Cryptocurrency Airdrop: What Is It and How Does It Work

The truth is, many individuals cannot afford to purchase many cryptocurrencies due to the extremely expensive prices. However, to the advent of “Cryptocurrency airdrop”, many individuals are able to get their hands on startup projects in the crypto space and potentially build a profitable cryptocurrency portfolio from them.

As the reader dives deeper through the article, we do recommend that notes are taken as this could potentially carry the answers to their financial hurdles in the crypto space.

Cryptocurrency-Airdrop-What-Is-It-and-How-Does-It-Work

What Is Cryptocurrency Airdrop?

For promotional purposes, certain digital currencies will “airdrop” their coins or tokens directly to users’ wallets. In exchange for a little service, like retweeting a message provided by the company creating the crypto, the new virtual money is distributed in tiny portions to the wallets of prominent users of the blockchain ecosystem. In the cryptospace, airdrops are ways to get the word out about a new coin and increase its circulation.

To assist get their virtual currency projects off the ground, blockchain-based firms will often engage in a promotional tactic known as a crypto airdrop. The purpose of this ICO is to promote the cryptocurrency and encourage more people to buy and sell it when it list on a market (ICO).

Companies often announce airdrops on their own channels, as well as on social media and cryptocurrency discussion boards. Focusing on the blockchain platform or the currencies held in current wallets, coins or units are only transmitted to those wallets that are authorized to receive them.

A recipient may be required to keep a specific number of the digital coins in the wallet in order to receive the free gift. Another option is for them to carry out some sort of action, such talking about the coin on a social networking site, making contact with a specific participant in the crowdfunding campaign, or publishing a blog post.

Types Of Cryptocurrency Airdrop

#1. Bounty Airdrop

In the crypto space, users can get bountiful airdrops in exchange for completing specific activities. As part of these duties, you can be asked to retweet a tweet about the program or share a social media posting that mentions the company. Additionally, people who bring in new participants, subscribe to the project’s email, or join the business’s Discord channel may be eligible for referral rewards or finder’s rewards.

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Users often accrue points in return for completing activities, with the points’ value determining the size of the reward airdrop they get. Additionally, users may need to reach a particular point total before they are eligible to get their airdrop. For an airdrop, a user might need 300 points, with each of the aforementioned categories costing 100 points.

#2. Holder Airdrop

Cryptocurrency airdrops are sent automatically to holders, with the amount received depending on the number of tokens each holder possesses. All blockchain users can see where tokens are being stored and allocated because this data is public and stored in a distributed ledger.

There is a risk that some token holders won’t accept an airdrop if they receive it as a reward for holding their tokens. As an option, holder airdrops restrict benefits to the largest and most committed investors. In the case of holder airdrops, the award value may be prorated if the member does not hold the minimum required number of tokens.

#3. Raffle Airdrop

A raffle airdrop could be used in conjunction with any of the other sorts of airdrops. Many projects advertise the quantity of airdrops they want participants to obtain raffle tickets for, to win free cryptocurrency. The right to this ticket might be demonstrated through the possession of tokens or the accumulation of points.

Finally, the population of citizens who want to participate in the airdrop can much outstrip the amount that the corporation is willing to give away. In this case, the airdrop is distributed to a select group of wallets via a lottery.

#4. Exclusive Airdrop

Another exclusive cryptocurrency airdrop is a subset of the owner airdrop in which only a small group of people receive the cryptocurrency. The key distinction is that they may be chosen not according to the amount of items they possess. But its based on other criteria, such as the duration of time someone have dedicated to a program. Notwithstanding, the amount of money that has invested on non-token activities, or the frequency of forum comments they have made. The exclusive airdrop would be a highly centralized method of rewarding the most integral members of the project. It may distribute tokens to wallets that have no tokens in them at all.

#5. Standard Airdrop

Most crypto airdrops require participants to just show enthusiasm for receiving the airdrop in order to be eligible to receive it. Some airdrops require nothing more than a wallet address from the participant.

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In the case of typical airdrops, the number of tokens available for distribution and the maximum number of tokens any one user can receive are both predetermined in advance. This means that there is a time limit on the most common types of airdrops. There is nothing preventing a single client from establishing many wallets to fast deplete the airdrop quantity. Thereby, making these airdrops potentially more difficult to receive despite their popularity due to their ease of use.

How Does Cryptocurrency Airdrop Work

Starting a crypto airdrop requires the project or firm to recognize a need for one. This could be done in reaction to market strategies. As a result of a network hard fork, or to reward current investors. The very first thing that must be done is to decide how and why the airdrop should be executed and who will be allowed to participate.

For massive, system-wide airdrops, the next stage is to announce the initiative to the public at large. Wallet addresses are usually all that is needed, but some businesses may additionally collect emails in order to expand their contact list, therefore this is something that corporations do.

Sometimes, in order to determine who qualifies for an airdrop based on a set of characteristics, a picture is taken. At closing time on December 31st, the project may take a snapshot to reveal all addresses holding over 1000 tokens. As airdrop outcomes are locked at the time of snapshot, value of the token will fluctuate in reaction snapshot timing.

After a list of participants has been compiled, the airdrop is typically handled by smart contracts. The corporation may utilize its Treasury wallet to distribute the tokens. It is a common practice to make the transaction restrict public to prove the airdrop’s fairness. When the transaction is complete, the airdrop will have been distributed from the company’s wallet to the beneficiaries..

Pros And Cons Of Cryptocurrency Airdrops

Pros

In light of the incredibly high level of rivalry among cryptocurrency firms, airdrops are an effort to distinguish oneself. There are companies that specialize in crypto airdrops, providing users with notifications and listing services for startups. There’s also a variety of advertising services to help them optimize their airdrops. There are, as always, excellent and bad companies operating in this market.

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CoinDesk Advisory Board Chair and MIT Blockchain Research Initiative advisor Michael J. Casey recently suggested in a blog post that bitcoin success requires some method of advertising. There is no value in a currency unless it is universally accepted. And that can’t happen unless people spend money promoting its wider adoption.

Cons

However, in regards to crypto airdrops, there’s many various factors to think about. The mechanism of “redeeming” airdrops raises particular concerns for network security. Some airdrops, for instance, can require users to link their wallets to malicious third-party sites (web3). This might then give the thief access to the participant’s private information (such as the keys or login).

The projects behind certain cryptocurrency airdrops may not be real either. Some projects use the allure of free money to persuade participants to increase their investment in their airdrop. It’s possible that the end goal is to “rug pull” shareholders. They flood the market with so many tokens at once that the price crashes and the airdrops are rendered useless.

Frequently Asked Questions

Do crypto airdrops generate revenue?

For people who own crypto wallets or certain crypto tokens, airdrops are actually a terrific way to generate passive income in the cryptocurrency markets and make significant returns on virtually no investment.

Crypto airdrops: Are they a free gift?

While cryptocurrency airdrops aren’t easy cash, they get the closest to letting you get some highly lucrative tokens for doing virtually nothing.

Conclusion

Airdrops are open doors to 10x returns in years ahead, although it goes with a lot of research expertise. With a bit of hard work, one could find him/herself on a path to success in the crypto space.

Editor’s Recommendation

References

  1. Cryptocurrency Airdrop: What Is It and How Does It Work
  2. What is a crypto airdrop, and how does it work?

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