What Is Cryptocurrency Airdrop and How Does It Work?
Airdrops has become all the rage since early 2010s as would-be trolls scouted the rich possibilities of sending unsolicited pictures to unwitting passers-by. Though, in the current world of fintech, akin strategy is implemented to stir up excitement around newly launched cryptocurrency projects and build project marketplace awareness. This marketing tactic is commonly known as cryptocurrency airdrops.
Take a Deep Dive — Cryptocurrency Airdrop
A crypto airdrop is referred to as a marketing scheme where platform associated send coins/tokens/assets to user wallet addresses. Small chunks of the new cryptocurrency are transferred to the wallets of active members or participants of the blockchain community for free, in some case, they ask for a small service like retweeting a post posted by the company issuing the currency. However, the core motive of a crypto airdrop is intentionally to promote platform gesture, create awareness and positive circulation of a new asset backing the platform.
Understanding Cryptocurrency Airdrops
This is a promotional activity generally done by blockchain startups and emerging crypto projects to help bootstrap their decentralized crypto project. The intention behind this program is to create positive influence and awareness about their cryptocurrency project and in return to attract attention of more people trading in it when the platform or currency gets listed on any exchange as an ICO.
Airdrop programs are usually promoted on the company’s official website, social media channels, and several other generic cryptocurrency forums. In the process, assets are sent only to wallets depending on the blockchain network or tokens kept in existing wallets. To try out the gift, the user should hold a minimum cryptocurrency in their wallet. In fact, they might have to complete some simple tasks:
- Doing any sort of common social activity: Like, follow, join or tweet,
- Posting views about the currency on certain social media forum,
- Joining few peculiar members of the blockchain project, or
- Write a blog post.
Types of Crypto Airdrops
1. Standard Airdrop
Here, interested participants to get free airdrop simply express their interest to grab tons of assets through the program. A user should have a valid wallet address, in fact there are few airdrops that does not require any additional information apart from this.
In this airdrop campaign the project has a set of assets to issue with a limit on number of tokens each person will receive. Hence, some standard airdrops usually come as time-sensitive, though this type seems quite popular due to its simplicity. Single user tends to create multiple wallets to quickly grasp the airdrop amount, as later these might be more difficult to obtain.
2. Bounty Airdrop
This type is initiated when users need to pick and complete certain tasks. Irrespective of the number, such tasks often entail creating enhanced awareness of a specific project by posting on various social media and tagging the company or retweeting some recent activity about the project.
Project might also issue some referral bonuses or finder’s fees for active participants who recruit referred person getting signed up for the project’s newsletter, or participate in the project Discord channel. After completing the tasks, the user receives additional points corresponding to set bounty airdrop bonus ratio they receive.
This type is automatically based on the person holding current assets and the number of tokens they hold. As the wallets and blockchain details are part of a publicly distributed ledger, participants of blockchain get entire transparency into the wallets and issuance of tokens.
The downside to this type of airdrop campaign is the user holding assets may not want an airdrop. Henceforth, holder airdrops confirms that only the largest, most invested person receive the benefit. Some of them might only award an airdrop if they are holding a particular number of tokens; or else, they may pro-rate the award amount.
4. Exclusive Airdrop
Such type happens when user is individually selected for the airdrop program. The difference lies in their selection as they might not be selected based on the number of tokens, they hold instead based on other factors like the time spent on a project, most money consumed on non-token activity, or count of posts in a forum. This airdrop is much more centralized way to reward and credit the closest user to the project.
Some of the above-mentioned categories of airdrops can be combined with a raffle airdrop. Usually, the project can state the airdrops ratio they are willing to issue and encourage users to earn a raffle ticket. Such ticket may be earned by holding assets, earning points, or simply showing interest.
Ultimately, the number of users joining the airdrop often outdo the number of airdrops the company intends to distribute. Hence, a raffle is initiated for a limited number of wallets which gets randomly selected to receive the airdrop.
What is the Crypto Airdrop Process?
This procedure starts by the project or certain company deciding to announce an airdrop. This might come in response to a hard fork in the network, market tactics, or a way to incentivize existing investors. The first and foremost step is to choose how the airdrop will get facilitated and eligibility criteria.
Then following step is to broad, general airdrops launch as the public campaign which consist of collecting data for interested participants. This is usually limited to only few wallet addresses, though project might also collect e-mail addresses to grow their contact list.
Few other types of airdrop programs can also depend on a snapshot, a capture of an instance that recognizes the person matching certain criteria. Once the list of recipients joining the airdrop is selected, program is facilitated via using smart contracts where the firm chooses to utilize their Treasury wallet getting the airdrop.
The company usually publicizes the transaction block to reveal the equitability of the airdrop campaign. The transaction portrays the airdrop shoving off the company’s wallet and distributing to the eligible recipients. Airdrop recipients then directly get the assets without accepting the tokens, though, few might need to add the asset along with its address to certain wallet in order to appropriately view their wallet token balance.
About Cryptocurrency Airdrop Scams
An authorized crypto airdrop never looks for the capital investment in the currency. Rather it’s focus is purely promotional. On the contrary, few crypto scams send the micro amounts of assets to unsuspecting recipients which is called as a dusting scam.
There are other airdrop scams depends on directing an investor to link their wallet to some sort of phishing website if they wish to claim certain airdrop. Usually, the web3 address will evoke a user to connect their addresses using any wallet services like MetaMask, Trust Wallet, or Oasis. Right after they link their wallet by offering secret phrase/keys, the scam gets done.
Next airdrop scam might happen by enticing market participants willing to invest in a certain security in hopes of filling their pockets with airdropped getting some different item. Say for instance, a project may boast about keeping some NFTs in a wallet will get owners receive a rare airdrop. Though the airdrop seems legitimate, its project owners think to entice market activity of the NFT to only sell theirs at a higher price.
Avoid Airdrop Scams
You always need to be vigilant about unprompted deposits into your crypto wallets. In addition, you must be cautious of the projects you think to invest in or attempt to claim tokens for. Any user should follow the genuine mostly used phrase — “do your own research”.
We advise any crypto-enthusiasts not to link your addresses to websites you are not familiar with. Research on any associated project particularly if it includes some external links, you must click on to browse directly from the project. Consider bookmarking usual sites you plan on checking out frequently to confirm you are always connecting to the right site.
Most of them times, firms publicly announce the airdrops and other promotions so consider following such transparent project on social media, reliable forums, or legitimate Discord channels to stay intact with the upcoming events. You need to be mindful that complicated scams may replicate, drive, or imitate project social profiles.
Crypto Airdrops Pros and Cons
Pros
- Rewards early participants or adopters engaged holding a stake in a project
- Create project awareness using the exceptional marketing aspect of an airdrop
- Motivates the use and adoption of an emerging issued token or assets
- Issue tokens across holders which might not naturally happen in an open market
Cons
- Pose security threats if wallet holders link their wallets to suspicious project to claim airdrop
- Might be used as “pump-and-dump” schemes
- Divert few investors from joining if they choose any different modes to distribute the assets
- Comes out to be worthless if the asset does not have liquidity on some exchange
Final Take
Crypto airdrops are a way for projects and firms to positively raise awareness of their asset and token backing up the entire ecosystem. In fact, it is a method to raise the liquidity of their security by issuing the asset away to thousands of variant wallets. Though airdrops holds certain value and may be considered as free money to get distributed, you need to ensure about the significant risks associated and be aware of potential scams coming with certain crypto airdrops.
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