Crypto airdrops were popular during the 2017 initial coin offering ICO boom, and many crypto firms continue to employ them as a marketing tool today.
- Crypto projects use airdrops to differentiate themselves and raise awareness.
- There are several forms of crypto airdrops, but they all involve distributing a limited amount of crypto to multiple wallets.
- Before joining up for an airdrop, one must always DYOR, especially if they need to link their wallet to a webpage.
It is challenging for crypto traders and investors to stay abreast of all the new initiatives with the ever-in number of new currencies. As a result, several crypto projects use airdrops to differentiate themselves and raise awareness. While everyone enjoys free cryptocurrency, airdrops are not always legitimate. Let’s look at how they operate and what you can do to protect yourself against airdrop frauds.
Crypto airdrop defined
A crypto airdrop transmits digital assets from a cryptocurrency project to several wallets. To raise awareness of the initiative, coins or tokens will get distributed to present or future users. These tokens are distributed for free, although certain airdrops demand users to complete particular tasks before they may claim them. Crypto airdrops were popular during the 2017 initial coin offering ICO boom, and many crypto firms continue to employ them as a marketing tool today.
Types of airdrop
A crypto airdrop may be carried out in a variety of ways. There are a few other sorts of airdrops than the typical one that delivers cryptocurrency to many wallets. Bounty, exclusive, and holder airdrops are famous examples.
Holder airdrops are free tokens given to anyone with a particular quantity of digital currency in their wallet. Regularly, the project team captures an image of users’ crypto holdings at a given date and time. If the recipient’s wallet balance matches the minimal criteria, they can claim free tokens based on their assets at the time of the snapshot.
Because they have the largest communities in the sector, many new projects airdrop tokens to bitcoin (BTC), ether (ETH), or BSC wallet holders, in 2016, Stellar Lumens (XLM) airdropped 3 billion XLM to BTC holders, and the airdrop was only available to Bitcoin network users.
A unique airdrop only transfers cryptocurrency to specific wallets. The beneficiaries often have a long experience with the project, including being active members of a community or early donors.
Uniswap, a decentralized exchange (DEX), will airdrop 400 UNI to every wallet interacting with its protocol before September 2020. Holders of the governance token can vote on future project development decisions.
A bounty airdrop demands users to do particular activities, such as tweeting about the project, joining the initiative’s official Telegram, or publishing an Instagram feed and tagging a few friends. To collect a bounty airdrop, you must fill out a form with your wallet address and confirm that you accomplished the tasks.
How airdrop functions
There are several forms of crypto airdrops, but they all involve distributing a limited amount of crypto to multiple wallets (usually on Ethereum or Binance Smart Chain). Although it is less prevalent, some programs distribute NFTs instead of regular cryptocurrency.
Some projects may distribute without getting anything in return, while others will need you to complete particular tasks before claiming. Following social media profiles, subscriptions to newsletters, or keeping a certain amount of coins in your wallet are typical examples of these duties. However, receiving the airdropped tokens is not always a guarantee.
In other circumstances, airdrops only get distributed to wallets engaged with the project’s platform before a specific date. Popular examples of companies that employed this strategy to help early adopters are 1INCH and Uniswap. However, unlike regular airdrops, they were worth thousands of dollars.
Justifying crypto projects airdrops performance
Blockchain projects provide free tokens to obtain greater acceptance and expand their network. A more significant number of holders is sometimes seen as a good indicator since it makes the project extra decentralized in token ownership. Crypto airdrops also encourage users to utilize and publicize the project. This may aid in developing an early user base before the project features on cryptocurrency exchanges.
Airdrops, on the other hand, may provide the illusion of growth. As a result, additional considerations must be given while assessing adoption. For example, if hundreds of thousands of addresses hold a given token, but nobody is utilizing it, the project is either a hoax or has failed to capture the community.
Differentiating crypto airdrop from ICO
Even though both include new coin projects, crypto airdrops and ICOs are distinct ideas. An ICO is a kind of crowdfunding, whereas airdrops do not need any user investment.
In an ICO, the project team sells tokens to raise capital from investors. ICOs gained popularity in 2014 when Ethereum held a crowdfunding campaign to promote its growth. The crypto industry had an ICO surge in 2017, with hundreds of new firms embracing the strategy.
The process of claiming an airdrop
The method of claiming a crypto airdrop differs per project. However, a crypto wallet is the most critical requirement for claiming an airdrop. MetaMask is common and straightforward to use as a cryptocurrency wallet. Following that, one may check to see if their wallet received free tokens. If not, they will certainly have to engage with a webpage to claim the airdrop.
Avoiding airdrop scams
Identifying whether an airdrop is legitimate or a hoax might be challenging. Before joining up for an airdrop, one must always DYOR, especially if they need to link their wallet to a webpage. Scammers may sometimes airdrop tokens into many wallets, but when users try to transfer these tokens to a crypto exchange or another wallet, their wallets will be emptied.
In other circumstances, fraudsters will announce a phoney airdrop that will direct you to a phishing website. They will dupe investors into linking their wallets to a website that appears identical to the actual one. When users connect their wallets and sign a transaction, other tokens get removed from their wallets. The practice remains common with fake Twitter and Telegram accounts that seem identical to legitimate ones.
Some airdrop scams encourage one to deposit cryptocurrency to an unknown wallet address to receive your free tokens. Legitimate airdrops will never want money or anyone’s seed phrase. Everyone should exercise caution while sending airdrop emails or direct messages.
Users must investigate the project’s official website and social media networks to prevent being duped. Save the official links and double-check if an airdrop event is taking place. If unfamiliar with the project, they should conduct more research to learn what the crypto community is saying. Users who cannot locate enough information should probably disregard the airdrop.
For additional security, one should create a second wallet and email account just for receiving airdrops. The second wallet can protect the cash in their wallet against phishing efforts connected to airdrops. Most essential, one should never give out their private keys to anyone.
In conclusion, crypto airdrops enable crypto projects to differentiate themselves and acquire traction in the crypto industry. It might also be an excellent approach for crypto enthusiasts to diversify their portfolio with new coins. However, there are likely to be more fraudulent airdrops than legal ones. Therefore one needs to proceed with caution and conduct an investigation before participating.