Ever wondered what all this hype about crypto airdrops is about? You access your crypto wallet just randomly, and you see some tokens or coins you didn’t buy, but they are there! A kind of surprise birthday present you get. Well, it’s not all that magical!
Let’s get you started with the world of free tokens that you can stand a chance to grab if you know what you need to do!
1. Introduction to Crypto Airdrops
Crypto airdrops are basically blockchain-based businesses or projects spreading awareness about their projects and contributing to their marketing strategies. How do they do so? By depositing digital coins or tokens into your crypto wallet as a gift. So, you get free tokens in your wallet, and the project gets you to know about them, fulfilling their part of a broader promotional initiative.
Encouraging the widespread adoption of the project’s native token is an exciting way to launch a network, as it targets likely early adopters. Let’s discuss in detail the major purpose behind an airdrop and the benefits it brings to the project!
2. Purpose and Benefits of Airdrops
Starting with crypto projects, you might think that the ultimate benefit is yours and not the project specifically, but here’s the catch! Crypto projects are the most significant beneficiaries of crypto airdrop events. As for why, check out these points!
- Airdrops raise awareness of the project, leading to increased popularity and aggressive promotion.
- Airdrop launch creates a buzz, driving social media mentions, community engagements, coin price, and the company’s capital sky high!
- The decentralization of the token distribution is executed with an airdrop, facilitating a balance in the coin’s supply.
3. Types of Airdrops
Airdrops can be of different types, depending on their goal. There can be several differentiating factors, such as pampering first-time users, bringing together a community, or just nutmegging competitive market situations. These airdrops are:
Users receive a set amount of the project’s native token in their respective crypto wallets. As this is solely done to boost brand awareness and lure more people into investing in the ICO, it doesn’t demand any tasks to be completed. Just sign up and be an early participant, as tokens are released on a first-come-first-serve basis.
You know about blockchain hard forks, right? A process of splitting a platform into two separate platforms. As the new platform is a derivative of the original code, developers airdrop the new tokens as breadcrumbs in a quest to convert native customers. Fork airdrops require one condition to be fulfilled, and that is that users must hold the original token.
Holder airdrops are parachuted to users who already hold a certain amount of another cryptocurrency in their respective wallets. In this type of airdrop, basically, what happens is that the project takes a screenshot of your holdings at a specific time and then gives you the option to claim free tokens on the basis of their ownership.
You receive a bounty when you complete a certain task. Similarly, you can claim bounty airdrops if you take part in a promotional activity. It could be anything from spreading the project’s awareness on social media platforms to subscribing to the project’s newsletter.
Token Swap Airdrops
4. How Airdrops Work
We discussed the benefits and types of airdrops; let’s move ahead to their functioning. How do projects make people aware of the airdrop? Well, just after deciding that the project wants to promote its token with airdrops, the first step they consider is launching a public campaign.
You’ll find these projects promoted on social media platforms like Twitter and Discord. With time, the campaign gains traction, and people start learning about the platform’s debut and the size of the prize.
When the campaign gains significant momentum, the project curates a list of potential candidates for airdrops. As for how they do that, They do so by saving screenshots of people’s holdings at a set point in time or collecting the wallet addresses of interested parties.
After having a list of candidates who’ll be receiving the airdrop, projects facilitate the airdrop either via a smart contract or an automated transaction program. You, as a candidate, have no role to play here. Upon the completion of the airdrop, the project will publicize the results and let people know that the airdrop has happened.
The first and foremost requirement for receiving crypto airdrops is having a crypto wallet with a balance. Of course, you won’t be able to receive any free tokens in your account if you don’t have a wallet address. Even though you might find exchange addresses easy to use, they are not recommended for airdrops.
5. Reasons for Conducting Airdrops
Airdrops don’t raise money at all, and they are designed solely to get tokens into the hands of users. These airdrops are aimed at enhancing the visibility of the project and accelerating the community-building process.
The ultimate goal of a project conducting airdrops is to establish a platform’s user base while ensuring it thrives. Who doesn’t want some free crypto tokens? These airdrops give projects significant popularity and make them stand out from the competition.
An airdrop is aimed at offering long-term value to the candidates receiving it. One of the most common strategies in the DeFi space is to parachute tokens to users who have coins from competing platforms. The reason is that these users serve as the ideal audience and are more likely to contribute to the project upon learning about the airdrop.
Blockchain-based projects distribute free tokens in an airdrop in a quest to gain mass acceptance and allow their network to grow. The higher number of holders serves as a favorable indicator, leading to the decentralization of the project when it comes to token ownership.
