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HomeOnline BusinesssWhat is Airdrop in Cryptocurrency - All You Need to Know

What is Airdrop in Cryptocurrency – All You Need to Know

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In this article, you are going to learn all about airdrop in cryptocurrency, how it works, advantages and disadvantages of airdrops.

In the digital currency space which is also known as Cryptocurrencies, you usually hear about the concept of the airdrop and presale. These terms are closely related because you cannot talk about any cryptocurrencies launch without mentioning these other two concepts. Take for instance when you are discussing a player in a football game, let’s say, Messi or Ronaldo, your base of argument is football.

 

The same thing goes when talking about a particular Cryptocurrency. You have to talk about airdrop and presale because those are what build a community that tends to create awareness about the particular token.  A token can’t exist on its own without a community, this means that a group of persons must come together and agree to accept that particular token as a means of payment. If no group exists then the token is prone to go into extinction because it lacks a community that gives it a monetary value.

 

The subject of this article is to discuss the concept of airdrop in cryptocurrency and how it works. But before that, let’s take a look at what Cryptocurrency is all about.

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What Is Crypto Or Cryptocurrencies?

Cryptocurrency is a digital or virtual coin that is accepted as a legal tender which means, it can be used as a means for payment of the exchange of goods and services. It is any form of currency that exists digitally or virtually and it uses cryptography to secure transactions.

It can also be regarded as a digital payment system that doesn’t rely on any bank to verify transactions. It functions as a peer-to-peer system that can enable anyone anywhere in the world to send and receive payment.

Crypto is the virtual coin that is run on a Blockchain, encoded in a series of codes from which a personal account is created similar to a bank’s balance sheet or ledger. Each currency has its own Blockchain which is an ongoing, constantly re-verified record of every single transaction ever made using that currency.

According to Wikipedia, a cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it. Individual coin ownership records are stored in a digital ledger, which is a computerized database using strong cryptography to secure transaction records, control the creation of additional coins, and verify the transfer of coin ownership. It does not exist in physical form like paper money and is typically not issued by a central authority

 

The Concept Of Airdrop in Cryptocurrency

An airdrop is an unasked distribution of a cryptocurrency token or coin, usually for free, to numerous wallet addresses. Airdrops are often associated with the launch of a new cryptocurrency or a DeFi protocol, primarily as a way of gaining attention and new followers, resulting in a larger user base and a wider disbursement of coins.

Airdrops aim to take advantage of network effects by engaging existing holders of a particular blockchain-based currency, such as Bitcoin or Ethereum in their currency or project.

In the United States, the practice has raised policy issues about tax liability and whether they amount to income or capital gains.

An airdrop, in the cryptocurrency business, is a marketing strategy that involves sending coins or tokens to different wallet addresses in order to promote awareness of a new digital currency. Small amounts of the new digital currency are sent to the wallets of active members of the blockchain community for free or in return for a small service, such as retweeting a post sent by the company issuing the currency.

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A crypto airdrop is a transfer of free cryptocurrency from a crypto project into users’ wallets.

There are several situations where one might decide to initiate an airdrop, but the effect is always the same. The crypto investor receives some amount of coins or cryptocurrency tokens, often for free or for executing a simple task.

In some cases, you may also have to identify yourself through the know your customer (KYC) verification to participate in an airdrop program.

Crypto airdrop might be rewarding when you spot a good one and make 1000 times return on investment (ROI) when the value of the particular token appreciates over time.

 

How do airdrops work?

New blockchain-based companies first start by promoting airdrops for their virtual currency on their website or a cryptocurrency forum. After creating awareness, the company sends the coin or tokens to established cryptocurrency wallet holders. Now, you may wonder how the company decides who to send tokens to. Well, there are a few factors that can influence this decision.

Many companies and startups send the new virtual currency to the wallets of active users of the blockchain community. Some companies might require a wallet holder to participate in a promotional activity like tweeting about the new virtual currency or making a post on a reputable crypto group. In some cases, the holder might also be required to hold a certain amount of cryptocurrency coins in their wallets to qualify for the airdrop.

Many of these companies will often send new tokens to holders who have Ethereum or Bitcoin in their wallets as the bitcoin and Ethereum communities are the largest in the crypto space.

