Cryptocurrency Airdrops [Definition, Different Types, Pros & Cons]

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Cryptocurrency has grown into a massive trend in the last several years. If you’ve tried learning more about cryptocurrencies, you have almost certainly come across the term “airdrop.”

Crypto airdrops are a central feature of the marketing business in the cryptocurrency world.

And they’re much more than “freebies.”

This article will explain what they are, how to get them, whether they are safe, and answer some FAQs about them.

What Is a Crypto Airdrop?

In the cryptocurrency world, airdrops are a common marketing stunt that involves sending free crypto tokens or coins to people with the goal of promoting a new virtual currency.

It’s similar to receiving a coupon from a new shop or getting a free drink from a new restaurant.

The practice was considered an unconventional form of guerilla marketing in the cryptocurrency space until it rose in popularity in 2017. In a short period of time, countless projects began using this marketing strategy with the aim of expediting the adoption of their new currency.

Specifically, a crypto airdrop is a small amount of a new virtual currency that’s sent to cryptocurrency traders’ wallets.

Different companies employ different techniques.

They often pick a specific blockchain community, like the Bitcoin, Ethereum, or the NEO network, and send the airdrops to wallet holders on the targeted platform.

Airdrops are always free. Sometimes, recipients may be asked to do a small task, such as sharing a post on a social media platform, connect with a certain member of the blockchain project, and even write a blog post, to get an airdrop. Other times, wallet holders might be required to maintain a minimum balance or hold particular tokens to be eligible for an airdrop.

Airdrops crypto are usually sent by currency startup companies that seek to promote their virtual currency for an upcoming cryptocurrency token sale or initial coin offering (ICO). They’re often the first part of a larger marketing campaign and help the company generate buzz around a virtual currency project.

Airdrops are an excellent way to raise awareness of the company’s goals and increase ownership of the virtual currency. Sometimes, airdrops are simply sent to reward loyal customers.

DID YOU KNOW: Crypto airdrop differs from ICO. ICOs are intended to solicit investments from individuals. They’re classified as securities offerings in the US. Airdrops are largely used to raise awareness about a new virtual currency and often precede an ICO or other types of token fundraising.

Different Types of Airdrops

Cryptocurrency airdrops have been around for quite some time. Over the years, this marketing stunt has taken on different forms.

Here are some of the main types of airdrops that a currency startup often sends to promote a virtual currency.

Standard Airdrop

Anyone is eligible for a standard airdrop. In standard airdrops, small amounts of the new virtual currency are sent to wallet holders in return for a service, like signing up for a newsletter or creating an account at a virtual currency project.

You might be asked to complete a KYC (Know Your Customer) verification or provide your email and wallet addresses before getting the airdrop.

Bounty Airdrop

In bounty airdrops, tokens are distributed to users who are asked to help promote a blockchain project, usually on social media platforms. Most often users receive the tokens in question after they re-tweet posts about the project, follow the company’s Twitter account, share a post on Facebook, create an Instagram post, etc.

Sometimes, you might get the option to refer other people to the network to earn more bounty airdrops.

Exclusive Airdrop

This type of airdrop is reserved for loyal followers of a particular virtual currency project or a blockchain community. Exclusive airdrops are often run by airdrop websites and aggregators who give first dibs to consistent followers of airdrops released by promising blockchain projects.

What’s more, exclusive airdrops usually come with no strings attached. For example, in September 2020, Uniswap sent out 2,500 UNI airdrop coins to its loyal users. They were worth $1,200 at the time.

Holder Airdrop

As the name suggests, these types of airdrops are usually sent to users who already hold certain tokens or coins of another cryptocurrency type. For example, members of the Ethereum blockchain community have sometimes been offered free tokens from a new virtual currency project that was created on one of their blockchains.

In another instance, Bitcoin wallet holders have received airdrops of HEX tokens.

Hard Fork Airdrop

This is not a typical airdrop.

A hard fork occurs when developers change the protocol code to create a new version of the blockchain and thus, a new token. The old version of the blockchain and original coin continue to exist under the existing protocol, while the new token operates under the amended protocol.

When the “chain split” happens, users who held the original coin receive an equal amount of the new token in their wallet addresses.

DID YOU KNOW: The concept of free crypto appeals to both newcomers and experienced traders. Luckily, learning how to earn free crypto is quite easy. Airdrops are one way to go, but there are other options, including shopping rewards and referral bonuses.

Advantages and Disadvantages of Cryptocurrency Airdrops

Every marketing strategy has its pros and cons. The same goes for airdrops.

The most appealing (and obvious) advantage of an airdrop marketing stunt is that it’s simple and low-cost advertising. Companies trying to promote a new virtual cryptocurrency give out a small amount to wallet holders who can discuss it with their friends in the crypto community, share it on social media, and sign up for news releases where they can learn more about it.

For a cryptocurrency to succeed, people have to hear about it first. And few things compare to worth-of-mouth marketing.

A well-timed token airdrop can prompt recipients to educate themselves about the token and can prove to be an excellent fundraising method.

Free cryptocurrency airdrop is great for wallet holders too, especially those with small to no crypto holdings. Who doesn’t want to see free money in their virtual wallets? In some cases, the freebies could surge in value over time, resulting in considerable profits at zero investment of capital.

Still, in most cases, it’s the issuing company that benefits from the airdrops, but recipients can be in for a treat if the value of the currency rises over time. It’s a win-win situation.

For example, those who received airdrops from Uniswap in 2020 and “held on for dear life” had around $12,000 from UNI alone in their wallets in April as the token’s value jumped from $2 to $30 that month.

