What Is An Airdrop? 6 Important Things You Need Know

Last updated on March 3rd, 2023 at 01:07 pm

Introduction

Airdrops, which involve sending unsolicited photos to unsuspecting individuals, became popular in the early 2010s. Not as shady as it may sound, in the world of fintech, a similar strategy is used to generate excitement around new cryptocurrency projects and increase platform awareness.

This tactic is known as a crypto-airdrop. Daily, new crypto airdrops are announced. Some are more obtainable than others. However, not all airdrops are trustworthy.

They may appear profitable at first glance, but they can also cause issues. To ensure you can benefit from crypto airdrops while avoiding potential pitfalls. You can read this article to learn more about What is an Airdrop? And how do they work?

What is a Crypto Airdrop?

Crypto airdrops, also known as token airdrops or coin airdrops, are a marketing strategy used in the world of cryptocurrency. They involve the distribution of free tokens or coins to individuals who meet certain criteria. This can include holding a certain amount of a specific cryptocurrency, joining a Telegram group, retweeting on Twitter, or signing up for an email list.

The goal of a crypto airdrop is to generate excitement and increase awareness for a new cryptocurrency project. By giving away free tokens, a project can attract a large number of potential investors and users. These individuals may then be more likely to invest in the project or use the platform in the future.

A crypto airdrop can also serve as a way for projects to distribute tokens to a community of users. For example, a blockchain platform may distribute tokens to its users as a reward for their contributions to the platform.

However, not all crypto airdrops are created equal. As with any investment opportunity, it’s important to do your own research and due diligence before participating in an airdrop. Some airdrops may not have a solid project or team behind them, and maybe nothing more than a scam.

1. What is an Airdrop – Why do they exists?

Promoting a blockchain startup, project, or service is the main reason for organizing a crypto airdrop. The team issues tokens to users to bootstrap the project and ensure fair distribution among the community from the start.

Additionally, recipients of these tokens are encouraged to spread awareness and help the project reach a wider audience when the token starts trading on an exchange.

The more interest in the token, the higher its price may rise. Airdrops gain attention by promoting the launch on a project’s website, cryptocurrency forums, and social media. It’s similar to receiving a discount code in your email. Which aims to bring more people to the platform through a financial incentive.

Legitimate crypto airdrops never require users to make any investment. It’s a way for the project to stand out among competitors that have pursued external funding before issuing tokens.

2. Types of Airdrops

In order to understand What is an Airdrop in-depth, Let’s see types of airdrops-

1. Standard Airdrop

To receive a standard crypto airdrop, participants simply express their interest and provide a valid wallet address. Some airdrops may not require any additional information. Standard airdrops usually have a fixed amount of tokens to distribute, with a limit on how many tokens each individual may receive.

So, these airdrops may be time-sensitive. Although these types of airdrops are popular for their simplicity, a single user can create multiple wallets to quickly drain the airdrop amount, making them more difficult to obtain.

2. Bounty Airdrop

Bounty crypto airdrops happen when users perform certain tasks, such as:

• Raising awareness of a project by posting on social media and
• Tagging the company or
• Retweeting a recent tweet about the project.
  
  Users may also receive referral bonuses or finder’s fees for recruiting other users, signing up for the project’s newsletter, or joining the company’s Discord channel.
  
  You receive points in exchange for performing tasks, which correspond to the size of their airdrop. Users may need to earn a certain amount of points to qualify for an airdrop.
  
  For example, a user may be eligible for an airdrop after earning 300 points with each item mentioned above being worth 100 points.

3. Holder Crypto Airdrop

Holder crypto airdrops are distributed automatically to holders of existing tokens based on the number of tokens they hold. The transparency of blockchain technology allows all users to view the wallets and distribution of tokens.

While holder airdrops may be unwanted by some token holders, they ensure that only the largest and most invested individuals receive the benefit.

Some holder airdrops may only award if members are holding a certain amount of tokens, otherwise, they may adjust the award amount accordingly.

4. Exclusive Airdrop

Exclusive airdrop is a type of crypto airdrop that is only available to a certain group of individuals or a specific community. These airdrops are not open to the general public, and individuals need to meet certain criteria to qualify.

These criteria could be anything from holding a specific amount of a certain cryptocurrency to being a member of a certain community or group. Exclusive airdrops may also be invite-only, where only individuals who have been personally invited by the project team are eligible to participate.

The main purpose of exclusive airdrops is to reward early adopters, influencers, or those who have contributed to the project in some way.

Exclusive airdrops can also help to create a sense of exclusivity and scarcity around the project, which can drive interest and increase demand for the token once it begins trading on an exchange.

5. Raffle Airdrop

Raffle airdrop is a type of crypto airdrop that uses a random drawing to select the recipients of the tokens. In this type of airdrop, individuals are required to register for the airdrop, usually by providing their wallet address and other required information.

Once the registration period is over, the project team will conduct a random drawing to select the winners of the tokens. The number of tokens to be distributed and the number of winners is usually specified in advance.

The winners are then notified and the tokens are distributed to their provided wallet addresses. The main advantage of raffle airdrops is that it ensures a fair distribution of tokens among the participants.

It also gives an opportunity for people who missed out on other airdrops to have a chance to get some tokens. However, it also means that not everyone who participates will receive tokens, and it could be seen as a gamble since the chances of winning are uncertain.