Moreso airdrops in cryptocurrency are sometimes disbursed into users’ wallets by merit, that is those who participated in the airdrop campaign. Also sometimes the owners of a particular crypto project send it at random to certain wallets.

Read Also: 10 Reasons Why You Should Be Investing in Cryptocurrencies

 

Types Of Airdrop in Cryptocurrency

Since the birth of cryptocurrencies, there have been many activities that sprouted up. This includes ICO, IDO, Airdrops, Presales, etc.  At the moment, airdrop has taken on different forms.

Here are some of the main types of airdrops that a currency startup often sends out to users in order to promote a virtual currency.

 

Standard Airdrop

This airdrop is available to the general public and anyone is eligible for a standard airdrop. In standard airdrops, small amounts of the new digital currency are sent to wallet holders in return for a service, like signing up for a newsletter or creating an account at a digital currency project.

You are required to complete a KYC (Know Your Customer) verification or provide your email and wallet addresses before getting the airdrop.

 

Bounty Airdrop

Unlike the standard airdrop, In bounty airdrops, tokens are distributed to users who are asked to help promote a blockchain project, usually on social media platforms. Most often participants receive the tokens in question after they have retweeted a post about the project, follow the company’s Twitter account, share a post on Facebook, create an Instagram post, etc.

Sometimes, you might get the option to refer other people to the community to earn more bounty airdrops.

 

Exclusive Airdrop

Just as the name implies, this type of airdrop is reserved for loyal followers of a particular digital currency project or a blockchain community. Exclusive airdrops are usually run by airdrop websites and aggregators who give first dibs to consistent followers of airdrops released by promising blockchain projects.

Moreso, exclusive airdrops often come with no strings attached. For example, the case of Uniswap. In September 2020, Uniswap sent out 2,500 UNI airdrop coins to its loyal users. They were worth $1,200 at the time.

 

Holder Airdrop

As the name implies, these sets of airdrops are often sent to users who already hold certain tokens or coins of another cryptocurrency type. For example, members of the Ethereum blockchain community have sometimes been offered free tokens from a new digital currency project that was created on one of their blockchains.

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Hard Fork Airdrop

This is a different type of airdrop and it’s not a regular type.

A hard fork usually occurs when developers change the protocol code to create a new version of the blockchain and by so doing a new token is formed. The old version of the blockchain and original coin continue to exist under the existing protocol, while the new token operates under the amended protocol.

When the “chain split” happens, users who held the original coin receive an equal amount of the new token in their wallet addresses.

 

How to Find Credible Airdrop in Cryptocurrency

 In the case of not having any idea where to look out for, observing sound airdrops might be complicated sometimes. A few airdrops are tricky some others might wind up utilizing your chance to their advantage without compensating you.

Due to the high rate of internet scams, finding a legitimate airdrop to participate in is almost impossible. But notwithstanding the shortcomings, BSCNews suggests Coinmarketcap’s airdrop gateway. There you can find genuine airdrops to participate in their fair launch.

Another options you may likewise take advantage of eventually are airdrop aggregator sites like AirdropAlert and AirDrop.io

 

 Is Crypto Airdrop Beneficial?

The benefits of crypto airdrop are enormous although it has certain disadvantages as well.

Digital money Airdrop is a big benefit when you consider the return on investment which an airdrop could give since all you need to do is simply share a post most times about that cryptocurrency and like their post, and so on.

Read Also: 7 BEST CRYPTO APPS FOR BEGINNERS

Disadvantages of airdrop in Cryptocurrency

Just like a coin that has two faces and anything in life is always a two-sided thing. Although when talking about airdrops the benefits outperform the negatives when you spot a good project to participate in. Notwithstanding this factor, below are some of the disadvantages of an airdrop.

 

  •   Worthless airdrops

 Most times the airdropped tokens are almost worthless. Such that, even though it is always great to get some money for free, spending time and effort on airdropped tokens that have no real value and have no potential for growth is useless which normally results in wasted time and effort.

