Airdrops 101: Your Guide to Free Crypto (No, Really)
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$500 million in free money? Sounds too good to be true.
If you’ve followed altcoin news closely over the last week, you may have seen some buzz around a new token called $ENS. The high-level version: Ethereum, early in its existence, created a service called ENS (Ethereum Name Service) and finally launched a token representing ownership in that service.
The idea is to create a decentralized domain name and governing body: while .com, .org, and .net are handled by a centralized organization called ICANN, the idea for .eth names is to create a decentralized, blockchain-based service (a DAO, or Digital Autonomous Organization) that performs the same function.
What Was the Airdrop?
But to create a DAO, you need members — and the more, the better. So when ENS launched the token that represents membership in the DAO, they decided to distribute it equitably and without cost to the people who were already stakeholders in some way: in this case, those who had already registered .eth domain names.
Registering a name is simple and has been very inexpensive in the past, although high gas fees lately mean it will now cost you at least $100 to register a .eth domain. But that early adoption and small investment has now been rewarded, with all .eth domain name holders able to claim the airdrop.
How Big Was the Airdrop?
Let’s say you registered a single .eth name on October 15th, 2021, just out of curiosity, and registered it for the minimum time period: one year.
That experiment into the world of .eth domain names would have netted you about 27 ENS tokens, worth $2241 at time of writing — and that’s on the low end. Accounts who registered ENS names early on earned over $10,000 in many cases. And this wasn’t limited to just a few people, it sent out to over 137,000 addresses for a total of about $500 million dollars distributed (although the tokens have gone up about 3x since launch).
I’ll start with the bad news: you missed out. The airdrop is now closed, and you’re out of luck if you didn’t already register a .eth name
The good news? These airdrops happen all the time. Other airdrops are now worth many thousands of dollars: Ribbon Finance airdropped $200,000 in tokens to early users, the dYdX airdrop was worth $50,000. This is very real money, and while amounts are often much lower, they can sometimes be life-changing.
Why Do Airdrops Exist in Cryptocurrency?
Most crypto and blockchain-based projects release a token because the economics make sense: investors and founders need to get paid. As to whether they will airdrop that token is a different story, but understanding why these token distributions occur is important to understand which protocols are likely to airdrop:
- Decentralize Governance: Crypto protocols that want to decentralize are likely to distribute tokens via airdrops as it’s a democratic and egalitarian way to reward early adopters.
- Bootstrap Liquidity: Providing incentives to liquidity farmers and teasing airdrops attracts money, liquidity, and early adopters to a platform.
- Build Hype: The $ENS token was a huge news story earlier this week and even reached mainstream media outlets. Token price exploded.
- Build Community: When someone gets a free token, they suddenly have skin in the game around a specific project. This is why we often see NFTs airdrop to existing NFT owners.
A note: tokens are not distributed evenly across all users. Different protocols want to encourage different behaviors on their platform and prevent gaming the system, thus you must be strategic when trying to become eligible for an airdrop.
Today I’ll discuss five crypto organizations that are likely to airdrop a token to users in the near future, and what you have to do to become eligible:
What Is Metamask: MetaMask is an Ethereum-based software crypto wallet that’s designed to integrate with online Web3 applications. It integrates with Binance Smart Chain, Avalanche, and Ethereum L2 scaling solutions.
Rumors: The MetaMask token drop is all but guaranteed in the eyes of most industry observers. The wallet came out of ConsenSys, a blockchain tech company founded by one of Ethereum’s cofounders, Joseph Lubin. He’s even hinted at a MetaMask token ($MASK, potentially) on Twitter.
Why: Joseph Lubin is very much a crypto-native founder and MetaMask is perhaps the foremost Web3 product. The fact that ConsenSys is looking to decentralize products means that a token is more than likely for MetaMask, and democratization of that token would mean a likely airdrop.
How: Most speculators say that tokens will be distributed as a function of how much users take advantage of MetaMask’s internal ‘Swap’ feature, which allows users to exchange tokens directly within the wallet.
What Is OpenSea: OpenSea is the world’s largest NFT exchange platform, built on Ethereum.
Rumors: There have only been rumors, none substantiated, around an OpenSea token launch, but many industry players speculate that it’s only a matter of time before it happens.
Why: As Coinbase, FTX, and non-Ethereum competitors come out with platforms that compete with OpenSea, creating a truly community-owned NFT exchange could be a phenomenal way for OpenSea to maintain its foothold in the space.
How: There’s no way to know exactly how the airdrop will be distributed, but buying, selling, and bidding on NFTs will probably get you access. Also possible — a bonus for downloading and using the OpenSea mobile app.
What is Arbitrum: Arbitrum is an Ethereum Layer 2 scaling solution that can settle transactions inexpensively and cheaply away from the mainnet.
Rumors: There are heavy rumors around Arbitrum decentralizing with a token. There’s been no confirmation from the team, but it’s one of the largest Ethereum scaling solutions without a token.
Why: Arbitrum has come under some criticism for the security of its scaling solution, which gives a higher degree of trust to validators to enable higher speed and more efficiency. But it comes with some concerns. It’s possible that Arbitrum might decentralize as a branding move.
How: Arbitrum really offers two products: a bridge and a blockchain. It’s anyone’s guess as to how they might distribute tokens, so play with both the bridge and the blockchain to maximize eligibility.
What is ParaSwap: Paraswap is a DEX aggregator, meaning it compares prices across exchanges and allows you to get the best deal when swapping tokens directly.
Rumors: While the founder has denied plans for a near-term airdrop, it’s hinted at a token several times and on-chain analysts have already found the contract for its ERC20 token.
Why: Most DEXes have a token, and investors/founders will need to exit. If it’s not distributed to the users, is it really even decentralized?
How: Make direct token swaps via Paraswap on the supported blockchains: Ethereum, Binance Smart Chain, Avalanche, and Polygon.
What is Hop Exchange: Hop Protocol (hop.exchange) allows users to swap L2 tokens across networks. You can swap tokens from the Polygon Network to Arbitrum, for example.
Rumors: An airdrop rumor was retweeted by the founder, raising suspicions on a token launch for a protocol that doesn’t have one yet. It’s not a confirmation, but there’s a good chance.
Why: Hop, for now, is a legal entity in Switzerland, but is built to be governed by a DAO. So a token will almost certainly be released at some point, as to if that token will be airdropped, we’ll just have to wait and see.
How: This airdrop is perhaps the most complex to collect: the simplest way is just to use the bridge to move assets back and forth. You could also stake or provide liquidity (both are slightly more complex than just swapping).
Congratulations, you found a free money glitch. Well, it’s not free — airdrops do have a cost. The cost of accessing this potential upside isn’t great financial risk, nor is it holding through volatility.
The cost of airdrops is access to information. Those who seek out knowledge, who research, who participate in crypto communities are the ones most likely to benefit. Those who don’t put in the legwork are likely to miss out.
As always, the world of crypto flips conventional models of ownership and capital on their head and those who are prepared, eager, and risk-tolerant will come out on top. Looking for airdrops is not about luck, and it’s a very real way to earn meaningful amounts of free crypto.
Congrats, and happy airdrop hunting.
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