3. Crypto Airdrop Process

1. Decision to distribute: The process of a crypto airdrop starts with the decision of a project or company to distribute tokens to a specific group of individuals. This can be done for various reasons such as market strategies, network hard forks, or incentivizing existing investors. The initial step is to determine the method of distribution and the eligibility criteria.
2. Public Campaign: Next, for general airdrops, a public campaign is launched where participants provide their wallet addresses and, in some cases, their email addresses to the company.
   
   For other types of airdrops, a snapshot is taken at a specific point in time to identify individuals who meet certain criteria.
   
   For example, a snapshot may be taken to identify all addresses that held at least 1,000 tokens on December 31st.
3. Coding through Smart Contracts: Smart contracts are typically used to facilitate airdrops once the list of recipients has been selected.
4. Transparency: The company may use its own Treasury wallet to distribute the tokens and often publicize the transaction block to ensure transparency. The recipients usually receive the tokens directly without any further action needed, but some may need to add the token and its address to their wallet to view their balance.

4. How to Avoid Airdrop Scams

Since we now have a handy bit of information about What is an Airdrop, let’s understand how you can avoid airdrop scams. Here are a few steps for your consideration:

1. Verify the authenticity of the project: Before participating in an airdrop, research the project and ensure that it is legitimate. Check for a whitepaper, a team of developers and advisors, and a functioning product or service.
2. Look out for red flags: Be wary of airdrops that require you to provide personal information or to pay a fee. Scammers often use these tactics to steal your personal information or money.
3. Check the source of the airdrop: Make sure the airdrop is being offered by the official team of the project and not by a third-party. Confirm the airdrop on the project’s official website or social media channels.
4. Don’t click on suspicious links: Be cautious of airdrops that ask you to click on a link to a website. Instead, type the website’s address manually into your browser to avoid phishing scams.
5. Be aware of the timing: Be wary of airdrops that are announced with very short notice or with unrealistic deadlines. Legitimate airdrops usually give adequate time for participants to research and participate.
6. Check the terms and conditions: Before participating in an airdrop, read the terms and conditions carefully to understand The requirements that apply to the airdrop.

5. How can you find upcoming crypto airdrops?

There are a few ways to find upcoming crypto airdrops:

1. Airdrop Alert Websites: Websites such as :
   • Airdropalert.com,
   • Airdrops.io, and
   • Airdropster.com
     
     provide a list of upcoming and ongoing airdrops. They typically provide information about the project, the requirements to participate, and the date of the airdrop.
2. Social Media: Many projects announce their airdrops on social media platforms such as Twitter, Telegram, and Facebook. Following projects on these platforms can help you stay informed about upcoming airdrops.
3. Crypto Communities: Joining crypto communities such as Reddit and Bitcointalk can also help you stay informed about upcoming airdrops. You can also find airdrop announcements on forums and in groups dedicated to specific projects.
4. Crypto News Websites: Crypto news websites such as CoinDesk, Coin Telegraph and CoinDesk also provide information about upcoming airdrops.
5. Crypto Airdrop Calendars: Some websites such as:
   • cryptoairdroplist.com and
   • cryptoairdrops.com provide an airdrop calendar, where they list all upcoming airdrops.

6. Advantages and Disadvantages of Airdrops

While airdrops can provide benefits for both projects and users, they also have some potential drawbacks.

6.1 Advantages of Cryptocurrency Airdrops

1. Increased awareness: Airdrops can help increase awareness and adoption of a new project. By distributing tokens to a large number of individuals, airdrops can help create a community of users who are invested in the success of the project.
2. Low barriers to entry: Airdrops allow individuals to acquire tokens without having to purchase them On ICO. This can make it easier for individuals who may not have the financial resources or technical knowledge. To participate in other forms of token distribution.
3. Incentivize engagement: Airdrops can incentivize users to engage with a project and its community. For example, airdrops may be offered to users who complete certain tasks such as promoting the project on social media or participating in a bug bounty program.
4. Cost-effective: Airdrops are a cost-effective way for projects to distribute tokens. Unlike ICOs, airdrops do not require projects to raise funds, which can be a significant cost-saving.

6.2 Disadvantages of Cryptocurrency Airdrops

1. Lack of value: Airdropped tokens may not have any intrinsic value, and their value is often based on speculation. This can make it difficult for individuals to determine the true value of the tokens they receive.
2. Scams: Scammers may use airdrops as a way to steal personal information or money from individuals. It is important to research a project and be cautious of airdrops that require you to provide personal information or pay a fee.
3. Lack of control: Airdrops can lead to a large number of tokens being distributed to individuals who may not have any interest in the project or its community. This can dilute the value of the tokens and make it harder for projects to build a dedicated community.
4. No guaranteed return: Airdrops do not guarantee any return on investment, unlike other forms of token distribution such as ICOs.

Conclusion

Airdropping is a popular technique used by crypto projects to create buzz and attract more users to their platforms. It enables the distribution of tokens to a large number of individuals. Ultimately increasing the liquidity of their crypto assets.

Though airdrops can be perceived as free money, there are also potential risks to be aware of, such as scams. It’s crucial for users to be vigilant and research the project. Before participating in an airdrop to avoid falling victim to fraudulent schemes.