What are Airdrops in Crypto

Jon Ganor
Jon Ganor
Blog

tl;dr

  • Airdrops are used as alternative means for project marketing and community-building.

  • Airdrops involve distributing free tokens to introduce projects or reward early supporters.

  • Benefits include: increasing awareness, attracting new users, rewarding early adopters, building communities.
  • There are two types of airdrops: free airdrops (tokens deposited) and bounty airdrops (tasks required).

Introduction

The Web3 world has witnessed significant growth and innovation, driven by the evolution of blockchain technology and the increasing adoption of decentralized applications (dApps). However, this growth has been met with challenges, as bans on advertising Web3 projects and cryptocurrencies on major social media platforms such as Facebook, Reddit, Twitter, and even Google have compelled these projects to devise unique methods for marketing and community building.

In response to these restrictions, Web3 projects have embarked on unconventional strategies to raise awareness and foster a vibrant community around their protocols. The absence of traditional advertising avenues has prompted them to seek alternative ways to connect with their target audience including Airdrops. 

Beyond airdrops, projects are focusing on cultivating strong communities through engagement, education, and collaboration. Many projects host online forums, community-led initiatives, and developer bounties to foster a sense of belonging and mutual support. Additionally, informative content creation, webinars, and AMA sessions serve as invaluable tools for educating the public about the intricacies and benefits of Web3 projects.

Partnerships with other protocols and projects are also gaining traction, creating synergies that amplify reach and value. This approach capitalizes on cross-promotion and shared audiences, tapping into the power of network effects.

What are Crypto Airdrops? 

Crypto airdrops have become a popular tactic for cryptocurrency projects to gain attention and establish a strong user base. These airdrops involve distributing free tokens to individuals, serving as a means to introduce them to new projects or reward early supporters. Airdrops offer a range of benefits, starting with their capacity to increase awareness of emerging projects. When users receive complimentary tokens, they are more likely to explore the project's features and value proposition.

Beyond awareness, airdrops effectively attract new users to cryptocurrency projects. The allure of receiving free tokens incentivizes individuals to engage with the project, transitioning from passive observers to active participants within the community. Furthermore, airdrops acknowledge and reward early adopters who take a leap of faith in the project's infancy. By offering tokens, projects express gratitude and nurture a sense of loyalty among these pivotal supporters.

Perhaps the most substantial outcome of airdrops is their ability to foster a vibrant and engaged community. Recipients of free tokens tend to contribute actively to community discussions, collaborations, and promotions. This organic engagement amplifies the project's visibility through word-of-mouth and grassroots advocacy. Overall, airdrops serve as a powerful tool within the cryptocurrency landscape, enabling projects to simultaneously attract users, acknowledge their supporters, and build a dedicated community that champions their success.

How do Airdrops Work? 

Airdrops operate with varying intricacies, but they generally adhere to a few common stages. Firstly, the project initiates the airdrop and outlines the eligibility criteria, which could encompass factors like owning a certain cryptocurrency or holding a specific amount of tokens.

Next, the project compiles a roster of qualifying wallets. These wallets typically align with the specified criteria and belong to users who meet the prerequisites for the airdrop. Tokens are then dispensed to these eligible wallets, directly transferring the specified amount to the recipients.

In certain cases, airdrops necessitate participants to actively claim their tokens. This step serves as a measure to ensure that individuals who are genuinely interested in the project partake, rather than tokens being distributed to disengaged or indifferent users.

Types of Crypto Airdrops 

Crypto airdrops manifest in two primary forms, each distinct in its mechanics:

In the realm of free airdrops, users are granted tokens without necessitating any action on their part. Tokens are seamlessly allocated to eligible wallets, requiring no engagement or task completion.

On the flip side, bounty airdrops demand participants to fulfill specific tasks to acquire tokens. These tasks encompass diverse actions like following the project on social media, retweeting designated posts, joining Telegram groups, or performing other engagement-driven activities.

Examples of Crypto Airdrops 

The Uniswap airdrop, conducted in September 2020, notably allocated 400 UNI tokens to each Ethereum address that had interacted with the Uniswap protocol before September 1, 2020. With a value surpassing $1,000 at the time, this airdrop significantly elevated Uniswap's stature as one of the most influential decentralized exchanges globally.

Arbitrum, a Layer 2 scaling solution for Ethereum, followed suit with its airdrop in December 2021. The initiative distributed 100 ARB tokens to each Ethereum address that had engaged with Arbitrum by December 1, 2021. This airdrop, worth over $100, showcased Arbitrum's potential to enhance Ethereum's scalability and garnered substantial attention within the crypto community.

