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It’s challenging for cryptocurrency¬†investors and traders to keep track of all the new projects due to the constantly increasing quantity of new coins. As a result, they stay updated through credible information from social media groups, reputable crypto firms, and various crypto user communities. Several cryptocurrency projects design airdrops to create awareness and, perhaps, gain more ground. It is essential that¬†crypto¬†developers heavily publicize their token projects via social media, press releases, crypto blogs, and other advertising media. Most people view airdrops as free money, and most crypto enthusiasts adore them, especially those with modest to no crypto holdings. In some cases, these unearned funds can increase over time or explode unexpectedly, generating enormous returns with no capital outlay.

Since its inception, crypto projects have used airdrops as marketing tactics to attract users to their platforms as part of¬†initial offerings¬†or compensation for spreading their project campaigns. Free cryptocurrency is always welcome, but airdrops are not always trustworthy. What is an airdrop, how is it earned, and how can you identify scam airdrops? Read on as we take you through the details about airdrops ‚Äď and scam airdrops.

What Is an Airdrop?

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What is an airdrop? source:thedefiant

An airdrop is the typically free delivery of a cryptocurrency token or NFT to several wallet addresses. These tokens are distributed for free, although some airdrops demand users to complete specific tasks before claiming them. Crypto airdrops gained popularity during the ICO craze of 2017, and today, many crypto firms still use them as marketing tactics.

When a new cryptocurrency or NFT is introduced, airdrops are frequently used to attract attention and new supporters. This leads to a broader user base and a more strategic distribution of coins. Little sums of the new virtual currency or NFT are transferred for free or in exchange for a small service to the wallets of active blockchain community members.

However, the main goal of a crypto airdrop is not to get the recipient to spend money but to promote fresh initiatives and services. It is typically a marketing strategy to raise awareness, create communities, and assist a coin in gaining value on time so that recipients may start trading their airdropped tokens.

Understanding Cryptocurrency Airdrop: How it works

There are various crypto airdrops, but they often distribute a modest quantity of cryptocurrency to several wallets. The main objective of an airdrop is to raise awareness and encourage more people to invest in it when it launches as an ICO. Some programs distribute NFTs instead of conventional cryptocurrencies. However, it is not a very common trend. Alternatively, users can be required to perform specific tasks such as publishing a blog post, interacting with members of the blockchain project, or blogging about the currency on their social media platforms.

When users sign up for airdrops, they must fulfill any applicable airdrop requirements before participating. The airdrop is then conducted, and at the end, the organizer sends the free coins to each eligible user’s¬†digital wallet.¬†Smart contracts¬†may be used to carry out the airdrop. However, their¬†digital wallets¬†must support the airdropped cryptocurrency. If not, there may be glitches in the transactions, which can lead to missing out on the airdrops.

What Is an NFT Airdrop?

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Explanation of  NFT airdrop. source:Freepik

An NFT airdrop rewards NFT holders with more tokens, just like other kinds of crypto airdrops. An NFT airdrop is simply a gift or reward. The firm sends them at random as a form of gratitude to its customers. In addition, it is a very effective marketing strategy.

To promote an NFT project or related events, NFT airdrops are most frequently employed as a promotional approach. But by giving away free items to its holders, NFT projects can continue to create value for their tokens. You should note that not all NFT airdrops are valuable. The Bored Ape Mutant Serum is one of the most valuable NFTs airdropped a few years ago.

These particular NFTs were freely airdropped for Bored Ape Yacht Club NFTs holders. And after a while, the airdropped NFTs began to sell for over 3 ETH. That’s huge, right? Those are the valuable ones. Some are worthless, and most times, scams.

Types of airdrop

While crypto or NFT firms offer unusual numbers of free coins, their overall aim is to motivate users. Airdrops can last for as long as possible through proper management and planning. Thus, there are no limitations on the timing of cryptocurrency airdrops. Here are the popular types of airdrops:

 Standard airdrop

As a form of marketing, a basic cryptocurrency airdrop distributes a certain amount of new tokens into existing wallets, usually during its initial coin offering. It boosts the crypto firm’s reputation and encourages more people to use the asset. Typically, you must participate in the distribution event, create an account with the new project, and submit your wallet address. And you will get your free token without performing any special tasks.

Bounty airdrop

Bounty airdrops are another marketing tactic. However, potential recipients must participate in marketing activities to obtain the digital asset. To receive bounty airdrops, they must perform particular tasks such as joining the project’s official Telegram group, posting a tweet about it on Twitter, or making a post on Instagram and tagging a few people. You’ll probably need to submit a form with your wallet address and evidence of task completion to receive a bounty airdrop.

Exclusive airdrop

Cryptocurrency coins are distributed to a group of followers of an airdrop aggregator via an exclusive airdrop. The awardees typically have a history with the project, such as being active community members, big-time investors, or early supporters of the initiative. These independent websites disseminate information about promising cryptocurrency projects and future airdrop occasions.

An exclusive airdrop only sends free coins to some specific wallets. Decentralized exchange (DEX) Uniswap distributed 400 UNI through airdrop in September 2020 to each wallet that had engaged with their protocol before a specific date. Holders of the governance token have the option to cast a vote on future project development decisions.

Holder airdrop

Free tokens are given away to people with a particular number of digital currencies in their wallets through holder airdrops. The project team often takes a snapshot of users’ crypto holdings on a specified day and time. Recipients can claim free tokens following their holdings at the time of the snapshot if their wallet balance satisfies the minimum criteria.

