Crypto airdrops are basically the giving away of free cryptocurrency tokens. This usually happens before a token generation event. Projects use airdrops, a type of social marketing, to spread the word about their upcoming tokens and entice potential investors. Usually, this means sharing and commenting on posts on social media, which raises the posts’ exposure and builds a user base that can increase the value of the token.
There are different kinds of crypto airdrops, such as holder airdrops, in which tokens are given to people who already own tokens; hard forks, in which an original chain is copied and similar tokens are given; and airdrops that require simple social media jobs before a token-generation event. Users can also get free tokens if they use blockchain goods like Uniswap and 1inch early on.
In the crypto world, an free airdrop crypto is often used to promote new companies, their tokens, or the release of NFT collections. By giving users digital assets, projects can take advantage of the airdrop’s marketing power and help guide the spread of tokens as awards for early community members’ loyalty.
Also, crypto assets can be used for different things at different times, such as governing rights within a system or getting access to exclusive material through NFTs. Digital assets are, of course, very liquid, which means that airdropped assets can be sold for other crypto or traded for local cash currencies. Because of this, users often sell their airdropped goods right after they get them, even though projects have taken steps in the past to make this less likely.
People think that projects that thank their communities by “airdropping” assets help promote HODLing and the tendency for users to stick around and be loyal. Users of real airdrops are never asked to spend or send money to an address.
Instead, projects often use money from outside sources to pay for the assets and to get people excited at key times. There are times when users have to pay the gas fees needed to sign a smart contract, which registers the wallet for an free airdrop crypto.
How airdrops work and some examples from the past
Crypto airdrops are a way for the cryptocurrency business to distribute and sell their products. Even though there are different kinds of airdrops, most of them require users to sign up for something in order to get their free digital assets sent to their wallet addresses.
Some airdrop models may require users to do certain things to get their free assets, but the end result is always the same: users’ wallet addresses are recorded before the cutoff date and time. Here are some ways that projects could do their Crypto airdrops:
- Users have to do one or more online jobs to be eligible for the free airdrop crypto in the future.
- Assets are automatically given to people who own tokens for a certain asset, as long as the wallet has a minimum amount on the blockchain where the airdrop is happening.
- Taking a picture of the blockchain as it was at a certain point in the past and letting users claim their airdropped assets through a smart contract request
- To get a crypto airdrop, users need a wallet address and may even need to “register” themselves by interacting with a smart contract.
Back in 2014, Auroracoin may have been used in the first crypto airdrop. Everyone who was born in Iceland and had a permanent resident ID got 31.8 AUR. But because the tokenomics design wasn’t well thought out, the project’s value fell within a few months, leaving token holders who didn’t sell right away with assets they couldn’t sell and that were useless.
Despite Auroracoin’s lackluster performance, it was the first to employ this method of covert marketing, which a number of other cryptocurrency projects later adopted. By 2017, websites were made to track and collect free airdrop crypto events from different projects. This showed how popular airdrops are becoming in the field and how excited people are about them.
Many Web3 groups have used “Crypto airdrops” to share their native files, which can sometimes even be rare NFTs. In the past, airdrops from companies with names like Stellar, Bitcoin Cash, and Uniswap stood out. In the case of Stellar, over $100 million in XLM tokens were airdropped to wallet owners.
Uniswap, which is probably Ethereum’s most famous DEX, surprised its early adopters with an airdrop of its UNI token. Overall, Uniswap gave early users of the DEX and its new automatic market maker (AMM) 400 tokens per wallet. By using the protocol, users told Uniswap which Ethereum wallet addresses were qualified for the free airdrop crypto. This is because users had to sign a smart contract to connect with the platform, which proved they were there.
That means that at the time, the airdrop was worth about $1,400 in UNI. This made a lot of noise at the time because it was such a big crypto airdrop. Uniswap had set aside $350 million for their first airdrop effort. Before September 2020, any wallet that had dealt with the system could claim its 400 UNI tokens.
Due to a number of confusing factors, there isn’t enough evidence to show that airdrops have long-lasting effects on market prices, which are set at the edge anyway. That is, airdrops might not change prices at all or only for a short time.
At the time, the price of UNI was somewhere between $2 and $4, but HODLers got even more when the price broke above $40 during the 2021 bull rush. Up until this point, most projects had only given away small amounts of crypto as airdrops, which were meant to increase in value over time if the project gained support.
Uniswap was one of the first projects to give prizes to users in the past through an airdrop. Before this, crypto airdrops were usually used as a way to sell a project before it started, not after.
But when Uniswap surprised everyone in this way, it changed everything and led a number of other projects down similar tracks. The people who bought bored ape NFTs got mutant ape serums and pet dog NFTs for their bored apes. Crypto airdrops are pretty common these days, and they have even caused discussions in communities about how useful they are and whether or not they achieve the goals they say they will.
Why are Airdrops so important?
In recent years, the Web3 community has relied heavily on airdrops to push brands, get users to stick with brands, and restart blockchains without losing user trust. In the end, airdrops help people and brands build new relationships, improve existing ones, and get the word out about their goods and services in a way that is easy and cheap compared to traditional marketing methods. But how can you use them in your favor?
What’s benefits about Crypto Airdrops?
From the user’s point of view, there are many perks to using airdrop.
- People who have airdrop tokens can make money without doing anything. When a project does well, the value of its coin generally goes up, so a user can make a lot of money by keeping an airdropped token.
- Airdropped native tokens can get different perks based on the platform. For example, if the token is also a governance token, it can be used to vote on the platform’s Decentralized Autonomous Organization (DAO).
- Airdrop tokens can be used in more advanced ways to earn interest, like yield farming and loans. So, airdrops can be a source of idle income and a good way for sites to connect with users.
Risks with Crypto Airdrops
Airdrops come with some risks:
- An airdrop scam is one of the most dangerous things that can happen. As part of fake airdrops that are used to steal money, scammers sometimes ask for personal information or secret keys. Before linking your wallet and giving out any information, make sure you’ve done your research and only join airdrops from well-known projects.
- Projects may ask you to do a lot of tasks that take a long time to finish. Make sure you weigh the time you will have to spend against the money you might make.
- Attackers could send a small bit of coin (called “dust”) to many addresses, including yours, as part of a dusting attack. The goal of this project is to track bitcoin activities and find out who the users are.
- Before taking part in an airdrop, make sure you read the rules and understand them. Some airdrops may have rules or standards that you need to know about.
Crypto airdrops can be a great way for people and groups to get free crypto. Even though users can get crypto assets for free or almost free, projects can get people’s attention, raise brand knowledge, and maybe even build a group of loyal and eager users. Some of the most well-known projects in the crypto world, like Bitcoin and Ethereum, have grown and developed significantly as a result of successful airdrops.
Before taking part in an airdrop, you should do a lot of research and think carefully about how real it is, as there are many scams and fake projects. Still, if users take the right steps and know what they’re doing, they may be able to gain from Crypto airdrops and help the crypto community grow at the same time.
Crypto airdrops are just one of the many ways that Web3 projects have changed the way startup projects use tokenomics. In fact, it is usual for companies to set aside a certain number of tokens from the total quantity for airdrops at the start of a project.
Even though airdrops can be profitable, some of them require you to spend a lot of time and money that you could have used elsewhere, so be careful. Seeking out airdrops just to get free tokens is a risky move that could lead bad people to try to take advantage of people who aren’t paying attention.