New and innovative projects are continuously being offered as the crypto business grows, creating a competitive atmosphere where certain initiatives struggle to stand out in the thriving crypto community.
Cryptocurrency airdrops have become a well-liked marketing tactic in the midst of this fierce rivalry. They work with initiatives who want to create a big impression on the cryptocurrency industry and raise awareness for their impending coin, item, or service.
In this article, we’ll investigate the concept of airdrops, dig into its mechanics, analyze the many kinds of airdrops utilized by blockchain projects, look at the motivations behind their use, and critically assess the advantages and disadvantages of these crypto airdrop campaigns.
What Exactly Is A Crypto Airdrop?
A cryptocurrency airdrop is a promotion technique used by projects in the cryptocurrency space to spread word about their fresh digital asset or endeavor. A tiny number of coins or tokens are distributed via cryptocurrency airdrops to wallet addresses that satisfy specific criteria. Cryptocurrency ventures can employ an airdrop to make sure that the community members receive an equitable share of their coins and tokens.
What Sorts Of Crypto Airdrops Are There?
Most crypto initiatives aim to accomplish a variety of objectives, and frequently do so by using a variety of tactics. To enter the crypto ecosystem, crypto projects use four different forms of airdrops. These are:
- Standard airdrop – A typical bitcoin airdrop is a public event that is available to everyone who is interested. Typically, all that is needed to get started is to create an account with the project. When the requirements are satisfied, the project gives qualified wallet addresses a tiny amount of the new cryptocurrency. Participants in a typical airdrop must move swiftly to obtain a position due to the restricted number of available spots.
- Bounty airdrop – Bounty airdrops are marketing techniques that provide participants in promotional events access to cryptocurrency. These can range from straightforward actions like signing up for a newsletter to posting project-related content on social media sites like Twitter, Facebook, and Instagram.
- Holder airdrop – Holder airdrops give rewards to users just for possessing a certain project’s token or currency. When a project experiences a hard fork, separates into two platforms, or debuts on a different blockchain, these airdrops are frequently deployed. Participants’ wallet addresses are used to predetermine how much cryptocurrency will be airdropped to them.
- Exclusive airdrop – In an exclusive airdrop, a project chooses a particular set of people to give tokens to. This style of airdrop is more focused and goes to people who have a close connection to the project. The degree of their commitment, the amount of time they spent working on the project, or their participation in extracurricular activities may all be considered as selection criteria. For instance, the Uniswap airdrop in September 2020 gave UNI tokens as a special gift to over 250,000 early exchange customers.
How Does A Cryptocurrency Airdrop Operate?
The first call to action when a blockchain or cryptocurrency project decides to launch through airdrop is to begin a public campaign. The team advertises cryptocurrency initiatives on discussion boards and social media sites including Twitter, Reddit, and Discord.
The team chooses the kind of crypto airdrop to deploy and develops a list of possible token beneficiaries throughout the open campaign. The campaign may be used by cryptocurrency initiatives to learn more about the people who could be interested in their goods or services.
The airdrop operation is then automated by the project using a smart contract or a self-executing application. The team then chooses a time for the smart contract to airdrop the chosen participants’ chosen tokens or currencies from the company’s treasury wallet. The team shares the transaction block results of the airdrop in order to earn the confidence of the community it has developed during the campaign.
When you receive a certain number of “free tokens,” regardless of whether you requested the airdrop in the first place, you will really need to pay tax on them since, in some nations, such as the United States, airdrops are seen as income. The cryptocurrency in airdrop recipients’ wallets also has transaction costs.
How Do You Take Part In Crypto Airdrops?
You can choose to take part in standard and bounty airdrops from the categories of crypto airdrops previously covered, and depending on your current involvement in a project, you can also be eligible for holder and exclusive airdrops.
Finding the project before it launches is necessary if you wish to take part in airdrops. Websites like DappRadar and Airdropalert keep tabs on airdrops. Always conduct your own investigation to confirm the legitimacy of the project giving the airdrop after discovering these airdrops.
You only need to enter your crypto wallet address once you’ve satisfied the prerequisites to be eligible for the airdrop. The project will typically let you know when the airdrop has been sent to your cryptocurrency wallet.
The Pros And Cons Of Crypto Airdrops
Pros
- Increased user adoption – People may test out new cryptocurrencies without having to make any financial commitments thanks to airdrops. A bigger user base for the project may result from increasing user adoption as a result.
- Enhanced community engagement – Users are frequently required to join social media groups or carry out other duties as part of airdrops in order to foster a sense of community. The community may become more engaged and have more lively debates as a result.
- Token distribution – Airdrops can aid in the wider distribution of tokens or coins, which can aid in boosting exchange liquidity and trading activity.
- Marketing – An inexpensive technique to publicize a project and generate awareness about it is through airdrops. Additionally, they may be used to reward devoted users and provide them incentives to promote the project.
Cons
- Misaligned incentives – Airdrops may draw those who are more concerned with getting free tokens or currencies than with helping the project advance. This can result in incentives being misaligned, which would be detrimental to the project.
- Fraud – In order to take advantage of the system and acquire free tokens or coins, fraudsters may also be drawn to airdrops and set up phony social media profiles or automated accounts.
- Cost – Airdrops might be economical, but they still need time and money to prepare and carry out. Before selecting whether or not to conduct an airdrop, projects must consider the advantages and disadvantages.
