What Is a Cryptocurrency Airdrop and How Does It Work?

Crypto airdrop. Another crypto term that we will dive into today. Maybe you have encountered this term in articles or stories about the military. However, cryptocurrency airdrop is on another level.

The cryptocurrency space is littered with jargon that comes from common words. But, when these words are used in relation to cryptocurrency, their definition and context totally change.

Let us learn more about crypto airdrop – its meaning, types, and its impact on the cryptocurrency network.

What Is a Crypto Airdrop?

To begin, a cryptocurrency airdrop is one way of obtaining free tokens. It is a promotional strategy of cryptocurrency start-ups wherein they send free crypto coins or tokens to wallet addresses of investors who are frequently active in the crypto space and often show interest in various projects. 

The recipients of airdrop tokens are not just random investors. There are certain eligibility requirements that participants should be able to meet. For example, you can either sign up for the airdrop or accomplish tasks. 

Why Is There a Need for a Crypto Airdrop?

Start-ups send free tokens to people in exchange for posting them on social media or mentioning them in a tweet or post. This is to help the crypto project attract more attention from people. In turn, this will increase the amount that people will invest and help the project to take off. 

Blockchain-based crypto companies publicly announce their airdrops on forums or on their respective websites. Accordingly, the new coins or tokens given to investors are similar to free samples of a certain product. 

Generally, some companies will ask for a shout-out from the recipients in return for receiving free tokens or free coins. Others will ask the participants to post about them in well-known cryptocurrency forums. While there are companies that will choose investors who already hold a certain amount of BTC or ETH in their crypto wallets. 

What Is the Purpose of a Crypto Airdrop?

Obviously, the goal of a crypto airdrop is to create awareness in people. Crypto users get to learn about the new concept. Then, hopefully, investors will put their money into it. The new blockchain-based startups want many investors to notice their idea and the crypto-airdrop is their marketing strategy to achieve it.

Holding a crypto airdrop helps startups make a name for themselves. We all know that a cryptocurrency’s lifespan depends on the demand for it. People need to continually use a crypto coin for it to successfully cement its circulation in the market.

In the words of Michael J. Casey, CoinDesk’s advisory board chairman: 

“A currency is nothing if it is not widely used. And that can’t be achieved unless people make some cost-incurring effort to encourage widespread usage.”

Crypto Airdrops Types

Crypto enthusiasts will find income-generating opportunities from these 4 types of cryptocurrency airdrops.

Standard Airdrop

This is the commonly-used kind of crypto airdrop. Crypto investors don’t need to do anything. They only need to make an account and provide their wallet addresses. However, companies only give away a limited supply of free crypto for the standard airdrops. Therefore, you have to register early.

Bounty Airdrop

Bounty Airdrops require crypto investors to perform tasks that will help promote their start-ups. It can be via an Instagram post, re-tweeting information about the start-up, or tagging their friends on Facebook. Once the assigned task is complete, the crypto investors will receive their free tokens or coins. 

Exclusive Airdrop

For this type of airdrop, only selected recipients will get free coins. Exclusive airdrops prioritize investors who participated early in their activities. These are people who made a connection and continued to interact with the start-up through the different phases of the projects. Hence, they aim to retain the loyalty of these investors by making them the first to receive free cryptocurrencies.

A popular example of an exclusive airdrop is Uniswap. They gave 2500 UNI tokens to their most loyal investors in September 2020. It is also important to note that UNI tokens belong to the category of governance tokens. As a result, it gives the holders voting rights in decision-making and proposals for the future direction of Uniswap. 

Holder Airdrop

Lastly, holder airdrops require crypto investors to hold another kind of cryptocurrency token in their wallets. Users need to provide snapshots of their crypto wallet over a specific period of time. This will show how many tokens of the other cryptocurrency they have. Then, the holder airdrop will reward them with the corresponding free tokens that they are qualified for. 

Not All Crypto Airdrops Are Legit

Clearly, crypto airdrops are not scam-proof. Furthermore, phishers often use the information to steal a crypto investor’s private keys. Sometimes, unsuspecting investors will click on links to claim their free tokens or coins. They give out their personal information, most especially their crypto wallet logins to that site. Voila! The scammers can now access and control the user’s wallet. 

For that reason, make it a habit to double-check links before you provide any sensitive data.

Read about Crypto Scams

Summary of Crypto Airdrops

In conclusion, airdrops are both beneficial for start-ups and investors. It provides both parties with advantages. The crypto space is always evolving and the ideas to be presented to crypto enthusiasts have to be innovative and remarkable.

So, crypto airdrops provide opportunities for exposure for these start-ups. Most especially, it gives them the chance to receive investments and grow their business.

However, there are always criminal elements lurking in the financial sector, be it traditional or decentralized. Investors have to be extra careful and double-check the emails and links that they receive. Scams are everywhere nowadays. Crypto investors have to be on double alert.

So, keep your eyes peeled for the next crypto airdrop, CryptoCoin Believers! It might just be the next gold mine!