Crypto Airdrops and how do they work?
The cryptocurrency industry is expanding at a phenomenal rate with announcements of new crypto and DeFi projects becoming an everyday norm. Till January 2022, there are more than 9000 crypto assets in the market. This results in a highly competitive market for any new crypto project that wants to disrupt the industry.
This is where crypto airdrops come in. Airdrops offer crypto projects a chance to climb the ranks and build a user base of their own. Sounds interesting? It surely is!
So here’s everything you need to know. Let’s start with the basics.
What are Crypto Airdrops?
Simply put, a crypto airdrop is a marketing event. Here, an upcoming crypto or a DeFi project sends a small portion of their native token into the wallets of crypto enthusiasts as a part of their marketing initiative. This helps a project to build communities and create awareness regarding it.
Importantly, in an airdrop, you do not buy crypto tokens but instead, you receive them for free.
This might take you back to the food/beverage stand back in the grocery stores and supermarkets which offer you their product for free to taste. What they are essentially trying to achieve is to stand out of the crowd and tell prospective buyers that they are a new player in that line of products. This is not only a clever strategy to promote their product but also a cost-effective way to create awareness. And that’s exactly what a crypto airdrop does.
Airdrops create a buzz in the industry regarding their token and the project. This puts them into a position of advantage when the token gets listed on crypto exchanges for an ‘initial price offering’(ICO). Also, the platform, whether it is a DeFi project, a cryptocurrency, or even an exchange, can access active members of the crypto industry at a fairly low marketing cost.
This brings us to the next big question.
How Does a Crypto Airdrop Work?
A project first uses the means of mainstream media and social media to release information regarding their upcoming airdrops. These airdrops are heavily promoted on crypto newsletters, forums, tabloids, and likewise sources to attract more enthusiasts to the event.
A key part of airdrops is that most airdrops require a minimum amount of cryptocurrencies in your wallet for you to qualify for the event. This requirement varies with each airdrop and can be checked at the website of the project.
Next, either of the following can take place:
- Some projects might require you to visit their website and register for the event by sharing your wallet address with them. Then simply the tokens will transfer to your account on the day of the event.
- Some airdrops require receivers to take part in quick-and-easy promotional activities such as sharing about the project on your social media accounts. On completion of these activities, the tokens are then sent to the participant’s wallet.
- Sometimes, projects automatically send airdrops to the wallets of users who are part of the blockchain on which the project is based. This usually happens with users on popular cryptocurrency platforms like Ethereum and Bitcoin.
- On registration on the website, some projects require participants to become a part of their blockchain project. Then the airdrop tokens are shared on the new wallet addresses part of the project’s blockchain.
So based on the nature of the airdrops we can classify them into the following categories.
Types of Crypto Airdrop
There are 4 primary types of crypto airdrops:
Regular airdrops
Receivers register themselves on the website to take part in the airdrop and are then sent tokens if they clear the requirements of the drop.
Bounty airdrops
These are work-and-receive airdrops where a user needs to take part in promotional activity and is given cryptos in return. The activities vary from tweeting about the project and likewise sharing it on other social media channels, to writing a blog about it on a crypto forum.
Exclusive airdrops:
A platform might periodically use an airdrop to reward its most loyal users. This is done to keep them attached to the platform.
Holder airdrops:
Holder airdrop is a niche of regular airdrops. Here, airdrops are sent to active members of a particular cryptocurrency. Usually, users of legacy crypto networks like Bitcoin and Ethereum receive such airdrops.
Airdrop and ICO: What’s the difference?
Airdrops often precede ICOs which often leads to the confusion that airdrop is a fancy name for ICO. However, both are distinct events with different intentions.
As discussed earlier, an airdrop is a market tactic to bring awareness regarding a crypto project. Here, the receivers never pay for the tokens received.
On the other hand, ICOs are events where a company sells their upcoming cryptocurrency to investors, who can buy it with alternative coins, tokens, and even fiat currencies. This is done to raise capital.
Interestingly, the reason why airdrops and ICOs tend to get tangled is because once an airdrop is sent, the receivers might start trading the new crypto asset. So by doing an ICO, the projects try to get the most out of this sentiment to drive up the prices of their tokens.
How can you Access an Airdrop?
(Source: Positivebreathe.com)
So it will be clear from the above discussion that airdrops are quite accessible, provided you qualify all the requirements. Here’s a quick checklist that you can follow to make the best out of these promotional events:
- Actively interact with new crypto projects which will increase your chances for random selection for airdrops. Also, keep an eye on crypto forums for the latest news on upcoming airdrops. CoinMarketCap.com and Binance.com offer lists and ways to take part in upcoming airdrops on their websites.
- On spotting an airdrop, register yourself on the project’s website and provide the details of the wallet that contains the minimum quantity of cryptocurrencies, based on the requirement.
- You need to make sure that your wallet can receive the airdrop tokens based on the compatibility with the project. For example, for Stellar-based airdrop tokens, receivers require a StellarPort web wallet that is compatible with the blockchain.
- Next, take part in promotional activities or join the project’s blockchain, if required.
And that’s it! Enjoy the free crypto tokens received.
Here’s What you Should Keep in Mind
Crypto airdrops are extremely enticing events. Who exactly does not love some freebies? The thought of getting free crypto tokens, which might 1000x their value in future, is an entailing proposition. However, you must act with caution.
Beware of dusting scams as well as pump-and-dump gimmicks that might be presented to you in the form of an airdrop. Here, thorough research about the legitimacy of the project and team is crucially important. Remember, research is the bare minimum that you can do to protect yourself from fraud.
So stay vigilant, study, and then register.
Make the best out of this airdrop season!
