What is a Crypto Airdrop?

Crypto airdrops are a type of marketing approach used to promote cryptocurrency companies and their new coins. It entails transferring free money or tokens to a number of different wallets.

Crypto airdrops are a type of marketing approach used by cryptocurrency businesses to promote their project and new coin. It entails giving out free copies of their native coin to present and future consumers. Before they may claim, individuals may be required to conduct simple promotional actions such as following the project's social media account and sharing their postings.

Different sorts of airdrops exist, and each cryptocurrency project has its unique set of requirements. However, most airdrops have the same goal: to raise project awareness and interest. Some are deposited automatically into users' wallets, while others require a claim to be submitted manually.

Anyone with a bitcoin wallet is eligible to receive or claim an airdrop, but be wary of fraudsters. When you claim or transfer free tokens, there are several fake airdrops that can steal your wallet cash. Before claiming an airdrop, double-check that the project is legitimate. When it comes to connecting your wallet to an airdrop service, you need be extra cautious.

Introduction

It's challenging for crypto investors and traders to keep pace of all the new projects with the ever-increasing number of new coins. As a result, several cryptocurrency projects use airdrops to differentiate themselves and raise awareness. While everyone likes free cryptocurrency, airdrops aren't always trustworthy. Let's take a look at how they work and what you can do to avoid being a victim of an airdrop scam.

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What is a crypto airdrop?

What is a crypto airdrop, and how does it work?

The transmission of digital assets from a crypto project to several wallets is referred to as a crypto airdrop. To raise awareness of the initiative, coins or tokens will be distributed to present or future users. Although these tokens are given out for free, certain airdrops require users to complete particular activities before they may claim them. Crypto airdrops were popular during the initial coin offering (ICO) frenzy of 2017, and many crypto businesses continue utilise them as a marketing technique today.

How do crypto airdrops work?

There are numerous sorts of crypto airdrops, but they all involve distributing a tiny quantity of bitcoin to several wallets (usually on Ethereum or Binance Smart Chain). There are other programmes that give out NFTs instead of normal crypto, however they are less frequent.

Some projects may distribute without asking for anything in return, while others will require you to do particular activities before you can claim. Following social media profiles, subscribing to a newsletter, and keeping a certain number of coins in your wallet are all examples of these chores. However, receiving the airdropped tokens is not always guaranteed.

Airdrops are often limited to wallets that have interacted with the project's platform before a specified date. 1INCH and Uniswap are two well-known companies that employed this strategy to help early adopters. Unlike most airdrops, however, they were worth tens of thousands of dollars.

Why do crypto projects perform airdrops?

As previously said, blockchain projects provide free tokens in order to increase acceptance and expand their network. A growing number of holders is frequently regarded as a positive indicator, since it indicates that the project is becoming more decentralised in terms of token ownership. Airdrops in cryptocurrency encourage users to utilise and promote the product. This can aid in the development of an early user base before the project is listed on cryptocurrency exchanges.

Airdrops, on the other hand, may provide the illusion of growth. As a result, while weighing the pros and downsides of adoption, other aspects must be considered. For example, if a token is held by hundreds of thousands of addresses but no one is utilising it, the project is either a hoax or has failed to capture the community.

Are crypto airdrop and ICO (Initial Coin Offering) the same thing?

Even they both include new cryptocurrency ventures, crypto airdrops and ICOs are distinct concepts. An ICO, on the other hand, is a type of crowdsourcing that does not need any investment from participants.

A token sale is held by the project team in an ICO to raise cash from investors. When Ethereum held a crowdfunding event to promote its development in 2014, ICOs became popular. Hundreds of new enterprises used the ICO strategy in 2017, resulting in a surge in the crypto market.

Types of airdrop

A bitcoin airdrop may be done in a variety of ways, as we've seen. We have a few other sorts of airdrops, in addition to the traditional one that just delivers bitcoin to many wallets. Bounty, exclusive, and holder airdrops are all common instances.

Bounty airdrop

Users must do specific actions in order to get a bounty airdrop, such as posting a tweet about the project on Twitter, joining the project's official Telegram, or publishing an Instagram post and tagging a few friends. You'll most likely be required to fill out a form with your wallet address and confirmation that you accomplished the activities in order to claim a reward airdrop.

Exclusive airdrop

Exclusive airdrops only distribute cryptocurrency to certain wallets. Typically, the awardees have a history with the project, such as being an active part of the community or an early sponsor.

Uniswap, a decentralised exchange (DEX), airdropped 400 UNI to any wallet that interacts with its protocol before a deadline in September 2020. Holders of the governance token have the power to vote on future choices affecting the project's evolution.

Holder airdrop

Holder airdrops give away free tokens to anyone that have a particular amount of cryptocurrency in their wallet. On a regular basis, the project team takes a snapshot of users' cryptocurrency holdings at a given date and time. Recipients can claim free tokens based on their holdings at the time of the snapshot if their wallet balance satisfies the minimal criteria.

Because bitcoin (BTC), ether (ETH), and BSC wallet holders have the largest communities in the sector, many new projects airdrop tokens to them. In 2016, Stellar Lumens (XLM) airdropped 3 billion XLM to Bitcoin (BTC) holders, and the airdrop was only available to Bitcoin users.

How to claim an airdrop?

As previously said, the procedure will differ from project to project. However, the most significant need for claiming an airdrop is the possession of a bitcoin wallet. MetaMask is a well-known and simple-to-use cryptocurrency wallet. After that, you may see if you have any free tokens in your wallet. If not, you'll almost certainly have to interact with a website in order to get the airdrop.

How to avoid airdrop scams?

It might be difficult to discern if an airdrop is legitimate or not. Before joining up for any airdrop, always DYOR (

Do Your Own Research

), especially if you need to connect your wallet to a website. Scammers can sometimes airdrop tokens into many wallets, but if you try to transfer them to a crypto exchange or another wallet, your wallet will be emptied.

Scammers may also announce a phoney airdrop that links to a phishing website. They'll dupe you into linking your wallet to a webpage that seems almost identical to the authentic. Other tokens will be taken out of your wallet as soon as you link your wallet and sign a transaction. This is common with bogus Twitter and Telegram accounts that appear to be identical to the legitimate accounts.

Some airdrop scams require you to transmit cryptocurrency to an unknown wallet address in order to receive your free tokens. Airdrops that are legitimate will never ask for your money or seed phrase. Use caution while sending out airdrop emails or direct messages.

Make sure to check out the project's official website and social media platforms to prevent getting duped. Make a note of the official links and double-check that an airdrop is taking place. If you're unfamiliar with the project, you should conduct more study to see what the crypto community has to say. It's usually best to disregard the airdrop if you can't locate adequate information.

For further security, create a second wallet and email account devoted just to receiving airdrops. This can protect the cash in your personal wallet against phishing (Phishing is a type of cyber attack where a malicious actor deceives people to collect their sensitive information.) efforts connected to airdrops. Last but not least, never give out your private keys to anyone.

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credit: Binance Academy