For instance, the 2014-launched cryptocurrency Stellar Lumens (XLM). As a gesture of gratitude to the Bitcoin network, its founders revealed a plan to airdrop lumen (XLM), its native cryptocurrency, valued at $19 billion, to current bitcoin (BTC) holders. You had to verify your BTC holdings to receive the XLM from the Stellar airdrop.

Why do Projects perform Airdrops

Paying Off Users

The sustainability of a project over the long term is unimportant to some investors who are interested in getting the best return on investment (ROI). As such, they do not add any real value to the project. They just come, invest small-time, and get away with their big bags after a pump. This habit of jumping from one crypto project to another harms the abandoned platforms. 

To avoid critical platform damages, crypto firms conduct airdrops to retain members. This accounts for why bounty airdrops or standard airdrops take time before they are distributed. In other words, crypto projects use airdrops to pay off users to stay with them.

Creating Awareness

Blockchain firms¬†mostly use airdrops to raise awareness.¬†ICOs¬†dominated the early stages of crowdfunding. It was a match made for cryptocurrency firms because it allowed them to develop their network organically by spending a small fraction of their tokens. But issues soon surfaced. During this startup “gold rush,” a deluge of businesses appeared, many with only weak goals and incomprehensible whitepapers in hand, oversaturating the market and scaring off potential investors.

Many cryptocurrency supporters went on a shilling rampage, endorsing projects to receive airdrops and “pump their bags” because of the popularity of airdrops. Anyone involved in the cryptocurrency community on social media can agree that airdrop recipients are some of the most vociferous supporters a project could ask for.

Understanding their local community

Since some airdrops ask recipients to submit personal information like their email addresses, social network accounts, and opinions on crypto projects, companies can gather useful data from the cryptocurrency community. This way, they can create better, user-oriented projects.

Decentralizing Token Distribution

Deep-pocketed investors may use their disparate riches to their advantage in the early stages of a coin’s life to achieve cheap pricing and hoard a sizable portion of its circulating quantity. The issue is that centralization, which is now one of Dogecoin’s most significant downsides, is caused by massive sums of coins in the hands of a few selected individuals. In response to situations like this, crypto firms can decide to create airdrops to balance the distribution of currencies.

How to claim an airdrop?

Airdrop Crypto
Airdrop illustration.source:Coinsutra

Steps involved in claiming airdrops are not always the same with different crypto projects. However, it would be best if you had a suitable cryptocurrency wallet ‚Äď the most crucial requirement for claiming an airdrop. Earning tokens from airdrops will be practically impossible without a functional crypto wallet. A popular example of a user-friendly crypto wallet is¬†MetaMask. Other ways to claim airdrops are:

  • Find websites that specialize in crypto airdrops.
  • Look for the hashtag #airdrop on social media to see if there are new updates.
  • Utilize different cryptocurrency administrations, merchandise, stages, and blockchains effectively.
  • Consult news sources and gatherings committed to cryptocurrencies for credible information concerning current or arranged airdrops.

How to avoid airdrop scams?

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How to avoid airdrop scam. source:Block-builder.net

Crypto airdrops can be scams! Yes! There are reported cases of bitcoin wallets being accessed and wiped clean ‚Äď all in the name of airdrops. As such, if you want to participate in an airdrop, proceed with caution. While it is not easy to know whether an airdrop is legit, do your homework before participating in any, especially if you have to link your wallet to an external source like a website.
Scammers can occasionally airdrop tokens into several wallets, but your wallet will be drained if you attempt to transfer these tokens to another wallet or a cryptocurrency exchange. Some airdrop frauds demand that you deposit cryptocurrency to an unidentified wallet address to access your free tokens. Genuine airdrops won’t ever request for your money, crypto deposits, or seed phrases. Use airdrop emails and direct messages with caution.

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Twitter scammers are hijacking verified accounts for fake NFT airdrop. source:Cryptonews

Conversely, some scammers will publicize a fake airdrop that directs users to phishing websites. They’ll deceive you into entering your wallet information into a webpage that resembles the actual one. As soon as you connect your wallet and sign a transaction, your tokens will be stolen from your wallet. This frequently occurs when people use phony Twitter and Telegram accounts that resemble legitimate ones.

To avoid being conned, check out the project’s official website and social media accounts to confirm legitimacy. Keep track of the official links and confirm that the airdrop event is taking place. If you are unfamiliar with the project, you should conduct additional research on what the cryptocurrency community is saying. It’s usually best to disregard the airdrop if you can’t find adequate information. The most important rule is never to divulge your private keys to anyone.

Conclusion

Airdrops are handy marketing tools designed as community incentives for new projects and early backers. And while they may at first appear to be of low worth, they may end up being extremely valuable on the long run. For cryptocurrency newbies hoping to acquire digital currencies, airdrops can help to kick-start your crypto journey. 

Crypto airdrops allow cryptocurrency projects to stand out and flourish in the market. For those interested in cryptocurrencies, it might also be an excellent method to expand their portfolio with emerging tokens. However, be cautious and conduct your research before joining, as there are probably more fake airdrops than real ones.

Any investment/financial opinions expressed by Play to Earn Diary are not recommendations. Our content is for educational purposes only. If you plan to invest in any game or cryptocurrency then please do your own research and only spend what you can afford to lose.

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