What is an Airdrop and why do cryptocurrency projects offer them?

In the cryptocurrency community you often encounter the term Airdrop. People are talking about free coins, but there are also some rumors about scams. After all why would projects give out free coins?

First let’s define what an Airdrop really is: Blockchain and cryptocurrency projects distribute small amounts of their tokens to a certain user base. This distribution is completely free of charge for the user, though sometimes they are required to fulfill small tasks like following the project on SNS and the like.

So for the user who receives free tokens with little to no effort this is obviously a win-situation. But what merit does giving away tokens have to the project?

The biggest and most obvious merit is to promote their project. Promotion costs with traditional promotion means (like buying ad-space) can be rather high and especially for smaller projects this is a big burden. Giving out free tokens doesn’t cost the project anything in regards to promotion. They give away tokens they generated themselves and just by doing so, users who receive those tokens will spread the word about the project.

Once the user has the projects token in their wallet, this user may feel involved with the project and may wish for the project to succeed as that would also raise the worth of the tokens he is holding. The user may recommend the project to friends or depending on what the products or services the project offers the user may become a costumer of these as well. This phenomenon is called the Alignment of Interests. Just by giving away free coins, the person receiving those coins may actively help to make the project a success.

Airdrops can thus create a win-win-situation for both the user and the project. The user benefits from free coins he is awarded and the project can promote their project at low cost and has a chance to win loyal follower of the project.