What Is a Crypto Airdrop?

TL;DR

• Crypto airdrops are a way to earn free cryptocurrency. They involve crypto projects distributing their native cryptocurrency to their users.

• Each project decides whether and how to distribute airdrop crypto. Sometimes users have to complete activities to claim the coins or tokens.

• Anyone with a cryptocurrency wallet can receive or claim an airdrop, but you should always be wary of scammers. 

What Is a Cryptocurrency Airdrop?

A cryptocurrency airdrop refers to the distribution of new tokens or coins by a project to a wide range of individuals in the crypto community.

The teams behind these projects often use airdrops to raise awareness of their project and encourage people to become users or investors. The airdropped assets are given away for free, but some airdrops require users to complete specific tasks before they can claim their tokens. Crypto airdrops became popular during the initial coin offering (ICO) boom of 2017, but are still used by many crypto projects today.

How Do Crypto Airdrops Work?

When a project announces an airdrop, it usually also sets specific criteria or requirements that participants must meet to be eligible. These requirements can include joining a specific Telegram group, following the project on social media, subscribing to a newsletter, or holding a minimum amount of a specific coin in a wallet. The airdrops may also only be given to wallets that have interacted with the project's platform before a set date.

However, these criteria are not always announced beforehand. Some famous airdrops have surprised the platform's active users by airdropping new tokens before revealing the airdrop criteria. There are no rules for airdrops, and each project may have its own method and plan.

Why Do Crypto Projects Perform Airdrops?

Cryptocurrency projects often use airdrops as part of their token launch strategy in an effort to raise awareness within the crypto community and encourage recipients to use their tokens. Airdrops can also be used to distribute tokens to potential users or investors fairly by ensuring that the initial supply is spread across a large number of people, rather than concentrated in the hands of a few early investors. This distribution model can contribute to a more balanced and decentralized ecosystem.

Airdrops are also initiated as part of a project’s marketing strategy to create buzz and draw attention to the project. Recipients may become curious about the project and explore it further, or discuss the project on social media. This increased exposure can lead to a bigger pool of users, investors, and potential partnerships.

Airdrop can also improve user adoption because the free tokens encourage individuals to experience the benefits of their cryptocurrency firsthand. This can incentivize users to engage with the project and provide valuable feedback. This can help to improve the platform over time.

Crypto Airdrop vs. ICO: What’s the Difference?

Crypto airdrops and ICOs are different concepts, even though they both involve launching new cryptocurrency projects. Airdrops don't require any investment from participants, but an ICO is a crowdfunding method.

In an ICO, the project team conducts a token sale to raise funds from investors. ICOs became popular in 2014 when Ethereum conducted a crowdfunding event to support its development. In 2017, the crypto space experienced an ICO boom, with hundreds of new projects adopting the method. To learn more about ICOs, check out What Is an ICO (Initial Coin Offering)?

Top Types of Cryptocurrency Airdrops

There are several ways to perform a cryptocurrency airdrop. Aside from the standard airdrop, which simply transfers crypto to several wallets, there are a few other types. Common examples include bounty, exclusive and holder airdrops.

1. Bounty airdrop

Bounty airdrops involve distributing free tokens to individuals who perform specific promotional activities, such as sharing posts on social media, joining Telegram groups, or referring friends to the project. Bounty airdrops are primarily used to promote a new cryptocurrency or blockchain project. The aim is to create awareness and generate interest among potential users.

2. Exclusive airdrop

In an exclusive airdrop, projects only send their tokens to specific wallets. The recipients typically have an established history with the project, such as being an active community member or an early backer of the project.

In September 2020, decentralized exchange (DEX) Uniswap airdropped 400 UNI to every wallet that had interacted with its protocol before a particular date. The governance token gave recipients the right to vote on decisions related to the project's future development as a reward for having used the platform.

3. Holder airdrop

Holder airdrops reward individuals who already have a specific cryptocurrency in their wallet. These airdrops are designed as a goodwill gesture to increase user loyalty and engagement. For example, a project could distribute free tokens to all existing holders of its cryptocurrency based on the amount they hold. The more users have, the more free tokens they may stand to receive.

