If you have been paying attention to the crypto world, then you have come across the term airdrop. So, what is a cryptocurrency airdrop and how can you benefit from it? A cryptocurrency airdrop is a coin giveaway that the crypto world uses as a means of distribution and awareness creation. Yes, you can get legit coins for free!
Note that an airdrop is not to be confused with an Initial Coin Offering where companies raise money for their crypto ventures. They may use this method at the initial stages of an ICO, though. They are a way of distributing crypto assets to investors, at no cost whatsoever, often as a means of encouraging people to adopt the specific token.
Sometimes in order to receive the free cryptocurrency, you may need a minimum amount of cryptocoins in your wallet. Or in other cases, you may be required to perform specific tasks like posting about something on social media forums, writing a blog post, or subscribing to an emailing list.
The Primary Purpose of a Cryptocurrency Airdrop
There are two main reasons why tokens are making airdrops, and we discuss them both below. But before that, note that it is not only the newbie tokens that are making airdrops. Bitcoin Cash whose market cap is $18.5 billion – making it the fourth most valuable cryptocurrency in the world – announced an airdrop of $20 million worth of Bitcoin Cash. Tron, the 10th most valuable cryptocurrency with $3.8 billion in market cap, made an airdrop or TRX worth $1.7 million. See, it’s not just the newcomers using this method to distribute and market their digital coins.
- Marketing New and Existing Coins
About a decade ago, there were only a handful cryptocurrencies, which didn’t need to fight for their place in the digital world. Today, there are over 1,900 different coins from different organizations and more on the way. Airdrops are being used as one of the most effective ways to market and distribute tokens, especially with the new rules that are making it almost impossible to advertise ICOs on online platforms. Being as airdrops are ways of distributing free money, they are the preferred method of getting the word out there.
Facebook, Google, and most recently Twitter have banned the advertisement of ICOs in relation to the ongoing scrutiny by regulatory bodies. This ban means tokens have to find new ways to get through to the masses without breaking the law and airdrops have proven to be one of the easier ways. Although the number of coins received is quite small, the idea is that the receiver will spread the word within their circles, effectively creating awareness of new offers. Does it always work? Well, not indeed as some people will receive the coins and not breathe a word of it, but the curious ones will interrogate and tell their peers about it as a way of showing gratitude.
- A Distribution Mechanism
The last few months have bred uncertainty for ICOs. While they were an acceptable method of distributing tokens and raising funds for both new and existing digital organizations, they have come under scrutiny lately with regulatory authorities questioning safety for investors. The main concern is whether an ICO qualifies as a security offering.
These uncertainties have made tokens look for alternative methods of creating awareness and distributing digital coins, which explains how 84% of funds raised by ICOs in January and February 2018 were made through private sales and then distribution made through airdrops.
Airdrops have also seen used where a token changes its protocol – hard fork. The best-known scenario was in 2017 when Bitcoin Cash forked from Bitcoin. Holders of Bitcoin received an amount of BCH equal to what they had in their wallets to make up for the new changes.
Who owns the airdropped tokens?
The recipient/ you.
As long as a crypto-asset (cryptocurrency) gets into your wallet, the asset is indisputably the property of the person or entity that owns the private key to that wallet. This means that once cryptocurrency is airdropped to your wallet, you can use it for whatever you see fit.
Some of the major reasons companies do cryptocurrency airdrops
- Marketing
Looking back at the history of the major players in the cryptocurrency world, they spread the word of their existence through airdropping. Take Ethereum for example – it didn’t become popular overnight because someone discovered ETH and blogged or tweeted about it. No. It rose to popularity through airdropping. ETH wallet-holders woke up to the undisclosed amount of ETH token as reflected in their balance. Of course, you will talk about something like this – hundreds or a thousand free coins – and that is how you make a company popular.
For most people, getting free coins means you first Google it, ask someone about it, then tell your friends and colleagues about it. With millions of others doing the same, airdropping becomes a marketing front.
