What is an Airdrop in Crypto, and How Do You Receive Free Tokens?
Feb 06, 2024
Blockchain projects and newly established crypto companies usually use the term “airdrop” when branding their digital assets. This campaign is usually surrounded by ambiguity and doubts, and users don’t feel the value of receiving a cryptocurrency for free.
Airdrops allow crypto companies to offer virtual products and services to a wide range of users and communities, using various tactics to become likeable in digital communities.
A crypto airdrop can be confused with giveaways, staking or other web 3.0 activities. Let’s discuss what is an airdrop in crypto and how to receive free tokens with airdrops.
- Crypto airdrops mean distributing free coins or tokens to users for marketing purposes.
- Airdrops can be given to current holders and investors, as well as potential users who participate in raising awareness about the cryptocurrency.
- Security concerns arise with crypto airdropping since many illegal projects try to manipulate users to connect their wallets or invest in scam coins to receive airdropped tokens.
Understanding Cryptocurrency Airdrop Meaning
Crypto airdrops work by distributing coins/tokens for free to early investors and communities for marketing purposes.
The term “air drop” can be associated with a physical aeroplane dropping crates of food, medicines, and supplies by air. This might not be too far from its meaning in cryptocurrencies, where companies distribute free tokens and coins to users and investors.
Newly created DeFi projects or cryptocurrencies face challenges in promoting their new coins, especially with the rising blockchain security concerns and the cyber threats associated with the decentralised economy.
After the staging period, crypto companies offer free coins to users in return for some favours like resharing a post on social media or retweeting about the project’s activities and future.
For example, in 2017, a blockchain protocol, Stellar, distributed 19 billion XLM or $125,000,000 worth of XLM, for free! The campaign marked one of the largest and the best crypto airdrops in history, targeting BTC holders on the developer’s waiting list.
Why is Airdrop Crypto Important?
Giving away free tokens is one of the most commonly used ways to catch the eyes of digital communities and crypto investors amidst the huge number of established and developing DeFi projects, blockchains and virtual currencies.
Airdrops are usually part of a crypto project’s market strategy, whether for introducing the coin, releasing a new product, or expanding the offered services.
This activity becomes largely valuable when collaborating with famous personnel or influential individuals who can tweet or reshare some of the project’s activities and gather millions of followers to like and talk about the newly introduced token.
Cryptocurrencies and blockchains also initiate airdrops as part of their initial coin offering (ICO), where they raise awareness and interest, and once they go public, traders are more likely to invest.
On the other hand, overdoing crypto airdrops can bring disadvantages to the company because it increases the supply of tokens and deflates the value, dragging the coin price lower.
Crypto Airdrop Types
Crypto companies introduce airdrops for several reasons and in different ways. While the ultimate goal is the same – to promote a new project and/or a new token – there are various types of distributions.
Standard airdrops are the most common and straightforward way to deliver free tokens. The particular project announces its intention to airdrop tokens for users, early investors, or the public.
Interested individuals sign up for free crypto tokens by providing their wallet addresses. Most airdrops only require the airdrop recipient’s address details. However, some projects may ask for other details like location, name and other details for sales and record keeping.
Standard airdrops usually state the total amount of distributed tokens and how much is allocated per user, and in most cases, free coin campaigns are short-dated and prioritise first entries.
Holder airdrops are rewarded to individuals who have already shown an interest in the project by investing and owning a number of the company’s tokens or coins.
These giveaways are automatically distributed using the previously registered blockchain crypto wallet addresses submitted upon buying or enlisting in previous campaigns.
Holder airdrop ensures that only interested and financially invested people receive these free tokens, which may contribute to further development and expansion of the network. Moreover, they demonstrate the network’s commitment to its loyal customer, motivating them to keep or increase their holdings.
Bounty airdrop is delivered in exchange for certain tasks performed by users. Therefore, they are given based on merits rather than randomly distributed for registrants.
For example, in order to participate, users may be asked to reshare one or more posts about the subject crypto project on social media besides tagging the company to raise awareness.
Bounty airdrops may require participants, for example, to produce or retweet three posts to qualify to get free tokens. Other projects may give away free coins according to the contribution made on social platforms, including online communities and forums.
One sub-brand of bounty distribution is producing referral bonuses, which work like referral programs, rewarding users who influence others to join or purchase the coin.
These airdrops are distributed regardless of ownership or contribution to any social media recognition. They are given to exclusively invited individuals or groups for their influence based on special agreements.
Despite not requiring the recipients to participate in marketing activities, they usually post relevant updates on social media as an interchange for earning free tokens.
How to Analyse & Participate in a Crypto Airdrop
Taking part in an airdrop campaign can be considered like investing in a startup. Participation is usually easy, but you need to analyse carefully to ensure a good potential and future value. Also, fraud airdrops are becoming widespread, so make sure you do the following.
- The first thing you need to have is a crypto wallet, where you will receive the free coins. A legitimate coin airdrop will only require your wallet address.
- Check out the crypto project and ensure its features, use cases, and products align with your expectations and interests.
- Check out the project’s social media platforms, where most announcements and details are shared.
- Ensure that participation does not require connecting your wallet to any third-party websites.
- Most valid airdrops share a whitelist link, where you write your wallet address and email address to receive notifications about the drop.
- Complete any tasks required to qualify for the airdrop, such as holding cryptocurrencies and retweeting or resharing some of the company’s posts on social media.
How Does the Crypto Airdrop Process Work?
The first step in airdropping tokens is the issuer’s announcement of conducting such an activity, whether to raise awareness of their project, introduce changes and new forks, or attract more investors to their network.
Then, an overall marketing campaign is launched to promote the event and gather wallet information either through registering on the waiting list or after fulfilling certain tasks in the bounty awards.
After the capacity is filled or the deadline is due, the company starts distributing free coins or tokens from their wallet to the users’ wallets, using their addresses. Airdrop recipients usually receive their free crypto coins directly.
Security Concerns with Airdrops in Crypto
Despite the popularity of legitimate airdrops, some security concerns are associated with them. Some illegal crypto projects manipulated this feature to lure individuals and investors into airdrop scams or pump-and-dump-type tokens.
Airdrops in crypto are not subject to investing or fundraising. Rather, they are marketing tools to raise awareness about a particular project or coin. Therefore, any campaign that asks to invest or purchase directly can be suspicious.
Additionally, air drops that require connecting your wallet to a third-party platform to receive free coins are dangerous. Once your wallet is connected to a foreign platform, your private keys become exposed to theft, and your belongings can be stolen.
Therefore, the first step to avoiding airdrop scams is to conduct due diligence regarding the crypto project, its goals, tokenomics, and future. Also, never connect your crypto wallet to an unknown website or platform. If needed, you can provide your wallet address as the written numbers and letters, which do not entail giving access to your digital assets.
So, what is an airdrop in crypto? Essentially, it is a marketing tool to spread and promote a Web 3.0 project, introduce a new token or coin, or potentially attract more investors to purchase the cryptocurrency. On the other hand, it’s also an easy profit opportunity for participants.
There are different types of airdrops in crypto. Some are distributed to a list of entries in the waiting list, while other types reward those who contribute to the popularity of the crypto project on social media platforms or participate in some online forums and communities. Before engaging in any airdrops, explore the project and ensure its legitimacy.