Many of you may have heard about airdrops. Whether that is through friends telling you about a project doing a crypto airdrop or seeing it in crypto projects that you are already involved in. However, not everyone knows what they are, how they work, and if they can benefit you or not.
This article will look through crypto airdrops, explain what they are, tell you if you should be interested in them, and how to look for legitimate airdrops instead of falling for airdrop scams.
What is a Cryptocurrency Airdrop?
A crypto airdrop is one marketing strategy that is being used by blockchain-driven services to gain traction. An airdrop is a distribution of a cryptocurrency token or coin, usually for free, to multiple wallet addresses. Airdrops are primarily implemented to gain attention and new followers, resulting in a more extensive user base and a wider disbursement of coins. They may also be used as a marketing strategy to encourage the adoption of a new cryptocurrency.
Airdrops are usually carried out by the developers of a new cryptocurrency token or coin to bootstrap its network effect and create an initial distribution of the currency. For example, when Litecoin was first introduced in October 2011, its developers gave away 10,000 LTC to Bitcoin Talk forum members.
Recently, airdrops have become more popular to fairly distribute tokens to the general public without requiring them to purchase them through an exchange. That is especially useful for new projects that may not have the funds or resources to carry out a more traditional marketing campaign.
Types of Airdrops
There are two types of airdrops: manual and automated.
Manual airdrops are carried out by the project team and require a lot of effort from the team to identify and contact holders of the parent currency. On the other hand, automated airdrops are done by bots that search for wallet addresses that hold the parent currency and automatically send the new tokens to those addresses.
Most airdrops are automated, which makes it easier for projects to distribute their tokens to a wider audience. However, not all wallets are compatible with automated airdrops, so it is important to check if your wallet is eligible before signing up.
Why are Airdrops Important?
Airdrops have many benefits, including promoting new services within crypto-currencies and using and distributing new services. Like traditional online marketing, users’ chances of flocking over the service exponentially increase when word goes around in the crypto ecosystem.
Airdrops are also often used to incentivize holding or staking a particular cryptocurrency to earn more of the currency. For example, many Proof-of-Stake (PoS) coins offer regular airdrops to encourage users to keep their coins staked and help secure the network.
To be eligible for an airdrop, you will need to hold a certain amount of another cryptocurrency in your wallet – this is often referred to as the “parent currency.” For example, if you are holding 1 ETH in your wallet, you may be eligible to receive a certain number of new tokens being airdropped.
You can also earn airdrops by participating in various tasks, such as sharing promotional material on social media or simply being an early adopter or supporter of a project.
How do you Receive an Airdrop?
Since airdrops require the transfer of cryptocurrencies, participants must have their own wallets. Typically, the platform will request this wallet address when registering for air drops to be carried out. Once the due date for delivering the airdrop arrives, the company transfers this promised sum onto your wallet address. Note that a different platform might require you to create wallets using the Blockchain their service uses.
Receiving an airdrop can be as simple as registering your cryptocurrency wallet address with the project. Once the airdrop is carried out, the new tokens should appear in your wallet. However, some projects may require you to carry out promotional activity, such as following people on Twitter, or providing your email address or Social Media handle, to receive the airdrop.
Are Airdrops Safe?
Airdrops are generally safe, but there are a few things to keep in mind when participating in them:
Make sure that you only use wallets that you trust. If you are not sure whether a wallet is trustworthy or not, do some research before using it.
Always make sure that you have backups of your wallets. This way, if something happens to your primary wallet, you will still have access to your tokens.
Be careful of fake airdrops. There are many scammers out there who will try to trick you into giving them your personal information or sending them money in exchange for an airdrop that never arrives. Always do your research before participating in an airdrop and only participate in airdrops from reputable projects.
Pros and Cons of Airdrops
- Airdrops are a great way to get free tokens.
- Airdrops can help increase awareness of a project.
- Airdrops can help build a community.
- Fake airdrops are common, so you must be careful when participating.
- You may not be eligible for an airdrop if you do not hold the required amount of the parent currency.
How to Spot Fake Airdrops
There are many fake airdrops out there, so it is important to know how to spot them. Read more if you want to know how to spot scam projects..
- The project has no website or social media presence: If a project does not have a website or social media accounts, it is probably a scam.