- Lead Database Generation
Airdrops generate valuable lead databases for organizations. For this, users have to fill out online forms with valuable user information.
- Pumping up the value of the coins
But, marketing isn’t the only thing that airdropping cryptocurrency does. It pumps the value of the coins. Often, after a company announces an airdrop, the coin holders receive bonuses proportional to the number of coins they hold.
- Reward to loyal customers
In most cases, blockchain-based services like trading platforms and cryptocurrency exchange employ airdropping as a reward system for their subscribers and customers. For example, Binance, a renowned cryptocurrency exchange platform used rewarded its account holders with an airdrop worth 500TRX of cryptocurrency between October and November 2017. All account holders needed was a minimum of 0.003 BTC in their accounts, and they were required to have completed at least a single transaction on the account.
And in March 2018, CloudBounce (a decentralized AI audio ecosystem) had an airdrop worth 8 million DB tokens.
This way, the airdrops boost engagement and encourage customer loyalty.
- Incentive
In other cases, airdrops serve as incentives for the receivers to research on the token and the project behind it. Startups often do this with the hope that a potential investor will like the project and support it further. Airdrops also demonstrate the value and capabilities of the network.
So what’s the catch?
Nobody gives away freebies out of the goodness of their heart. One indirect catch in airdropping – is that despite the recipient being the undisputed owner of the tokens, the tokens cannot be traded on the common and large exchanges. You may have to sign up to smaller and less-known exchanges to use that coin.
Another issue is that there might not be much that you can do with the airdropped coins because, they are so new and pretty much unknown.
Who can participate in Airdrops?
Anyone, really, as there are two ways airdrops are conducted. One, surprise airdrops that will be made to existing Ethereum and/or Bitcoin wallet holders. The conditions for surprise airdrops are mostly only known to the token making the drop, but pre-announced airdrops are a tad different.
These are the three common conditions necessary for a pre-announced drop:
- Have a Telegram account: The crypto community uses Telegram as its default messaging app, and so you should have an account to converse with people and get informed.
- An ERC20 Compliant Wallet: an Ethereum wallet is a must-have as most tokens are ERC20 tokens. Your account must be active too for you to be selected for airdrops.
- Be on Twitter: one of the requirements by airdrops could be Twitter re-tweets, and so they insist you follow their Twitter accounts. Active participation on Twitter could land you a few free digital coins!
Get involved Today!
Since we all love free coins, getting involved in airdrops sounds like an excellent idea! So, I’m sure you want to get started right away. Finding news about an upcoming airdrop will not be hard if you are already on telegram and twitter, and following the markets closely. News on cryptocurrency is very active and fast paced today. You won’t miss out on anything, if you are keeping a keen eye on the community.
Some tips for people wanting to get involved with Airdrops
Be Wise – Avoid Scammers
Naturally, such activity as airdropping attracts scammers and you will know them by their actions.
They will ask for money: If we haven’t made it clear enough, you are not required to pay a dime for an airdrop. If you receive a request for any amount of money however small, run!
Private Key: It is called a private key for a reason. Do not be tempted to give it to anyone or your wallet will be drained. Protect your coins.
Sources for information: The most trusted sources of information as far as airdrops are concerned are Twitter and Telegram. There are other sites dedicated to airdrop news such as Airdrop Addict and Airdrops Live.
Is this Method Sustainable?
It looks like airdrops are here to stay, but we never know whether regulatory bodies will start looking into them too. At the moment, they work ideally.
Final Thoughts
Even though airdrops might be great investments, they might be a complete waste of time especially if you don’t research widely to uncover the actual value of the coins and the company’s growth plans.
Be security-conscious when taking part in airdrops since there are numerous fraudulent airdrop campaigns to steal private keys and hack wallets. Confirm the authenticity of an airdrop before participating and don’t use your private keys to check your token balance.