From collecting crypto airdrops to the risks involved in doing so—here’s what you need to know.
Have you ever received discount coupons or special rewards simply because you were a brand’s registered member? That’s the idea behind crypto airdropping, too. In 2014, Auroracoin, the first crypto airdrop, distributed 31.8 AUR (US$385), its native token, to each Icelander in a bid to make it the national currency of the country. That amounted to 50% of its total coin supply. All residents had to do was register with the Auroracoin project to receive the tokens.
The crypto market is becoming increasingly crowded, with every other company trying to get in on the action. After all, for a cryptocurrency to succeed, it needs to be widely used. One way to boost adoption and set yourself apart from your competitors is by offering airdrops.
What is airdropping?
In airdropping, a crypto project or startup sends free tokens to the wallet addresses of its community members. For instance, Gas DAO sent GAS tokens on Ethereum to anyone who had paid US$1,559 or more in gas fees on the blockchain platform. Investors could claim their tokens on Gas DAO’s website.
Airdropping’s purpose is two-fold: one, it aims to encourage usage; two, it aims to boost awareness. In essence, it is a marketing strategy designed to promote your blockchain startup.
With more people using your tokens, you can earn enough to bootstrap your business and help it grow. You can also ensure a fair distribution of your tokens, avoiding resting power in the hands of a powerful few if you are airdropping governance tokens.
How can you get free airdrops?
Here’s your step-by-step guide to collecting crypto airdrops:
Step 1: Set up your cryptocurrency wallet. Without one, airdrop projects would not have anywhere to send you the tokens.
Step 2: Check out sites that list different airdrops. Some popular ones include CoinMarketCap, Airdrops.io, Airdrop Alert and AirdropKing.io. Also follow crypto news alerts on social media channels to stay posted.
Step 3: Browse different projects and check their eligibility requirements for you to be eligible for an airdrop. Typically, there are four kinds of airdrop projects:
- Standard: Standard airdrop projects require you to sign-up for their newsletter using your name and email address. You get tokens for signing up.
- Holder: Some airdrop projects send you free tokens if you have a minimum balance of a certain cryptocurrency in your wallet. For instance, if you have at least 0.1 ETH in your crypto wallet, you qualify to receive the airdrop. For this, you need to be an active cryptocurrency investor and maintain a balance amount.
- Bounty: Follow and engage with the project’s social media channels to receive airdrops. Some airdrop startups might require you to share, promote and like their posts.
- Exclusive: If you are the follower of a project’s social media pages and a member of their website, you automatically qualify to receive their tokens.
If you access it well in time, some projects also let you claim tokens for free directly from their website using the smart contract mechanism.
Step 4: Do your research. We cannot emphasize this enough. Whenever you plan on getting involved with any cryptocurrency-related project, don’t just rely on what the project is telling you. Engage in thorough research. Speak with other crypto enthusiasts, read news articles related to the projects and ask questions.
Are airdrops safe?
Not always. While airdrops can be profitable, they can also turn out to be scams. For instance, the Founder of Bitcoin Advisory, Pierre Rochard, warned in a tweet that airdrops can be pump-and-dump schemes. It’s when project owners artificially boost the price of a token only to later sell all their tokens and make away with the cash, thus causing the token’s value to fall and you suffering losses.
Additionally, some airdrops might turn out to be dusting scams. These aim to hack into your account when you use the token, thus revealing your personal details. Safe to say, not all free things are great.
That said, airdrops do offer a host of benefits. For startups, airdrops can boost awareness considerably. For instance, following their airdrop, BRD Bitcoin’s social media following increased from a mere 2,000 and less to over 40,000. Additionally, it can also increase your token’s value. In 2020, decentralized exchange (DEX) Uniswap airdropped UNI, its native token, to wallets that had used the platform to perform at least one transaction before September 1, 2020. After their airdrop, the token’s value increased by more than ten times, from US$2 to US$30 in April 2021.
In the end, airdrops are little more than a marketing strategy. It helps companies when they want to launch an initial coin offering (ICO) or build stronger relationships with their community.
When casting around for airdrops, remember:
- Legit airdrops won’t ask you to make any sort of investment in their project.
- Some sites might airdrop tokens, thus building curiosity. However, it might be a ploy to get you on their website and execute a phishing scam.
- The airdrops you receive might be taxable, depending on the regulations of where you live. For instance, in India, you will have to pay a 30 percent tax on airdrops you receive.
Crypto startups that want to stand out from the crowd and reach more people should consider airdrops. After all, they have been known to boost awareness and usage. Investors, too, can gain access to super profitable tokens at no cost. However, in the crypto space, exercising caution is crucial.
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