Abstract

Cryptocurrency airdrops are a marketing strategy used by cryptocurrency startups to promote projects and their new tokens, mainly to existing or potential users for free. The project’s native cryptocurrency. Some airdrops require users to complete simple promotional activities before they can receive them, such as following the project’s social media account and sharing posts.

There are different types of airdrops, and each project has its own requirements. But most airdrops have the same goal, which is to increase public awareness and overall interest in the project. Some are deposited directly into user wallets, while others require users to collect them manually.

All users with cryptocurrency wallets can receive or claim airdrops, but must always beware of scams.  There are many fraudulent airdrops that steal personal wallet funds when claiming or transferring free tokens.  Before receiving the airdrop, please be sure to confirm the legality of the project. If a project requires linking a personal wallet to an airdrop website, special care must be taken.

Introduction

With new coins emerging all the time, it is difficult for cryptocurrency investors and traders to keep track of all the new coins. Project dynamics. Therefore, some cryptocurrency projects use airdrops to differentiate their projects and increase awareness. While everyone loves free cryptocurrency, not all airdrops are legal. Let’s learn how airdrops work and how to protect yourself from airdrop scams.

What is a cryptocurrency airdrop?

Cryptocurrency airdrops refer to the transfer of digital assets from cryptocurrency projects to multiple wallets. The idea is to distribute tokens to existing or potential users to increase project awareness. Tokens are given out for free, but some airdrops require users to complete specific tasks before claiming them. Cryptocurrency airdrops became popular during the initial coin offering (ICO) boom in 2017 and are still a common marketing strategy for many cryptocurrency projects.

How do cryptocurrency airdrops work?

There are many types of cryptocurrency airdrops, and a common method is to distribute small amounts of cryptocurrency to multiple wallets such as Ethereum or Binance Smart Chain. However, there are also rare projects that use NFT to replace regular cryptocurrencies for distribution.

Some projects have no additional conditions for issuing tokens, while others require users to complete specific tasks before receiving them. These tasks typically include asking you to follow a social media account, subscribe to a newsletter, or at least hold a specific number of tokens in your wallet. Of course, this does not completely guarantee that you will receive airdrop tokens.

In some cases, airdrops are only available to wallets that interacted with the project platform before a specific date. 1INCH and Uniswap are classic examples of early adopters of this model. But unlike regular airdrops, those are worth thousands of dollars.

Why do cryptocurrency projects conduct airdrops?

As mentioned earlier, blockchain projects promote and expand network development by issuing free tokens. A large number of holders often sends a positive signal, meaning a project’s token ownership is more decentralized. Cryptocurrency airdrops can incentivize recipients to use and promote the project, cultivating an initial user base for the project before it is launched on a cryptocurrency trading platform.

On the other hand, airdrops can give people the illusion of growth. Therefore, other factors must be considered when assessing adoption. For example, if hundreds of thousands of addresses hold a certain token but no one is actually using it, the project is either a scam or no one cares about it.

Are cryptocurrency airdrops and initial coin offerings (ICOs) the same thing?

Although both involve new cryptocurrency projects, cryptocurrency airdrops and initial coin offerings (ICOs) are completely different concepts. An airdrop does not require any investment from participants, while an initial coin offering (ICO) is a form of crowdfunding.

During the initial coin offering (ICO), the project team will conduct token sales to raise funds from investors. Initial coin offerings (ICOs) have been popular since 2014, when Ethereum held crowdfunding campaigns to aid its development. In 2017, cryptocurrencies experienced an initial coin offering (ICO) boom, with hundreds of new projects following suit. To learn more about the concepts, read our What is an Initial Coin Offering (ICO)? 》

Airdrop Types

As we can see, cryptocurrency airdrops are done in different ways. In addition to regular airdrops, which are simple transfers of cryptocurrency to multiple wallets, there are other types. Common examples include bounty airdrops, exclusive airdrops, and holder airdrops.

Bounty airdrop

Bounty airdrops require users to complete certain tasks, such as sharing the project on Twitter related posts, join the project's official Telegram, or create a post on Instagram and tag a few friends. To claim the bounty airdrop, users need to fill out a form containing wallet address information and provide proof of completion of the task.

Exclusive airdrop

Exclusive airdrops are limited to sending cryptocurrency to designated wallets. Typically, recipients have had previous exposure to the project, either as active community members or as early supporters of the project.

In September 2020, the decentralized exchange platform (DEX) Uniswap airdropped 400 UNI to all wallets that had interacted with the platform protocol before a specific date. Users holding governance tokens will have the right to vote on future decisions related to the development of the project.

Holder Airdrop

Holder Airdrop distributes free tokens to those who hold a certain amount of digital currency in their wallets. The project team typically takes a snapshot of a user's cryptocurrency holdings on a specific date and time. If the wallet balance reaches the minimum requirement, the recipient will receive the tokens for free based on their holdings at the time of the snapshot.

Many new projects airdrop tokens to Bitcoin (BTC), Ethereum (ETH) or Binance Smart Chain (BSC) wallet holders because they have the largest communities in the space. For example, Stellar Lumens (XLM) airdropped 3 billion XLM to Bitcoin holders in 2016. This airdrop was exclusive to users of the Bitcoin network.

How to receive the airdrop?

As mentioned earlier, the process varies from project to project. But to receive the airdrop, you must have a cryptocurrency wallet. MetaMask is a popular cryptocurrency wallet that is easy to use. Once you have the wallet, you can check to see if you have received free tokens in your wallet. If you do not receive it, you must interact with the website to receive the airdrop.

How to prevent airdrop scams?

Determining whether an airdrop is legitimate or a scam is extremely challenging. Before registering for any airdrop, you must do your own research (DYOR). If the other party asks to associate the wallet to the website, you should be cautious. Fraudsters sometimes airdrop tokens to multiple wallets. When the recipient attempts to transfer the tokens to a cryptocurrency exchange or other wallet, they find that their wallet is empty.

Some fraudsters lie about airdrops and then lure people to phishing websites. Fraudsters trick others into linking their wallets to websites that closely resemble the real ones. Once the wallet is associated and the transaction is signed, the tokens in the wallet will be maliciously emptied. This usually happens with fake accounts that are similar to official Twitter and Telegram accounts.

Some airdrop scams ask individuals to send cryptocurrency to an unknown wallet address and unlock free tokens in return. Legal airdrops will never require individuals to provide funds or mnemonic phrases. Please be careful with airdrop emails or private message messages.

To prevent being scammed, be sure to check the project’s official website and social media channels. Bookmark the official link to verify if the airdrop event is real. If you have no idea about the project, you should do additional research to understand the views of the cryptocurrency community. If you cannot find enough information, it is best to simply ignore the airdrop.  

In order to be foolproof, individuals can set up a new wallet and email address specifically for receiving airdrops. This ensures the safety of personal wallet funds and avoids phishing attempts in the name of airdrops. Most importantly, never share private key information with others.

Summary

Airdrops for cryptocurrency The project stands out in the field and is deeply rooted in people's hearts. For cryptocurrency enthusiasts, it is also the preferred way to diversify a personal portfolio of emerging tokens. However, there are more airdrop scams around us than legitimate airdrops. Therefore, please be cautious and do your own research before participating.