How to Get Crypto Airdrops?

A free crypto airdrop can be an attractive idea, but criteria for participation isn’t always communicated beforehand. This can make partaking in an airdrop tricky for new entrants to DeFi. Let's take a look at the various ways to claim an airdrop with the following step-by-step guide.

1. Set up a crypto wallet

To participate in crypto airdrops, you'll need a wallet that supports the specific blockchain or token being distributed. Choose a wallet that is compatible with the tokens you're interested in receiving.

2. Research projects and requirements

Once you encounter an airdrop opportunity, such as a successful crypto project without a token, research the project behind it. Look for information about the team, their whitepaper, roadmap, and community. Make sure the project is legitimate and aligns with your interests and values. Also be sure to check for potential  airdrop requirements such as completing certain tasks.

3. Meet airdrop requirements

If you decide to participate, follow the instructions provided by the project. Make sure you meet all the requirements to be eligible for the airdrop. If there's no official airdrop announcement or instructions, but you think there will be one, you may increase your chances by becoming an active platform user. If an airdrop is eventually announced, the project may prioritize rewarding those who have been actively involved from the beginning.

4. Protect your privacy and security

Scammers often imitate popular projects or launch fake airdrops to steal personal information or funds. Examine the legitimacy of the airdrop by visiting the official project website, social media accounts, or forums. Look for verified badges, community engagement, and reliable sources confirming the airdrop.

Be cautious about sharing personal information during the airdrop registration process. Legitimate airdrops usually require minimal information like your email address or social media account username.

5. Claim your airdrop tokens

Once the airdrop distribution period begins, follow the instructions provided by the project to claim your tokens. This may involve signing a message with your wallet, providing your wallet address, or completing additional verification steps. Make sure you follow the correct process to securely receive your tokens in your crypto wallet.

6. Manage your airdropped tokens

After receiving the airdropped tokens, it's essential to manage them properly. Depending on the project, you may decide to hold the tokens, sell them, or use them within the project's ecosystem. Understanding the token's utility, market value, and potential risks before making any decisions is critical.

What Is a Crypto Airdrop Scam and How to Avoid It?

Unfortunately, scams that drain your funds when you claim the airdropped tokens are common in the cryptocurrency ecosystem. But you can protect yourself by following a few important steps.

Firstly, conducting thorough research is crucial. Take some time to investigate the project behind the airdrop and assess its legitimacy. Look for information about the project’s team members, their experience, and any previous projects they have been involved with. If the team's credentials are difficult to verify or lack transparent information, it may be a warning sign of a potential scam.

Another important step is to verify the official channels associated with the project. Scammers can create fake websites and social media accounts that closely resemble those of legitimate projects. Carefully examine the website's URL for subtle variations or misspellings — telltale signs that you’re on a scam site. You should also verify the authenticity of the project's social media accounts by looking for verified badges or cross-referencing information from trusted sources.

Also, be skeptical of overly generous airdrops. If an airdrop seems too good to be true, or promises unusually high rewards for minimal effort, it's wise to exercise caution and investigate the legitimacy of the project further.

Stay informed by following reputable cryptocurrency news sources, forums, and social media accounts that provide insights and updates on airdrops. Engaging with the cryptocurrency community can also provide valuable insights and warnings about potential scams.

Lastly, it's important to approach airdrops with a healthy dose of skepticism and conduct your due diligence before participating. You should be particularly careful when it requires you to connect your wallet to an airdrop website.

Closing Thoughts

Crypto airdrops can be an exciting opportunity for crypto enthusiasts to receive cryptocurrency for free. However, it is important to approach airdrops with caution and vigilance to avoid falling victim to scams.

Remember that while airdrops can provide you with free tokens, there are no guarantees of value or future success of the tokens. By approaching crypto airdrops responsibly and staying informed, you can potentially benefit from these promotional distributions while protecting your personal and financial security.

Disclaimer and Risk Warning: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Hibt Academy.