What is an airdrop?
Cryptocurrency airdrops are simply free coins or tokens distributed to the public during an initial offering/launch into the market. An airdrop is a procedure for distributing tokens/coins in certain proportions to holders of particular currencies such as Bitcoin, NEO or Ethereum. For you to get the coins, you need to have a way of storing them, i.e, have a wallet which supports the airdropped coins. Distribution of airdrops is done free and anyone in the world can get these coins.
Established blockchain companies also perform airdrops. One of the most common airdrops in the crypto market happens when there are hardforks. When there was a hardfork of Bitcoin to Bitcoin Cash, holders of Bitcoin were given an equivalent amount of Bitcoin Cash. At that time, if you were holding 0.5 BTC, then you received 0.5 BCH.
How airdrops work
Blockchain-based startups focus on marketing their projects because it helps generate a buzz in the crypto community. The pre-announcement about airdrops helps the community to familiarize themselves with the project and gain interest. The buzz before the airdrop helps a project to gain a huge following which will be pivotal for their ICO and value in the market.
The aim of an airdrop is to reset a project. Therefore, the process involves completion of specified tasks by those interested in the airdrop for them to qualify. The project specifies the date for the airdrop and all those who had qualified receive free tokens in their wallet.
Airdrops are seen as more effective ways to showcasing coins and as opportunities to give the market a taste of the token. Recipients of these tokens can therefore consider purchasing more if they believe in the projects.
Why an airdrop?
- Create awareness about a new token
The crypto market is large hence a new token in the market can go unnoticed if the creators do not carry out big marketing campaigns. The crypto ecosystem is fueled by hype and buzz. Airdrops therefore serve to get new people interested in a new token. The market takes time to review and market the token to in an aim to earn more of the free tokens.
The new airdrops create certain requirements in order for them to issue the tokens. The involved people need to market the token on social media through posts on Twitter, Facebook, BitcoinTalk, Reddit and Steemit among other platforms. Also, there needs to be regular blog posts and YouTube videos all marketing the new token. Such marketing ensures that a high number of crypto enthusiasts get the information about the new token, increasing participation in the cryptocurrency.
- Even distribution of the total token supply
Many projects aim at having their tokens owned by many people across the world. Having just a few holders of a token may affect its price as well as performance. This is hugely because their actions will reflect on the token. Certain projects have voting or staking rights. With such a right in the project, if few individuals own most of the token supply, then they might take over the entire decision making, resulting to a network takeover or a 51% attack.
- Generate lead database
Marketing involves creating leads and using data to analyze the interests of people. Companies use this to understand how to sell their products and also increase patronage for their campaigns.
Airdrops can be used by projects to generate valuable lead databases. These projects create online forms where users are required to fill in valuable information in exchange for the free tokens. The information is used to develop targeted marketing campaigns by the crypto projects.
- To reward loyal investors
Many projects in the crypto community like to reward their loyal and early investors, supporters and adaptors. These include exchanges, wallets, trading platforms etc. the airdrops can influence more customers to hold the tokens.
An example of such an airdrop is that of Binance in 2017. Binance carried out an airdrop of 500TRC tokens to account owners on their platform. The airdrop took place from end of October 2017 to middle of November 2017.
Hardforks are a popular way in the crypto market to create new coins. When hardforks happen, the new coins are mostly distributed to the holders of the parent coin in form of airdrops. Coins that have hard successful hardforks include Bitcoin, Ethereum, Litecoin and Monero.
- Mass adoption
The blockchain technology faces adoption issues as only a small percent of the world population is currently in support of the technology. Many projects that undertake ICOs do not reach their funding goals. This means that the use of their technology might be limited. Offering free coins to the market might therefore entice more people to invest in blockchain projects, trade, hodl and use the tokens in their daily transactions.
How to get involved in airdrops
There are many online sites such as Icodrops and Airdropalert that are dedicated to informing users about past, active and incoming airdrops. These sites also advice you on the currency you need to hold to receive the coins and days remaining for the airdrop to take place. Other social media sites such as BitcoinTalk, Telegram and Twitter also have groups and dedicated handles which offer detailed updates of airdrops. You therefore need to be active on some of these sites to get information of upcoming airdrops.
Getting involved in an airdrop therefore requires you to be informed and sign up. There are certain requirements that you need in order to qualify for the airdrops. These include; Ethereum Wallet, Twitter account, Telegrams group member and email address for verification.
Claiming an airdrop
Different projects have different ways of releasing their airdrops to the participants. Some projects also state the wallet that participants will need for the coins to be released. Majority of the cryptocurrencies with airdrops in the market are Ethereum dapps. You therefore need an ERC20 compatible multicurrency wallet.
Avoiding airdrop scams
There are a lot of scammers in the cryptocurrency market. You need to be aware of certain factors before you get scammed in the name of airdrops. There are several red flags that can warn you of a scam;
- Projects asking for money
Steer away from any airdrop that asks you to send money. Airdrops are FREE! There are certain requirements you need to adhere to in order to receive the free tokens but none of them is sending any money or token to any address.
- Projects asking for private keys
There are tools such as Etherscan that can help anyone to check your crypto balance. Therefore, you do not need to send someone your private key since they are out to drain you of your coins.
- Suspicious official sources
When projects are doing airdrops, they will post on their social media platforms before the date of the airdrop. Be sure to check their official accounts on Twitter, Facebook and Bitcointalk for such information. If there is no such data, they might be scammers. Also ensure that that is the official account for the said token since scammers are known to create fake profiles to entice users.
The lack of regulation in the crypto market is one of the causes of the many scams. Make sure that you are safe from these scams by undertaking a research to ensure the project and the airdrop is legit.
There are many sites which can help you to stay informed about airdrops in the market. Remember that these projects might perform very well in the market in future, bringing you huge returns from hodling. I hope this guide on airdrops will help you earn coins in the market which can later translate to money.