- The project has plagiarized content: If the project’s website or whitepaper contains plagiarized content, it is probably a scam.
- You are asked to pay for an airdrop: Airdrops are free, so you should never have to pay for one.
- You are asked to give away your private keys: Never give away your private keys! This is how scammers will steal your tokens.
- The team members are anonymous: If the team members are anonymous, it is probably a scam.
- The project is too good to be true: If a project sounds too good to be true, it probably is.
Airdrops can be a great way to get free tokens, but you must be careful of fake airdrops. Always do your research before participating in an airdrop and only participate in airdrops from reputable projects. You can find out about upcoming airdrops on social media, airdrop aggregators, cryptocurrency forums, and Telegram groups. Remember that you should never have to pay for an airdrop and always beware of projects that sound too good to be true.
Look out for Dusting attacks
Dusting attacks are a type of attack in which small amounts of cryptocurrency are sent to multiple addresses to deanonymize the recipients. This type of attack can be used to track the activity of a specific address or group of addresses, so it is important to be aware of them. It is probably a dusting attack if you receive a small amount of cryptocurrency from an unknown address. You should not panic if this happens, but you should protect your privacy by using a new address for each transaction and avoiding using exchanges.
This can become common if you constantly sign up for every airdrop you find without researching the project.
How can you Find out About Upcoming Airdrops?
There are many ways to find out about upcoming airdrops:
- Social media: Many projects announce their airdrops on social media, so follow the accounts of projects you are interested in.
- Airdrop aggregators: There are many websites that collect information about upcoming airdrops, such as Airdrop Alert and AirdropKing.
- Cryptocurrency Forums: Crypto-related forums, such as BitcoinTalk, are also a good place to find out about upcoming airdrops.
- Telegram groups: There are many Telegram groups dedicated to airdrops where you can learn about upcoming airdrops and participate in them.
Frequently Asked Questions
What are Airdrops in Crypto?
An airdrop is when a blockchain project or cryptocurrency distributes free tokens or coins to its community. Airdrops are usually done to generate awareness and excitement for a new project or to reward existing cryptocurrency holders for their support.
Are Crypto Airdrops Real?
Yes, crypto airdrops are real. They’re a way for companies to distribute tokens or coins to their audience. Airdrops are usually done to create awareness about a new project or to stimulate the adoption of a new token or coin.
Is a Crypto Airdrop Safe?
Airdrops can be safe, but they can also be risky. It really depends on the project and the team behind it. Do your research before you participate in an airdrop! There have been a few scams out there, so it’s always better to be safe than sorry.
How Do Crypto Airdrops Work?
Blockchain projects will typically snapshot the addresses of users holding a specific amount of another cryptocurrency or have a list of addresses who have completed a task. Once the snapshots are complete, these projects will then send out free tokens to those addresses.
Where Can I Find Crypto Airdrops?
There are many different ways to find them, but the easiest way is to look on social media. Twitter and Telegram are both good places to start. You can also try searching Google for “crypto airdrops” or “airdrop calendar.”
Another option is to join an airdrop campaign directly. Some ICOs will have their own campaigns that you can sign up for, and there are also websites that list upcoming airdrops.
How to Receive Crypto Airdrops
The answer depends on the project. However, some will require you to already hold some tokens or to hold an NFT or complete a task such as following them on social media.
Is a Crypto Airdrop Taxable?
Yes, a crypto airdrop is considered taxable income. The value of the coins you receive is considered taxable income and must be reported on your taxes. Receiving cryptocurrency due to an airdrop may trigger other tax consequences, such as capital gains tax. Be sure to consult with a tax professional to determine all the tax implications of participating in an airdrop.
How are Crypto Airdrops Taxed?
For tax purposes, the value of the tokens received in an airdrop is taxable as income in the year it is received.
The value of the tokens received in an airdrop is generally determined by taking the token’s price at the time of receipt and dividing it by the total number of tokens distributed in the airdrop. So, for example, if you receive 100 tokens in an airdrop worth $1 each, then your share of the full value of the distribution would be $100.
Airdrops are a great way to get free tokens and increase project awareness. However, you must be careful of fake airdrops and ensure that you only participate in airdrops from reputable projects.