Considered a marketing strategy by crypto startups to showcase their projects and tokens, airdrops are now part of the decentralised finance ecosystem. Let’s find out exactly what a crypto airdrop is.
What is a crypto airdrop?
A crypto airdrop is a free distribution of crypto currency tokens or coins to a select group of people. Airdrops can be used to promote a new cryptocurrency or to reward existing users of a platform for their engagement.
Airdrops are often advertised on social networks and participants, may be required to meet certain requirements, such as following a social network account or completing a certain trading volume on their exchange to be eligible to receive the free tokens.
How does an airdrop work?
A crypto airdrop involves distributing a small amount of cryptocurrency to multiple wallets. There are also projects that offer NFTs instead of traditional cryptocurrencies.
Most projects require you to complete certain tasks before you can collect the tokens, such as promoting their projects on social networks or subscribing to a newsletter, for example.
Sometimes, however, a system of draws is set up and airdrops are only awarded to wallets that have interacted with the project’s platform before a certain date. 1INCH and Uniswap are popular examples that have used this method to support early adopters. But unlike ordinary airdrops, these were worth thousands of dollars.
The first big airdrops were mainly DeFi protocols, to reward early adopters, but mainly to increase liquidity on their protocol. With the craze for decentralised finance, this practice has become commonplace: PoolTogether, Uniswap, 1inch, Pangolin, Mirror – all these projects have used this solution.
What is the difference between airdrops and ICOs?
Despite their involvement in new cryptocurrency projects, airdrops and ICOs (Initial Coin Offerings) are different concepts. Airdrops require no investment from participants, whereas ICOs have a participatory funding method.
In an ICO, the project team organises a sale of tokens to raise funds from investors. For example, Ethereum organised a crowdfunding event to support its development.
The different types of airdrop
Indeed, there are different types of ways to airdrop cryptocurrencies. In addition to the standard airdrop, which simply transfers the cryptocurrency to several wallets, there are a few other types. Bounty, exclusive airdrops and holder-only airdrops.
Bounty airdrop
This type of airdrop requires users to complete certain tasks, such as sharing a post about the project on Twitter, joining a Discord server, or creating a post and tagging a few friends on Instagram. To claim an airdrop, users will need to fill in a form, provide a wallet address and provide proof that the tasks have been completed.
Exclusive airdrop
An exclusive airdrop only sends cryptocurrencies to designated wallets. Typically, recipients are active members of the community or early supporters of the project.
Holder airdrops
Holder airdrops distribute free tokens to those who hold a certain number of digital assets in their wallet. The project team usually takes a snapshot of users’ crypto funds at a specific date and time. If the wallet balance meets the minimum requirements, recipients can claim free tokens based on their funds at the time of the snapshot.
Airdrops allow projects to stand out and gain ground in the crypto space. It can also be a good way for cryptocurrency enthusiasts to boost their wallets with promising tokens. However, there are probably more scams than legitimate airdrops, so be careful and make sure you do your own research before participating.