Tokenomics and Liquidity
Crypto airdrops have the most significant impact on liquidity. These airdrops promote the circulation of the project’s tokens in the market, thereby enhancing liquidity. This further allows the tokens of the project to get listed on crypto exchanges, enabling users to trade tokens.
6. Participating in Airdrops
So far, we’ve concluded that crypto airdrops can be a great way to grow your existing crypto portfolio, and that too for free. But how do we participate in such rewarding airdrops? Well, the process of claiming crypto airdrops is different per project.
Finding Airdrop Opportunities
The first step is to find an airdrop opportunity. You must keep yourself updated with the latest announcements in the crypto space. Generally, projects announce airdrops through a campaign, which is typically promoted on crypto forums, the official website of the project, crypto community platforms, and social media channels.
Start by joining new platforms to stand a chance of benefiting from any airdrops they offer. Sign up for the unique offers brought to you by airdrop aggregators and follow them.
Completing Airdrop Tasks
If you want to become a part of the campaign process, you are required to fulfill the specified airdrop conditions. These conditions could be anything like following their social media handles, signing up for their newsletter, or sharing some posts on your account.
Airdrop Token Distribution
Upon successful completion of the tasks, airdrop tokens are then transferred to your crypto wallets. It should be noted that the crypto airdrop is a time-limited process, and the tokens are made available to the recipients only after the completion of the token distribution.
7. Airdrop Security Considerations
Regardless of the fact that they give you some free tokens, they are not always completely risk-free. Let’s discuss some airdrop scams and how you can stay safe.
We don’t want to take down your enthusiasm over some free tokens, but some airdrops can be a simple pump-and-dump scheme. It means a token was issued, it got hyped and listed on an exchange, trading began, and the creator sold his massive portion of shares, leading to a crash.
Protecting Personal Information
Dusting attacks are another threat that comes with airdrops. This attack vector involves a scammer sending a small amount of crypto to your wallet and breaking through your privacy. Furthermore, the attacker will track down the transaction activity of the wallet tokens distributed, only to de-anonymize you!
In order to ensure that your wallet remains safe, you should avoid connecting it to a third party. Also, you should never share your private keys with anyone.
Avoiding Phishing Attempts
It’s better to be safe than sorry. Before indulging in any kind of task or registration leading to an airdrop, you must conduct thorough research about the project. In case you witness any ney crypto or NFT in your wallet, the source of which you are unaware, then you must prefer not to interact with those coins.
8. Tax Implications of Airdrops
Airdrops are now considered an income source by the Internal Revenue Service of the United States. Well, this means that, similar to every other income source you have, free tokens are one of your sources. So, you need to pay taxes on them, even if you didn’t want an airdrop.
9. Examples of Successful Airdrops
As I mentioned earlier, some of the airdrops on the market can be scams, but not all. There have been some notable airdrops that are now counted among the biggest names in the crypto sector. These are:
- Stellar – This project surely tops the list as it airdropped $125 million worth of Stellar lumens (XLM) to users back in November 2018. Due to its partnership with Blockchain.com, the platform distributed the airdrop in a quest to increase wallet usage.
- Bitcoin Cash – Back in August 2017, Bitcoin Cash (BCH) distributed an airdrop guaranteeing each user with each BTC owned one Bitcoin Cash.
- Uniswap – Uniswap conducted an airdrop in September 2020 in which it rewarded over 250,000 early users of its exchange platform. Just two days after the airdrop, the value of Uniswap surged by 160%, marking a notable growth in users’ portfolios.
10. Future Trends in Airdrops
Airdrops, though, have been on the market for years now. There are several trends for 2023 that might assure a bright future for crypto airdrops. These are some of the most significant trends you must take a look at.
- NFTs – NFTs are becoming more and more mainstream and are gaining traction. We can expect more use cases for these tokens in fields such as real estate, gaming, and ticketing.
- Global Crypto Adoption – As cryptocurrencies are getting accepter widely across the world, these cryptocurrencies are highly likely to strike our daily lives. This will ultimately result in companies accepting crypto as a form of payment.
- Gaming and DAOs Growth – Decentralized Autonomous Organizations and gaming sectors are growing, and we can see increased incorporation of crypto and blockchain technology into games.
- Web3 – Web3 can be a really impactful factor for the future of crypto airdrops as it enables the development of more user-friendly and secure crypto services.
Airdrops have grown to be a leading and common marketing strategy for blockchain-based companies. With these promising trends, there is no denying that we’ll have more of them in the future, with more reliability and reduced risks.