Crypto projects often distribute free tokens to crypto community wallet addresses to encourage the adoption of a well-known or new cryptocurrency. This is called an “airdrop” (literally: airdrop) and happens for various reasons.
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Features of a crypto airdrop
What is a crypto airdrop? Crypto airdrops distribute cryptocurrencies for free by sending them to wallets, mostly unsolicited. Recipients can have shown early interest in a new decentralized application (DApp), blockchain technology, or cryptocurrency project. Airdrop is often designed to promote an old or new cryptocurrency and encourage recipients to participate in a particular cryptocurrency project.
However, these tokens can also be used for various other purposes and are particularly important for managing logs on the blockchain. Numerous DeFi and cryptocurrency projects have distributed management tokens to their communities. Being a co-founder of cryptocurrency projects can be a lucrative opportunity when the value of management tokens increases.
Airdrops also serves as a marketing tool for new protocols to attract more users as they explain details about blockchain projects to newcomers. Free airdrops are an easy way to attract more cryptocurrency users to increase activity on innovative protocols. Crypto-enthusiasts have capitalized on the free giveaways and made significant profits with a modest initial investment.
How do crypto airdrops work?
With airdrop, distribution often takes place on the cryptocurrency’s blockchain. For example, if you provide your BTC address to distribute a new altcoin, the tokens will be broadcast on the BTC network.
You must provide your cryptocurrency wallet address to receive an airdrop. It is best to use a wallet that runs on the Ethereum blockchain. Most airdrops are ERC-20 standard tokens running on the Ethereum blockchain. After completing the distribution, the project management team will send the tokens to all eligible addresses.
What are the most common airdrops?
Here are the four most common types of airdrops:
- Standard airdrops. As a marketing tactic, a crypto-airdrop sends a certain number of free native coins or tokens to existing wallets. This typically occurs during an initial coin offering (ICO) – this serves to boost the company’s reputation and encourage the community to utilize the asset. To participate in the giveaway, you usually need to open an account on the project’s platform and provide your cryptocurrency wallet address. By the way, do not confuse this address with an email address.
- Bounty airdrop. Bounty Airdrop requires the recipient to participate in a promotional campaign in order to receive tokens. This includes, for example, tweeting about a blockchain project on Twitter or performing certain tasks on other social media channels (messaging). Compared to regular airdrop, bounty airdrop requires a bit more work, but the tasks are usually very simple and take little time.
- Exclusive airdrops. In an exclusive airdrop (also known as a VIP airdrop), tokens are distributed to a select group of subscribers of the airdrop aggregator. This crypto-airdrop is usually reserved for fans loyal to the blockchain project for a long time. In addition, these sites distribute information about promising, exciting projects and upcoming events.
- Holder airdrop. Individuals with a certain amount of a particular cryptocurrency in their wallet are eligible to participate in a holder distribution. Typically, a crypto project takes a snapshot of all cryptocurrency holdings as of a certain date and allows users to request airdrop based on their market position.
How to obtain crypto airdrops
Airdrops can be obtained in two different ways:
- As a bonus, directly from the provider of the respective wallet. New users often receive airdrops as a welcome gift. Even regular customers sometimes receive it as a loyalty bonus. As a rule, if such an event is expected, you will be informed here, via a newsletter.
- Due to the small state, users often receive airdrop coins. For example, users may share content or join Telegram groups to be able to participate in the giveaway. However, it’s essential to learn about relevant projects beforehand. As soon as you are asked about investments ahead, you should be wary because there are always scammers out there.
Airdrops give you cryptocurrencies or assets. They behave just like any other cryptocurrency. You can hold them or sell them. Since airdrops are often used when a new coin enters the market, it is advisable to hold on to it for a while. The success of a blockchain project can increase the value of the currency. This makes it possible to profit from crypto airdrops as well.
How to participate in a cryptocurrency airdrop
How to get crypto airdrops? Each airdrop has specific requirements. Since giving away cryptocurrencies is primarily part of a promotional event, finding out if you qualify for upcoming crypto events can be challenging. Terms of participation are often only communicated after the fact, which is known to make qualification more difficult.
Here are some routes to explore:
- Visit websites dedicated explicitly to airdrops.
- Search for the hashtag #airdrop on social media.
- Utilize various cryptocurrency-related services, products, platforms, and blockchains to stay active in cryptocurrency.
- Search forums and other cryptocurrency websites for links to current or planned airdrops. For example, the Cryptocurrency subreddit on Reddit is a very active forum.
A wallet is essential for getting cryptocurrency airdrops because you can only get an airdrop if you have a wallet address. While using an address on an exchange can be convenient, it is unsuitable for airdrops. Instead, interested users should familiarize themselves with one of the many cryptocurrency wallets. Either way, always check everything thoroughly to protect yourself from scammers. Remember that any type of crypto investment is speculative and high-risk.
What have been some popular airdrops so far?
In fact, airdrops can also be a real financial success for the lucky person. Below we have documented three of the most popular airdrops that have caused quite a stir.
- Decred (DCR). Decred focuses on sustainable development and a balanced consensus system. The project is primarily known for its two-part mining system that relies on Proof of Work (PoW) and Proof of Stake (PoS).
- Uniswap (UNI). In 2020, the decentralized exchange Uniswap conquered the crypto world. In a very short time, Uniswap was able to compete with the most prominent businesses on the market in terms of trading volume. The UNI platform token has also increased in value in line with the exchange’s success.
- Bitcoin Cash (BCH). Bitcoin Cash is a Bitcoin hard fork from August 2017. After much discussion, the blockchain of the oldest of all cryptocurrencies was split. In addition to BTC, BCH, another form of Bitcoin, was created. The new token, which was distributed in the form of airdrop, was rejoiced by many users.
Are there any risks?
Airdrops themselves are not directly related to financial risk. While the coins and tokens should have no value, you cannot incur losses with them.
However, there may be some risk if you pursue the theme. Especially if you want to participate in an airdrop that requires a certain amount of cryptocurrency.
If this cryptocurrency subsequently depreciates, there could be indirect financial losses due to the airdrop.
Other airdrop forms also carry some risk, especially when the underlying crypto projects are fraudulent. For example, if personal data (email address, password, etc.) must be provided for airdrop, scammers may use this data for other purposes. Also be wary if the procedure requires access to one’s own wallet for the airdrop.
To summarize, no financial losses can arise from distributing tokens and coins. The potential risk of airdrop is that scammers can use phishing to obtain sensitive data.
Anyone who uses a separate airdrop wallet and engages in only serious and safe airdrops is generally not at risk.
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