Learn Cryptocurrency
6 Jan 2022

What are Crypto Airdrops?

Deepan Datta

The act of receiving free crypto tokens from the cryptocurrency project is termed as crypto airdrops. 

Crypto airdrops are not a new concept in the market. It’s an old marketing strategy packaged in a new form. It is practised by businesses worldwide since time immemorial as a marketing activity to promote awareness around newly launched products. 

For example, companies offer heavy discounts on newly launched products to promote their use and adoption. 

Understanding Airdrops in Cryptocurrency

In the cryptosphere, anyone can participate in the airdrop and receive free tokens, but one needs to become eligible for the airdrop. Currently, crypto projects use several ways to identify eligible users for airdrops. The popular methods include distributing tokens to holders of certain other tokens or having an active wallet address on a particular blockchain. 

For example, Tron performed an airdrop of BTT tokens to users holding at least 100 TRX in a specified exchange wallet or public wallet that supported the BTT airdrop initiative. In some cases, users need to perform certain actions to earn free tokens. Like users of Brave browsers can earn free BAT tokens on performing certain tasks on the web browser. 

Why Crypto Projects Perform Crypto Airdrops?

As mentioned earlier, airdrops are a way to create awareness and hype about the crypto project and increase its adoption rate. Some of the other fundamental reasons why crypto projects perform crypto airdrops. 

Rewarding early backers and users

It’s a way to reward those loyal users and backers of the project who use their platform or hold specific coins in their wallets for a certain period. 

Enhance liquidity in the market

One of the important metrics of a successful coin is its liquidity. How easily one can sell or buy coins in the exchange market. Airdrops act as a way to enhance the liquidity of coins in the market as buying and selling activity in the coin increases soon after the airdrop. 

Reduce centralisation of coins

One of the key issues with small or micro cryptocurrencies is the centralisation of tokens in a few wallets, which gives the wallet holder the power to move prices in their favour. Therefore, to reduce centralisation, crypto project airdrops tokens to varied classes of users. For example, OmiseGo airdrops their token OMG to Ether holders on the Ethereum blockchain. Similarly, Uniswap offers UNI to users who have interacted with their DEX platform. 

Attracting investments

Airdrops help create a buzz around the crypto project, attracting investors’ attention towards the project. Many crypto projects perform pre-ICO airdrops to drive up the value of tokens and boost their funding prospects. 

what is crypto airdrop

Pros of Crypto Airdrop

  • You get hands-on free crypto tokens, which you can sell for some value
  • Can bolster your crypto portfolio and returns over the long term
  • It helps you to learn about many existing opportunities in the crypto market

Cons of Crypto Airdrop

  • It can act as a pump and dump scheme, artificially inflating and deflating the crypto token’s value.
  • It can be a pyramid scheme to get crucial sensitive information of users for conducting a fraudulent transaction. 
  • Through airdrops, crypto projects can influence the cryptocurrency’s price in the market.

What are the Different Types of Crypto Airdrops? 

Over the years, the crypto airdrops have evolved, as for crypto projects, it has become one of the effective, low-cost forms of marketing. Following are the different types of crypto airdrops:

  • Standard Airdrop 
  • Bounty Airdrop
  • Exclusive Airdrop
  • Holder Airdrop
  • Hard Fork Airdrop

Let’s discuss everything in detail. 

Standard Airdrop

It is the standard transfer of crypto tokens into the wallets of existing token holders. 

Standard airdrop is a part of a standard marketing strategy to encourage existing token holders to adopt the crypto tokens on a larger scale. To be eligible for a standard airdrop, you just need to hold the crypto-asset in a specified wallet.

Bounty Airdrop

Bounty airdrop requires users to engage or perform specific actions to be eligible for the airdrop. For example, performing sign-ups, subscribing to the newsletter, project emailers, promoting the project on social media, viewing advertisements, participating in forum discussions, etc. 

Exclusive Airdrop 

As the term describes, an exclusive airdrop is earmarked for a specific group of people or loyal followers of a particular cryptocurrency project. For example, Uniswap’s airdrop programme discussed earlier in this article. 

Airdrop aggregators or websites also run such airdrops for loyal and consistent followers.

Holder Airdrop

Holder airdrop is a common type of airdrop in the cryptosphere, where cryptocurrency projects airdrop their token to holders of certain other tokens. For example, Ether holders often receive airdrops of new tokens created on the Ethereum blockchain. 

Hard Fork Airdrop

Hard fork airdrops are rare in the crypto market. It happens when a new coin is created due to the hard fork of a crypto chain. The users holding the coins of the forked chain in their wallet receives the same quantity of new coins. For example, the most popular hard fork airdrop was of BCH. After Bitcoin Cash was created following the infamous hardfork of the Bitcoin blockchain, users holding bitcoins before the fork received the same amount of bitcoin cash in their wallets. 

How to Get Free Crypto Airdrops?

Many platforms on the website collect information related to upcoming airdrops in the crypto market. Platforms such as Etherscan.io, AirdropAlert.com provide information about forthcoming airdrops in the market. 

But, before subscribing to any airdrop programme, do remember, airdrops are not a free pass to profit massively from the crypto market. If you have not researched the crypto project, there are risks of falling into a crypto airdrop scam. Also, many crypto projects witness a fall in the value of their token after the airdrop. 

To mitigate the risk of airdrops, you should use a separate crypto wallet specifically for airdrops. 

Wrapping Up…

Crypto Airdrops are legitimate ways of earning free crypto tokens in the crypto market. But that doesn’t mean all airdrops are good. Some may turn out to be a scam, or coins may lose value soon after the airdrop. There are risks involved, but by treading cautiously, you can earn a fortune. And, it also allows learning and knowing more about promising crypto projects in the early stage. 

FAQs on Crypto Airdrops

How does airdrop crypto work? 

Crypto airdrops allow you to receive free crypto tokens of a cryptocurrency project to drive awareness and increase its adoption rate. The eligibility criteria for receiving crypto airdrop differs with each crypto project. For example, some projects airdrop their crypto tokens to wallets holding a specific token. And, some require you to perform certain tasks to get the free tokens.

Are crypto airdrops worth it?

Yes, crypto airdrops are worth it and participating in legit airdrops can help you make a fortune over the long term. 

Is crypto airdrop safe?

Not all crypto airdrops are safe, and some can be a scam to get sensitive information of users to conduct fraudulent transactions. You need to check the authenticity of the cryptocurrency project before participating in the airdrop. 

What is an airdrop token?

Airdrop token is the free crypto token that you have received in your wallet for holding a specific cryptocurrency or by performing certain actions. Airdrop tokens have some value, which you exchange with other crypto coins. 

How to Verify AuthenticityAuthencity of the Crypto Airdrop?

If you come across news of crypto airdrop and you wish to participate, you should run the following checks:

  • Know about the coin, check coin website, social media accounts, community, etc.
  • Avoid it if the crypto project asks for sensitive information like wallet private keys or passwords. It is a scam. 
  • If the crypto project asks you to purchase coins before withdrawing your airdropped tokens, avoid it.
  • And, lastly, always use a separate wallet for crypto airdrops as a safety measure. 

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Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.

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Deepan Datta

Content Writer

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