects, earn free tokens, and diversify their portfolios. Airdrops can also introduce users to new features and functionalities of the blockchain ecosystem. Users may also benefit from the price appreciation of the tokens they receive or use them for various purposes within the project’s platform.
Risks of Crypto Airdrops
Crypto airdrops are not without risks. Some of the potential pitfalls include:
- Scams: Some airdrops may be fraudulent or malicious, aiming to steal personal information, private keys, or funds from unsuspecting users. Users should always do their own research and verify the legitimacy of the project before participating in any airdrop. Some signs of scam airdrops are unrealistic promises, vague details, low-quality websites, or requests for sensitive data.
- Tax Implications: Depending on the jurisdiction, airdropped tokens may be considered as income or capital gains by tax authorities, and users may have to report and pay taxes on them. Users should consult their tax advisors and follow the relevant laws and regulations in their country. Some factors that may affect the tax treatment of airdropped tokens are the value of the tokens at the time of receipt, the source of the tokens, and the purpose of holding them.
- Technical Issues: Some airdrops may require users to use specific wallets or platforms that may not be compatible or secure. Users should always back up their wallets and keys and follow the instructions carefully to avoid losing access to their tokens. Some airdrops may also have limited availability or expiration dates, so users should claim their tokens as soon as possible.
How to Find Airdrops to Add to Your Crypto Investment?
There are many sources and platforms that list and aggregate crypto airdrops for users to find and join. Some of them include:
- Airdrops.io: A free source that presents the world’s most current and legitimate cryptocurrency airdrops. Users can choose an airdrop and follow the instructions provided to claim free crypto tokens. The website also features a calendar, a blog, and a newsletter for the latest updates on airdrops.
- CoinMarketCap: A leading cryptocurrency data provider that also features a section for upcoming and past airdrops. Users can filter by category, status, and exchange to find suitable airdrops. The website also provides information on the token’s price, market cap, and volume.
- CoinDesk: A leading media platform for crypto news and analysis that also provides information and guides on crypto airdrops. Users can learn more about what an airdrop is and why they are issued. The website also covers the latest developments and trends in the crypto space.
- Twitter: This is another cool space to find amazing airdrops. All you need to do is to follow Twitter influencers. They post threads that will give you a comprehensive insight into what you need to do to apply for the airdrop. You can follow @AirdropStarboy for airdrop news and @CryptoStark for super cool DeFi insights.
How to Participate in Crypto Airdrops?
To participate in crypto airdrops, users usually need to have some basic requirements, such as:
- A Compatible Wallet: Users need to have a wallet that supports the token they want to receive. Some common wallets are MetaMask, Trust Wallet, or Ledger. Users should make sure that they have full control over their private keys and that their wallet is secure and updated.
- Social Media Accounts: Users need to have an account on the social media platform that the project uses for its airdrops, such as Telegram, Twitter, or Facebook. Users should follow the project’s official channels and avoid fake or phishing accounts.
- An Email Address: Users need to have an email address that they can use to register or verify their participation in the airdrop. Users should use a valid and active email address and check their spam folder for any confirmation or notification emails.
Depending on the type of airdrop, users may also need to perform some additional steps, such as:
- For holder airdrops, users need to hold a certain amount of the original cryptocurrency in their wallet by a specific date or block number. Users should not move or spend their coins until they receive their tokens.
- For bounty airdrops, users need to complete some tasks that the project requires, such as joining a group, following an account, or sharing a post. Users should provide proof of their tasks and submit their wallet addresses to receive their tokens.
Crypto airdrops are an innovative way for cryptocurrency projects to distribute their tokens and grow their network. They can offer various benefits for both the project and the users, but they also entail some risks and challenges. Users should always be cautious and informed before participating in any airdrop and enjoy the rewards of being part of the crypto community.
So, that’s a wrap for today. If you found this article useful then you will surely love the following resources:
- How to Create a MetaMask Wallet from Scratch?
- A to Z: All Crypto Terms Explained
- How to Make Charitable Donations Using Crypto?