  •   Fraud

Oftentimes, scammers may entice people via airdrops to phish their wallet’s private keys and rip them off their funds. As such, one should properly research an airdrop campaign, before actually making the decision to take part in it. Never hand your wallet’s private keys to anyone. Also, always check very carefully the URL of your wallet before entering your private keys to log in, because some scammers will use sites that look exactly like your wallet’s login page to phish your private keys.

  •   Fake numbers

The founders of some ICOs usually follow the trend and get tempted to grow their social media numbers and Telegram channel, believing that this will help them raise funds, but that’s not really the case. Airdrops can also sometimes, be a very bad tool to use for marketing when conducting an ICO. For example, the Ubex Token Sale. Their Telegram channel hit 100K people, and 60K followers on Twitter and Facebook, yet they are struggling to hit their hard cap.

Another example is the Shivom project, some months ago during their giveaway airdrop, their Telegram channel grew to over 70K people, but at this moment their Telegram channel count is 46K people, reflecting that interest in the project was more focused on the “free money” rather than supporting the project.

 

How to claim airdrop in cryptocurrency/tools needed

To participate in crypto airdrop the fundamental things anyone with any interest at all in these projects ought to have included the following

A Smartphone and Internet

Essentially every airdrop is electronic. You would require an Internet-empowered cell phone to observe an airdrop and participate in its fair launch.

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Crypto Wallet Address

Most airdrop missions will demand your wallet address. You would require a crypto wallet to get and store your airdrop tokens. The wallet could be programmed-based or an equipment wallet. Whichever kind of wallet you use, make sure they are legitimate. If downloading a product wallet from Google Playstore for instance, try not to download clones.

Some of these wallet addresses have clone versions put on the play store by hackers with the motive to steal users’ tokens. The most preferred way to go around it and avoid being scammed is by downloading the app from their official website.

For example, Trust Wallet. When you visit the play store, there is more than 1 Trust Wallet app you’ll find. In order to avoid being scammed. Go to the official website of Trust Wallet and download the app or get a direct link from the site that will lead you to your play store or app store.

 

Online Entertainment Accounts

Crypto projects frequently require airdrop members to utilize virtual entertainment stages to advance the venture. To partake in airdrops you would normally require a Twitter, Facebook, Telegram, and so on account. The purpose of this is to help them create awareness.

As you retweet on your timeline, people get to see it and they also retweet. Which helps to build credibility about that token and you are being compensated in return for the task.

 

Email Address

A few activities might expect you to subscribe to their newsletter using your email address which they might use to inform you on the off chance that you win. They may likewise email you project-released dates.

 

Time

Getting the juice out of airdrop’s valuable open doors requires time. The term a specific airdrop is generally a brief period. When related to profit, it normally takes patience to benefit hugely from them. Sometimes it might take a shorter time when there’s a pump and the price value of a particular project will move from zeros to cents.

For example, the popular meme coin known as Shiba Inu airdrop it tokens to the market. Those who participated are now billionaires in a space of 2 years.

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Ordinary Tasks

Various airdrops indicate various errands. Some of these tasks include commenting and retweeting the particular token to your timeline using your Twitter account, following their social media handles, subscribing to their YouTube and telegram channels, Instagram, and discord handle as well.

 

Airdrop related terms

ICO

stands for initial coin offering (ICO) in the cryptocurrency industry’s equivalent to an initial public offering (IPO). A company seeking to raise money to create a new coin, app, or service can launch an ICO as a way to raise funds.

 

ICO Bounty Program

Bounty programs on the other side are more like incentives offered to an array of participants for various activities associated with an initial coin offering (ICO). A company looking to raise money to create a new coin, application, or virtual currency service launches an ICO as a way to raise funds. While a bounty program doles out rewards or tokens for participants completing specified tasks that help promote the ICO.

 

Pre-mining

Pre mining is the act of mining or the making of some quantity of blockchain-based tokens or “coins” before a cryptocurrency is launched to the public.

Pre mining is attached with the initial coin offerings (ICOs) as a way to reward founders, developers, or early investors in the project.

 

SUMMARY

Airdrops in cryptocurrency are more of a harmless marketing stunt aimed at spreading the word about a particular digital currency. It’s a marketing method that can benefit both the company promoting the currency as well as the blockchain community, which receives free tokens. Airdrops are often small, at least at first, but they can be hugely profitable without investing any money.

 

 

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