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What Are Airdrops?

In this article, we will explain what crypto airdrops are and what their role is. We will also cover the different types of airdrops, as well as a few things to keep in mind before taking part in one.

 

What Are Crypto Airdrops?

In the crypto space, airdrops are a marketing method that involves the free distribution of new cryptocurrencies to wallet addresses in order to bootstrap a project. 

Many crypto projects send small amounts of a newly minted cryptocurrency to the wallets of active members of the blockchain community either for free or in exchange for a small task, such as sharing a social media post.

News of such an event is typically posted on the project’s Medium page, website, or a third-party airdrop tracker. It is then shared across social media platforms to become even more visible. 

In order to benefit from these airdrops, the recipient needs a cryptocurrency wallet, one that can accept different types of tokens. To be eligible for an airdrop, the recipients may also be required to hold a minimum amount of a certain token or maintain a minimum balance. 

A legitimate crypto airdrop is purely promotional and never seeks capital investment in the cryptocurrency.

 

Reasons Why Crypto Companies Conduct Airdrops

Crypto projects do airdrops for various reasons:

  1. To create awareness – the primary reason for airdrops is to spread awareness, increase ownership of the currency startup, and build a community rapidly. 
  2. To reward users – airdrops are also a way to reward loyal users for using a project’s platform or holding a specific number of tokens in their wallets for a certain time. 
  3. To balance out a token’s distribution – since wealthy investors can purchase significant amounts of a token’s circulating supply, some crypto startups conduct airdrops to avoid centralization and decentralize their token’s distribution.
  4. To learn more about their communities – through airdrops, some projects may require recipients to fill a form and provide their views on the project or personal details, such as their emails. 

Even if crypto airdrops are different from initial coin offerings (ICO), they can indirectly attract investments, given that they create awareness. Airdrops can boost the funds raised without the project spending too much on marketing, as they are often followed by an IDO, ICO, or another form of token fundraising. You can find more about IDOs and ICOs in our videos on these topics.

 

Types of Airdrops

There are different types of airdrops, as follows: 

  1. Standard airdrops – through which users receive free tokens just for registering with an email address or something similar. 
  2. Bounty airdrops – in such cases, the recipients are required to perform simple tasks, such as joining a Telegram group or retweeting something about a project. 
  3. Hardfork airdrops – when a hard fork takes place, a new coin is created. The users holding the old coin receive an equivalent amount of the new version of the coin.
  4. Exclusive airdrops – tokens are airdropped only to loyal users or people who have contributed to a project or have an established history with it. For example, loyal users of Uniswap received 2500 UNI tokens in September 2020 via such an airdrop.

 

What to Consider Before an Airdrop

Unfortunately, not all airdrops have good intentions, so it is best to do some research before you sign up for an airdrop. For example, benevolent airdrops will not ask you to send funds to their projects. When this happens, you’re likely dealing with a scam. 

It is recommended to create a new wallet specifically for airdrops so that you can separate the coins you’ve paid for from those you receive through an airdrop. If not, you risk revealing your public address to a scammer or a hacker. Also, be mindful of phishing sites, “dusting attacks,” and the type of information you give up when signing up for an airdrop.

 

Conclusion

Crypto airdrops are promotional activities usually performed by blockchain-based startups to spread awareness. They are an easy way for a project to reach more users and supporters and for crypto enthusiasts to get in early on promising projects without spending any money.

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