Crypto airdrop: What is it? How does it work?

The number of cryptocurrencies in circulation around the world increases every day. In this context, standing out from the rest has become challenging for virtual currencies. Their life cycle depends on the amount of people trading and holding them. A popular solution for promoting them to those who have public crypto wallets? Crypto Airdrop! A technique of cryptocurrency trading that you must know.  It’s different from the traditional method of investing your own money. 

Interested to know more about it? Keep reading!

What is a Cryptocurrency Airdrop?

‘Airdrop’ in cryptocurrency means the distribution of coins or tokens sent to investors for free. They are sent in order to generate mass awareness of these crypto projects and generate engagement from the recipients. A marketing strategy used by blockchain companies to encourage investors to be on their platforms

In plain English, it’s like trying out a small sample of a product that is new in the market. The company may decide to allow a selected number of people to use these coins or tokens for free. Its made with the promise of future monetary rewards if it gains traction in the market

How to receive crypto airdrops?

The main criteria for being considered suitable to receive these free crypto airdrops is holding a cryptocurrency wallet so the blockchain-based company can deliver the free tokens to the participant wallet address. 

Something to also take into consideration is that the participants must know and understand the blockchain on which the platform is constructed because each platform could demand participants to have a wallet that is based on the blockchain they use. 

For example, the crypto wallet ‘MyEtherWallet’ is used for Ethereum-based tokens. In other hand, the crypto wallet ‘StellarPort’ is for those built on the Stellar Blockchain. 

How do airdrops crypto work? 

The process starts when a new blockchain-based business wants to promote its cryptocurrency. To do that, they transfer free coins or tokens to established cryptocurrency wallet holders after they raise awareness of the project. You must take into account that airdropped tokens are coins in their early days.  This means that the market is not fully developed and trading prices are nonexistent

Also, depending on the type of crypto airdrop, it works in different ways. The most common examples are the following: 

  • Bounty airdrop: This is the most common crypto airdrop. It requires users to complete determined tasks to receive the free tokens. For example, it could involve sharing posts related to the company’s project on social media. For this type of airdrop, the participant can claim the bounty airdrop after filling out a form with their wallet address and proof of having completed the task.
  • Exclusive airdrops: Those who are active and considered ‘early’ members community are usually the ones who are given small amounts of the cryptocurrencies at no cost. Also, the governance token gives them the right to vote on development matters of the project in the future. 
  • Holder airdrops: This type of crypto airdrop is for those who hold a specific amount of digital assets in their wallet and such wallet meets the minimum requirements. The crypto airdrop is done on a specific date and time and the recipient can claim the free tokens depending on the holdings they had when the snapshot occurred. For instance, Stellar Lumens airdropped 3 billion XLM tokens in 2016 to holders of Bitcoin. 

Either way, both companies, and participants can have win-win outcomes. The participant gets awareness of the new virtual coin while the company gains exposure through the word of mouth of the participant.

Airdrop crypto scams: Recognise legit crypto airdrops

Being able to recognize if a crypto airdrop is legit or a scam, could be difficult. For this reason, it is important to run a background check to verify the validity of the airdrops. Specially, you must keep an eye on those who ask for actions involving economic costs for the participant or ask participants to have control over their private keys. Legit airdrops will never ask for this information. This is dangerous not only in regards to losing funds but being stolen of private and personal information too

To avoid these situations, make sure you look into the official social media and website channels of the company, paying attention not only to their official announcements but to what the community members are saying about it. If you cannot find enough information or the amount of the airdrop promised is way too high, it is better to ignore the airdrop. 

At Games for a Living we recommend you to set up a new crypto wallet with a new email address used exclusively for receiving crypto airdrops. This could help you protect your funds and private information from phishing attempts.