37. What is Cryptocurrency Airdrop all about?
For most traders, nothing more matters than the return on investments. Interestingly, this can be done quickly and does not have to be a hugely difficult task. A good example of this is airdrops, which provide an additional boost to your cryptocurrency portfolio. So, how to get a cryptocurrency Airdrop and what does it consist of?
What are airdrops?
It’s basically a marketing strategy that involves sending coins or tokens to the wallet addresses of members involved in a particular blockchain community. Airdrops are given away completely free or for a small favour such as retweeting a particular company’s post.
Typically, cryptocurrency projects have a certain number of tokens that they give out to people. By performing certain tasks, you may-but also don’t have to become eligible to receive such a token. Sporadically, this is not guaranteed, so read the terms and conditions carefully.
How do airdrops work?
The purpose of such a free giveaway is to help boost a particular project. Its purpose may be to spread awareness about cryptocurrencies, or to reach more people. This makes sense, especially during ICO.
Typically, such airdrops are promoted on a particular project’s website, social media or cryptocurrency forums. As we have already mentioned, to receive such airdrop, you must perform a certain task, related to the project. Everything is always clearly defined in the terms and conditions of a given blockchain project.
Types of airdrops
For such airdrops, it is enough to express one’s interest in a particular project. Then the person gives their wallet address, to which the received tokens are to be sent. And that’s all it takes.
In the case of standard airdrops, their quantity is usually specified. Therefore, in this case, time plays an important role.
- Bounty Airdrop
In this case, you have to perform certain tasks. Very often they are related to raising awareness of a particular project or simply promoting it. What could be such a task? Posting about the project on your social media, tagging a particular company or retweeting information about the project.
Interestingly, this drop of airdrops can reward you for recommending the project, and even give you extra tokens for finding other people interested in the project.
- Airdrops for those already in possession
We know, the name is not very catchy. In this case, airdrops are distributed to people who already have the token of a particular project. The disadvantage of this type of airdrops distribution is that someone who already has them may not want them anymore.
- Exclusive airdrops
You can feel special in this kind of drop. Airdrops get here only those who have been selected individually. How to join such a group? Those who participate in exclusive airdrops are selected based on how much time they have spent in a particular project, or how much money they have spent on related activities.
Exclusive airdrops are a very centralized way of rewarding those who are closest to a particular project.
In our opinion, the most interesting way to reward airdrops. In this case, the project states the number of airdrops it wants to give away and encourages users to take part in a lottery. A ticket to such a “game” can be earned through the number of tokens held, solving tasks and earning points, or simply by expressing one’s interests.
Unfortunately, many times the number of people who would like to participate in such a lottery is greater than the number of airdrops.
Airdrop – how does it work?
The whole process starts with the project’s decision that they need a drop. This may be in response to market strategies, a hard fork of the network, or it may simply be a procedure to encourage investors. At the outset, the company in question must choose how the airdrop will take place.
The next step to take is to launch a public campaign that informs people about such a drop. This encourages people to take part in the venture.
Airdrops are often communicated on social media. If you want to be part of such airdrops, follow the latest projects on X (formerly known as Twitter) or sign up for newsletters.
Advantages and disadvantages of airdrops
The key advantage is that such airdrop allows a given project to stand out from the crowd. Such activities also affect the success of a given cryptocurrency.
Another advantage of airdrops is that they reward their loyal patrons in this way. Interestingly, in this way, they also influence the faster distribution of a given token.
An undeniable drawback will be scams. Many projects, after making airdrops, require users to connect their wallet to suspicious sites. This way we can easily get rid of our addresses and private keys.
Sometimes airdrops can be anything but legitimate. While tempting, they lure investors with the possession of profit. In what way? They urge the user to buy more of a given token, and in return, they get more airdrops. As a result, many tokens are dumped into the market, the price drops, and they themselves become worthless.
Often, airdrops can also be seen as low-quality projects. Instead of free airdrops, some projects would be more likely to focus on rewarding miners, or other heavily involved network participants.
And the final, and essential, disadvantage of airdrops is that they can be totally worthless if they cannot be traded on an open exchange. In fact, at first, this may be due to the stage of the project. However, if down the road the blockchain project has no intention of entering exchanges with them, your airdrop will be worthless.
Airdrops – examples
The first airdrop is attributed to the AuroraCoin (AUR) project. It took place in March 2014. The cryptocurrency was to be a digital asset for Iceland.
However, let’s take a look at airdrops that were not so far back in time.
- Gas DAO, which was established in 2021, was to distribute tokens to people who paid a certain amount for gas in Ethereum. 55% of Gas DAO tokens were distributed to 634,429 wallets.
- OpenDAO, which distributed tokens to holders of NFT, based on their activity on OpenSea.
- El Salvador. Yes, the country that adopted Bitcoin. Also had its airdrop. The country gave away Bitcoin for installing a cryptocurrency wallet built by the Salvadoran government.
- Uniswap and its UNI token, which was distributed to DEX users in 2020. More than 250,000 accounts received 400 UNIs each!
- Symbol. This blockchain project chose holding airdrops. Each eligible holder with at least 100 XEM received additional tokens to their wallet at a 1:1 ratio.
- Bitcoin Rhodium. Although the name is misleading, the cryptocurrency has nothing to do with Bitcoin. Bitcoin Rhodium gave away 2.1 million XRC tokens during its airdrop! All users had to do to qualify for the giveaway was hold XRC in their wallet for three months.
- ARCS. Blockchain for data infrastructure in accounting. Projects sent 25 ARX to the first 200 people who registered on the platform.
Airdrops are thousands in number. We could do a separate lesson about their examples, and it is not clear if we would describe them all anyway.
Airdrops are great for companies that are just entering the cryptocurrency market. In this way, they can mark their place on the digital map, as well as communicate important information about the project to users. Of course, although airdrops have value and are often considered free money, beware of airdrop scams.