With the ever-growing number of new coins, it's difficult for crypto investors and traders to keep track of all the new projects. As such, some crypto projects offer airdrops as a way to stand out and increase awareness. It involves distributing their native cryptocurrency to current or potential users' for free.
Anyone with a cryptocurrency wallet can receive or claim an airdrop, but you should always be careful with scammers as airdrops are not always legit. Let's see how does airdrop work and the different types of airdrop there are.
Airdrop Crypto Meaning
A crypto airdrop refers to the transfer of digital assets from a crypto project to multiple wallets. The idea is to distribute coins or tokens to current or potential users to increase awareness of the project. These tokens are given out for free, but some airdrops require users to perform certain tasks before claiming. Crypto airdrops became popular during the initial coin offering (ICO) boom of 2017, but are still used as a marketing strategy by many crypto projects today.
How Does Airdrop Work?
There are different types of crypto airdrops, but they usually consist of a small amount of cryptocurrency being distributed to several wallets (usually on ETHereum or Binance Smart Chain). Although less common, there are also projects that giveaway NFTs instead of regular crypto.
Some projects will do the distribution without further requirements while others will require you to perform certain tasks before claiming. These tasks often include following social media accounts, subscribing to a newsletter, or holding a minimum amount of coins in your wallet. However, you are not always guaranteed to get the airdropped tokens.
In some cases, the airdrops are given only to wallets that interacted with the project's platform before a certain date. 1INCH and Uniswap are popular examples that used this mETHod to support early adopters. But unlike common airdrops, those were worth thousands of dollars.
Claiming an Airdrop
As mentioned, the process will vary from project to project. But the most important thing you need for claiming an airdrop is a cryptocurrency wallet. MetaMask is a popular and easy to use crypto wallet. After that, you can check if your wallet received free tokens. If not, you will likely have to interact with a website to claim the airdrop.
Types of Airdrop
As we've seen, there are different ways to conduct a cryptocurrency airdrop. Apart from the standard airdrop that simply transfers crypto to several wallets, we have a few other types. Common examples include bounty, exclusive, and holder airdrops.
Bounty Airdrop
A bounty airdrop requires users to complete certain tasks, such as sharing a post about the project on Twitter, joining the project's official Telegram, or creating a post and tagging a few friends on Instagram. To claim a bounty airdrop, you'll likely be asked to fill out a form with your wallet address and provide proof that you completed the tasks.
Exclusive Airdrop
An exclusive airdrop only sends crypto to designated wallets. Typically, the recipients have an established history with the project, such as being an active community member or an early supporter of the project.
In September 2020, decentralized exchange (DEX) Uniswap airdropped 400 UNI to every wallet that had interacted with their protocol before a certain date. The governance token gives holders the right to vote on decisions related to the project's development in the future.
Holder Airdrop
Holder airdrops distribute free tokens to those that hold a certain amount of digital currencies in their wallet. The project team usually takes a snapshot of users' crypto holdings on a specific date and time. If the wallet balance meets the minimum requirement, recipients can claim free tokens according to their holdings at the time of the snapshot.
Many new projects airdrop tokens to bitcoin (BTC), ETHer (ETH), or BSC wallet holders, as they have the largest communities in the space. For example, Stellar Lumens (XLM) airdropped 3 billion XLM to BTC holders in 2016, and the airdrop was exclusive to users in the Bitcoin network.
Closing Thoughts
Crypto airdrops allow crypto projects to stand out and gain traction in the crypto space. It can also be a good way for crypto enthusiasts to grow their portfolio with up-and-coming tokens. However, there are likely more scam airdrops than legitimate ones around
Thus, having understood how does airdrop work and the various types that exist to date, do be cautious of especially those that sound too good to be true and make sure to do your own research before participating.