Here’s where a crypto airdrop gets tricky.

To achieve results, companies have to send out the right amount of tokens to the right number of people. Giving out too few carries the risk of making zero marketing and community-building impact. If they give out too many, they might dilute the tokens’ market value.

In some cases, the company might even run out of tokens. This isn’t a hypothetical scenario. U Network actually ran out of tokens after it sent out too many tokens and was later forced to buy some of the tokens back from the recipients.

Another disadvantage is that recipients might start selling the freebies after the token airdrop before they even become tradeable. If a significant number of wallet holders sell the tokens they received right away, their value will drop, including for those who invested in the cryptocurrency, which can damage the company’s reputation.

This happened to Uniswap before its UNI asset soared in 2021. The company sent out tokens to users who quickly dumped them, causing the currency to sell at a low price.

There’s also the risk of falling for crypto scams, which have become incredibly sophisticated in 2021 so that they’ve even caught seasoned investors. Some traders employ a pump-and-dump scheme in which they artificially inflate the value of the cryptocurrency to make a quick profit.

The scheme can be hard to spot since the dump airdrop involves real airdrop coins. To ensure that you’re not getting scammed, it’s best to spend a little time on the project’s website as actors behind dump airdrops don’t usually put much time into it.

Other scams include private key scams which are designed to trick users into providing the private key to their wallets. Information scams involve actors collecting users’ personal information and then selling it to third parties.

Remember that legitimate airdrops would only ask for your wallet’s public address.

DID YOU KNOW: An altcoin airdrop that involved a pump-and-dump scheme was EDOGE. Its developers successfully created a buzz but recipients later discovered that their tokens were locked. Meanwhile, millions of EDOGE tokens were being dumped on different platforms.

How to Get Airdrops Crypto

This marketing method is quite common nowadays which is why airdrops make themselves relatively easy to find. The easiest way to get some free airdrops is to search for them online. They are usually advertised on the company’s website or cryptocurrency forums.

You can also lookup websites that are exclusively devoted to discovering upcoming airdrops or follow various channels on social media platforms, like Reddit, Twitter, Telegram, and Facebook that track airdrops and post them regularly.

Some of these aggregating sources also post other crypto-related information.

DID YOU KNOW: Some of the most popular sites among cryptocurrency users are Airdrop King and Airdrop Village. Airdrop King has an API that makes it easier to find airdrops, while Airdrop Village offers additional website content, whitepapers, videos, logos, and even bots.

Are Crypto Airdrops Worth It?

Airdrops are great for both companies that are trying to promote new virtual currency and for recipients, as long as they know how to use them correctly.

For companies, sending out airdrops is a great marketing method. It doesn’t cost as much as advertising and can still be enough to spread the word about your enterprise and generate a buzz about your new virtual currency.

There are risks involved. You can give out too many tokens and plummet their value or too few and fail to improve the token spread and adoption. With the right amount, however, this marketing stunt can do wonders for your enterprise.

For most recipients, getting free tokens, especially if you don’t have much in your wallet, is a great feeling. In most cases, you’ll have to do a small task in exchange and the cryptocurrency token might be worth very little. But, there are some examples of real airdrop gems.

Airdrops can be a great source of income if you know how to recognize the right ones. It’s crucial to research the projects in question and assess how promising they are in the long run.

Are Cryptocurrency Airdrops Safe? 

While airdrops are a valid and well-known marketing method, users should practice caution because there are many crypto scams out there. The aim of a legitimate airdrop cryptocurrency is always purely promotional, which means that it never seeks capital investment in the currency.

Crypto scams include sending micro amounts of cryptocurrencies to unsuspecting wallet holders to obtain their personal information and sell it to third parties or use it for phishing. Some may ask for private keys or use your private information for referrals or to register somewhere else.

Thus, it’s very important to verify the authenticity of the airdrop as part of your cryptocurrency strategy and always look for signs of fake airdrop campaign activities. Some of these signs include:

  • airdrop look-alikes
  • a request to fill in a form on a third-party platform, e.g. a Google Form
  • a requirement to give a donation for access
  • new posting accounts
  • a suspiciously high airdrop

It’s best to research the virtual currency project behind the airdrops crypto with instant payout and see whether it’s legitimate and whether it has any chance of becoming successful over time. If the answer is yes, then the smart move would be to hold on to your airdrop tokens and hope they become more valuable in the future.

Conclusion

Airdrops crypto is a rather harmless marketing stunt aimed at spreading the word about a virtual currency. It’s a marketing method that can benefit both the company promoting the currency as well as the blockchain community, which receives free tokens. Airdrops are often small, at least at first, but they can be hugely profitable without investing any money.

FAQ

How to value airdrops crypto?

The value of the airdrop depends on the value of the cryptocurrency in question. To determine the approximate value, you would have to do a bit of research. However, there is no sure way to know how the crypto would do over a period of time.

How to get cryptocurrency airdrops and freebies?

You can look up crypto airdrops online. If you want to get into airdrop hunting, it’s best to find legitimate websites that publish upcoming airdrops, as well as social media channels, some of which even send alerts to their followers.

How to calculate tax for airdrops and bounties crypto?

The taxation of cryptocurrency is still a gray area for most investors. The IRS says that income from airdrops and bounties is taxed as ordinary income. To be on the safe side, you can find the best crypto tax software to do the work for you.

ABOUT AUTHOR

I learned a lot about finance after working for a digital marketing company specializing in investing and trading stocks, forex, etc. After that, I got exposed to other verticals such as wealth management and personal finance, which further improved my understanding of the financial world.

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