Crypto Airdrop: What It Is (and How to Get It)

There are thousands of cryptocurrencies to date, and new ones are surfacing every other day. Each of these projects may stand out from its mechanisms, the purpose it serves but many of these projects struggle to bring mass awareness to the public. And that’s where crypto airdrop comes in. 

Crypto airdrop is typically considered a marketing stunt involving sending free crypto coins or tokens to users’ wallets and this tactic has now grown in popularity, and many new cryptos are using it to expand adoption.

In this article, we explore crypto airdrops and whether there are any risks associated with them.

What Is a Crypto Airdrop?

Crypto airdrop involves free distribution of any new coins or tokens to users who own a specific coin. The purpose of giving out free coins is to increase a project’s visibility, increase the crypto’s circulating supply, stimulate trade of the token and foster a thriving community.

For example, if you hold some Bitcoins you may be entitled to the corresponding tokens like XLM that are proportional to the amount of BTC/XLM. Generally, the endowment effect from crypto airdrop prolongs the lifespan of a coin in which airdrop recipients tend to value an owned object higher than its market value. Thus, lowering the selling pressure of a coin through the effective holding (HODL) of the airdropped coin for the long term. 

Besides generating users’ interest in the crypto space, it also makes the token valuable early on so that existing holders can start trading them immediately. Therefore, startups that want to enhance their crypto exposure use crypto airdrops.

Let’s say when a developer is ready to airdrop free crypto, they’ll generate hype posts about their upcoming coin — be it on their project’s website, or a third-party airdrop tracking website, or on Medium. The post is then shared across all social media crypto groups so that enthusiasts are aware of this new currency’s arrival.

When it’s time to release the cryptocurrency, the developers send a few tokens to users on a specific blockchain platform. For instance, a startup might choose to send free crypto to specific wallet addresses on Bitcoin and Neo Networks.

How to Be Eligible for Crypto Airdrops

To be eligible for a crypto airdrop, you might be required to hold a certain token in your wallet or have a specific minimum balance. For example, people holding TRON (TRX) will keep getting BitTorrent BTT crypto airdrops until 2025.

Alternatively, users may have to complete specific tasks in exchange for a crypto airdrop, such as posting about this new crypto on their social media pages.

Are Crypto Airdrops Similar to Initial Coin Offerings?

An initial coin offering (ICO) isn’t the same as a crypto airdrop, since the former is, in fact, crowdfunding for upcoming crypto.

In an initial coin offering, the developers launch a white paper of the project that explains how it will work and the number of tokens that will be mined. Then, they give investors a reduced price for tokens if they purchase them earlier on in the campaign.

On the other hand, in crypto airdrops, developers actually give away free tokens to raise awareness about their projects.

Example of a Successful Airdrop

Although an airdrop is meant to create a crypto community for the introduction of the new coin, it doesn’t always work. For example, the token’s price might dip, leaving the recipients with little to no gains. However, there are many examples of success too. One of them is the 1inch Airdrop.

On Christmas Day 2020, 1inch DEX airdropped a shocking 90 million tokens to over 55,000 wallet addresses. People who had completed a transaction before Sept. 15, or conducted four trades or transactions by Dec. 24 worth $20 or more, were eligible. When 1inch launched in Dec. 2020, its token’s price was $2.70. By April, 1INCH had risen above $6. Currently, the token is priced at around $3.

Types of Crypto Airdrops

Crypto airdrops may take place in different ways. The most common method is to deposit free tokens into a user’s wallet for minimal tasks, like registering their email address or posting on social media.

Here are some of the various types of airdrops.

Bounty Airdrop

In a bounty airdrop, the recipient has to do something in exchange for the free coins. For instance, they may have to tweet about this new project or post on Instagram and tag their friends in the post.

These requirements are set to increase awareness around the project: the more people who know about it, the better it is for the developers.

Sign Up Airdrop

This is precisely what it sounds like. The recipients have to sign up for a newsletter or perform a similar task in exchange for an airdrop.

Exclusive Airdrop

These airdrops are exclusively for some users, especially those who have been loyal users of a particular community, website or project.

Hard Fork Airdrop

A hard fork airdrop is different from a regular airdrop because a new token is created from a blockchain. Let’s say that Token X is Blockchain A’s crypto. When it hard forks, it creates Token Y on the same blockchain.

In this kind of airdrop, existing owners of Token X will get an equal amount of Token Y in their wallets when the hard fork makes its appearance.

A well-known example is Bitcoin Cash (BCH). The hard fork took place in 2017, in which users who already had Bitcoin got an equal amount of Bitcoin Cash in their wallets.

Staking (Holding) Airdrop

Staking (or holding) airdrop occurs when certain users who already have specific tokens in their crypto wallets get new tokens. These differ from hard fork airdrops because the new token isn’t a hard fork of an existing crypto on the blockchain.

