Definition: Airdrop

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In the world of crypto, an airdrop is a marketing stunt, in which tokens or coins are sent out to blockchain wallets. Most commonly, it is done to promote a new token or cryptocurrency. 

Usually, this is done without any cost to the receiver. Sometimes, this is done at random, or recipients are specifically selected after an initial promotion of the upcoming airdrop. 

Recipients may be required to do something to promote the digital asset themselves, such as a retweet. Airdropping explored in popularity during the crypto coin boom of 2017.

However, there is an important distinction between an airdrop and Initial Coin Offering (ICO). If a participant deposits capital themselves towards its promotion, then it becomes an ICO rather than an airdrop. 

They have proven to be an extremely effective way of promoting digital assets, and continue to be to this day. Participants are often incentivised to collect more coins or tokens as a result of airdrops.

This has often proven to have a amplifying effect, with the buzz around a coin or token helping to inflate its value. Airdrops are also used as a way to invoke loyalty in their participants, with subsequent airdrops taking place that give more of the asset away to participants who hold the most. 

However, they have split opinion within the crypto community. Some now associate airdrops with spam, and as a result, some social media sites now don’t allow advertisements promoting them.

Additionally, scammers have taken advantage of their popularity to set up fake airdrops as a method of stealing funds off unsuspecting participants. Websites such as airdrop alert have been set up to mitigate this threat, which lists legitimate coin and token airdrops only. 

Three types of airdrops exist:

  • Bounty airdrop: This is the most common type of airdrop, and is used to promote and create hype around a new token or coin. 
  • Holder airdrop: This is done to reward holders of a certain token or coin for their loyalty. Therefore, the requirement of a receiver is to hold the token or coin in question at the time of the airdrop.
  • Fork airdrop: This is done when a blockchain forks, such as when Bitcoin Cash forked from the Bitcoin blockchain in 2017. In a fork airdrop, participants will be required to hold the coin of the pre-split cryptocurrency, and then will be given coins of the new forked cryptocurrency in the airdrop. 

The first airdrop in any form can be traced back to 2010, and the first Bitcoin faucet. At the time, the incentive was 5 BTC for participants who completed certain tasks. 

Although this may sound unbelievable considering how much a Bitcoin is worth today, at the time it was only worth a tiny fraction of that amount. Bitcoin Faucets still exist, but not surprisingly, the rewards on offer are considerably less than 5 BTC. 

Stellar Lumens (XLM) held an airdrop in 2017, with the only requirement being that the participant held Bitcoin. Around 19% of its total token supply was given away. Another $125,000,000 worth of XLM was given away in 2018. 

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