Similarly, Ethereum Name Service, or ENS orchestrated an airdrop in November 2021, gifting 100 ENS tokens to Ethereum addresses that had registered an ENS domain before November 1, 2021. With a valuation exceeding $100, this airdrop contributed significantly to ENS's status as a leading decentralized naming system. These examples underscore the strategic significance of crypto airdrops in fostering community engagement, incentivizing participation, and amplifying the recognition of innovative projects across the crypto sphere.

Hord’s Airdrop

Hord's Early Adopter Program offers participants in the GALXE campaign a unique opportunity to engage with the platform and receive rewards for their involvement. By completing tasks like staking ETH within the Hord ecosystem, participants become eligible for an airdrop of HORD tokens. These tokens hold multifaceted value as they grant holders a proportional share of the platform's revenue and bestow governance rights.

The program not only incentivizes early adopters to actively participate in the Hord ecosystem and establishes a link between their contributions and the project's success. By offering HORD tokens as rewards, Hord ensures that its users have a vested interest in the platform's growth and prosperity.

The Pros & Cons of Crypto Airdrops 

Airdrops bring forth several benefits. First, they provide a pathway to obtain cryptocurrency at no cost, offering an accessible entry into the crypto realm and enabling portfolio diversification. 

Second, airdrops serve as a powerful tool for boosting the visibility of emerging cryptocurrency projects. This heightened exposure aids projects in attracting fresh users and potential investors. 

Third, airdrops can serve as a form of recognition for early adopters, rewarding their trust and commitment to a project during its nascent stages. Lastly, airdrops contribute to the formation of engaged and robust communities around cryptocurrency projects, fostering a sense of unity and shared enthusiasm among participants.

There are also notable drawbacks to airdrops. Users must remain vigilant against scams that aim to deceive participants by requesting personal information or funds in exchange for tokens. 

Additionally, the value of airdropped tokens may be uncertain or fleeting due to their free distribution and the unpredictable trajectory of the underlying project's success. Tax complexities arise as well, with airdropped tokens potentially being categorized as taxable income in specific jurisdictions. 

Lastly, participating in airdrops demands users' time and effort, often involving tasks like following projects on social media or completing assignments.

Airdrops Scams

Airdrop scams in the cryptocurrency realm are fraudulent schemes designed to deceive users into sharing personal information or sending cryptocurrency under the pretense of receiving fake airdrops. Scammers employ various tactics, including phishing, bounty scams, and fake airdrop websites, exploiting users' trust and curiosity to steal their assets.

Phishing involves crafting deceptive messages or emails resembling legitimate cryptocurrency projects, luring users to fake websites where personal information and cryptocurrency are extracted. In bounty scams, scammers present themselves as airdrop organizers, prompting users to reveal sensitive details or transfer cryptocurrency to their wallets. Fake airdrop websites replicate authentic project sites, often with countdown timers, enticing users to submit information or cryptocurrency to access the purported airdrop.

Remaining vigilant and informed is essential in safeguarding yourself against the risks posed by airdrop scams in the cryptocurrency space.

Final Thoughts

The future of airdrops in the cryptocurrency landscape is likely to be influenced by evolving policies and shifts in the industry. As the Web3 ecosystem gains recognition and legitimacy, there are indications that airdrops may change, particularly in their necessity & prevalence.

One notable factor is the evolving stance of advertising policies on major social media platforms. With bans on advertising for cryptocurrencies and Web3 projects gradually being reconsidered, the avenue for projects to promote themselves is expanding. This shift could reduce the reliance on airdrops as a means of raising awareness and attracting users.

As more avenues for legitimate advertising open up, cryptocurrency projects may increasingly prioritize alternative methods for community-building and engagement. While airdrops have been effective in the past for generating interest and establishing a user base, the changing advertising landscape might encourage projects to explore a wider array of marketing strategies.

Nonetheless, airdrops may not entirely disappear from the cryptocurrency space. They could continue to serve as a tool for rewarding early adopters, incentivizing user engagement, and fostering community participation. Additionally, in regions where advertising policies remain restrictive, airdrops might remain a viable means of gaining exposure.

FAQs

How can I get airdrops from crypto?

To receive an airdrop, you need to be eligible for one, depending on the protocol’s requirements.

How Can I Find Crypto Airdrops?

There are several dedicated websites to airdrops in the Web3 space.

How Can I Make Money from Crypto Airdrops?

Eligible individuals that have received tokens can sell them on an exchange or DEX.

Are Crypto Airdrops Legit?

Some are, some aren’t. Please do your research regarding an airdrop before participating.

Are Crypto Airdrops Taxable?

Taxes on cryptocurrencies can vary depending on your country or even regions within countries. Please consult with a qualified accountant or expert on taxes in your area.