The new token is entirely different from the token the users currently hold.

Why Crypto Projects Offer Airdrops

Crypto projects offer airdrops mainly for promotional reasons. When a startup enters the market, it needs exposure before users start trading it.

Previously, ICOs took center stage. However, these events oversaturated the market: many startups saw them as an opportunity to create hype around a project and get money from investors, but with nothing to offer in return.

The era of plagiarized and flimsy white papers ended when airdrops became popular. People who receive free tokens become advocates of the project, and its popularity grows organically.

Secondly, crypto projects use airdrops to reward their users. Since many investors in the world of cryptocurrency are in it to profit from the return on investment (ROI), they go from one project to another in order to increase their profits.

In doing so, they harm the project’s sustainability because they don’t provide any value to the project’s protocol. Many startups are countering this problem by giving free coins to their loyal users in exchange for holding the tokens in their wallets for specified periods.

More importantly, startups can hype their project using airdrops. Today, online interactions and metrics matter a lot. If a token starts trending on Twitter or any other social media platform, its popularity is bound to soar.

Investors study these analytics to determine the future prospects of crypto and invest in it accordingly. Therefore, a crypto airdrop raises community engagement, which further attracts investments and increases the overall capital raised by the startup in its early days.

Finally, crypto startups may ask for users’ information in exchange for free tokens. Then they can use these details, such as social media and email addresses, to create targeted marketing campaigns.

Are Airdrops Truly Free?

In most cases, airdrops are genuinely free. All you have to do is tweet about new crypto and get free coins.

However, not all forms of crypto asset airdrops come without monetary requirements. For instance, the startup might require users to have a certain amount in their wallets or conduct a specific number of transactions.

Although none of this directly costs you any money, these types of airdrops aren’t ideal for new enthusiasts who don’t have any investments in the market yet. But then again, you do get a bounty airdrop for free.

Risks Associated with Airdropped Cryptocurrencies

Although many amateur investors see airdrops as an opportunity to increase ROI, most experts would tell you that certain risks are associated with airdropped cryptos.

For one, there is always the risk of scams. A few years ago, many supposed “startups” created much hype about their projects — and produced nothing. They told interested investors to deposit a certain fee in order to be eligible for the airdrop and to make money. However, unbeknownst to the investors, there would be no airdrop — since there was none in the first place.

Here are some tips to stay safe from airdrop scams:

• If an airdrop project asks for your private key, it is definitely fake. Never give your private key to anyone, irrespective of how “real” they “seem.”
• Be wary of look-alikes. They may appear as legit startups — but they’re out to get your money and information. In some cases, they might not even ask for any registration fees. Instead, they use your information and sell it to third-party registrations or in the black market.
• If a startup promises a ridiculously high amount, they’re probably fake. They want to create an offer people cannot resist. Legitimate startups will offer reasonable perks.
• Only engage with the project’s real website. Do not give your personal information or register elsewhere.

Another potential risk associated with crypto airdrops is depreciating prices. In the early days of an airdrop, when there’s excessive hype about a token, its price increases. However, a few months down the line, the investors might be left with nothing.

To reduce this risk, if you plan on getting an airdrop, make sure to trade it as soon as you can.

How to Claim Crypto Airdrops

Keep in mind that airdrops aim to market a token, so any information about the event will be easy to find. When you search for “crypto airdrops” online, you’ll receive sufficient news about upcoming airdrops, or ones that are currently happening.

Alternatively, you can use websites such as airdrops.io or CoinAirdrops.com to find the next airdrop. 

Staying Alert for the Next Crypto Airdrop

Airdrop tracking websites aren’t the only way to search out new opportunities for getting free crypto. You can also use other methods, such as the ones below:

• Hold the existing coins in your crypto wallets. New tokens developers tend to airdrop crypto at particular intervals to loyal existing users.
• Check ongoing and upcoming airdrops on Etherscan. The website shows you the symbol and token address of each airdrop. More importantly, make sure you only follow the startup websites mentioned here, since they are reliable.
• Airdrop Alert is another website that lets you get free crypto through airdrops. In addition, the website has giveaways that you may be eligible for.
• CoinMarketCal is quite literally a calendar keeping track of everything important happening in the blockchain world, including hard forks, upcoming events and airdrops.

Besides keeping track of upcoming airdrops, it’s also essential to be active in the blockchain sphere. If you’re new to crypto, make sure you understand how smart contracts, staking and overall blockchain technology work. Being both knowledgeable and wary will help you stay away from scams.

The Final Note

With the increasing interest in blockchain and cryptocurrency, there’s also a rise in crypto exchange platforms, new tokens and blockchain layering. All these buzzwords and concepts may be a bit complicated to grasp for a newbie in the field.

Hopefully, this article has made you familiar with the concept of crypto airdrops and the need to tread lightly when you choose to receive them.