What is a Crypto Airdrop? Pros and Cons, how does it work?

Currently, most of us are aware of various types of cryptocurrencies around us. While the debate over their use continues, more and more people are entering the world of cryptocurrencies. With this, there will be more players in the industry, and the demand for attracting more users to the blockchain services of projects also increases. Thus, coin airdrops have become a very important tool for such purposes. So, what is an airdrop? Fundamentally, an airdrop is just what you’ve seen in many online games you play, a promotional gift for the player to keep them engaged. Coin airdrops do this by giving away free coins or tokens related to the service. In return, they often require participants to promote their service on various social media platforms.

There have been many airdrops so far, with some of them still lined up in the coming weeks. Most cryptocurrency investors have encountered an airdrop from one platform or another in the past. In case you also have but are unsure about its meaning, below is an example for you to understand what a coin airdrop is and how they work.

How does Crypto Airdrop work?

A crypto airdrop works as a promotional activity typically conducted by blockchain-based startups, with the aim of bootstrapping their cryptocurrency project. Here’s a detailed breakdown of how it works:

1. Objective: The primary goal of a crypto airdrop is to promote a new cryptocurrency project, increase its awareness among potential investors, and encourage more people to hold and use the new cryptocurrency.
2. Distribution of Tokens: During an airdrop, the project distributes free tokens or coins directly to the wallets of existing cryptocurrency holders. This is usually done automatically and free of charge.
3. Eligibility Criteria: To receive the airdropped tokens, individuals usually must hold a minimum quantity of another cryptocurrency in their wallet, such as Bitcoin or Ethereum. Some airdrops have different criteria, such as following the project on social media, signing up for their newsletter, or performing other promotional activities.
4. Marketing and Publicity: Airdrops are an effective marketing tool. By distributing free tokens, projects can incentivize users to learn more about their new cryptocurrency, talk about it, and trade it on exchanges. This can increase the token’s visibility and potentially its value.
5. Potential for Scams: While many airdrops are legitimate, some can be scams. Fake airdrops may trick users into giving away private keys or personal information. Therefore, it’s important to research thoroughly before participating in any airdrop.
6. Long-term Benefits: For the cryptocurrency project, the long-term goal is to create a larger user base and community. For recipients, the benefit lies in getting free tokens that could potentially increase in value.
7. Post-Airdrop Activity: After receiving the airdrop, recipients can hold onto the tokens, trade them on exchanges, or use them within the blockchain project’s ecosystem, depending on the project’s nature and token utility.
8. Automated Distribution: Most airdrops occur automatically based on a snapshot of wallet addresses at a certain date and time. This means eligible wallets are determined in advance, and the corresponding airdrop is automatically executed.

By understanding how crypto airdrops work, participants can make more informed decisions about engaging in such promotions and take necessary precautions to avoid scams.

Example of implementing a crypto airdrop

As mentioned, an airdrop is a marketing strategy being followed by blockchain-based services. To understand that through an example, imagine if a cryptocurrency exchange like Binance or WazirX is preparing to open. To gain maximum attention in the cryptocurrency world, this platform launches its own virtual currency, like WazirX with WazirX Token or Binance with Binance Coin.

Then, the platform announces through various online channels that they will give away a certain amount of X of that currency unit for free to the first users. In return, it might require users to register with the platform or share its updates on their social media accounts or perform other such tasks to sign up.

Those who complete these tasks then become airdrop participants. When the airdrop day arrives, the platform transfers the promised amount in its own virtual currency to some lucky winners.

Note that each platform may have different requirements for participating, and even completing all the listed tasks does not guarantee you an airdrop in most cases. This is simply because the number of participants is too large, and it is not possible to reward everyone who participates in such transactions.

Guide on how to receive Coin Airdrop

Since airdrop involves the transfer of cryptocurrency, it requires participants to have a cryptocurrency wallet. These are similar wallets where you store Bitcoin, Ethereum, or any other type of cryptocurrency you may own. Platforms often require this wallet address at the time of airdrop registration.
So, when the due date for the airdrop arrives, the company will transfer the promised amount to your wallet address, that is, if you are one of the lucky winners in the batch.

Note that different platforms may require you to have a wallet based on the blockchain they use for their service.

For example: MyEtherWallet is used for tokens built on the Ethereum blockchain, while StellarPort is a web wallet for tokens based on XLM and Stellar.

Therefore, you will need to pay attention to the blockchain on which the platform is built to become a part of its airdrop. As you will need a wallet containing the corresponding tokens that you might receive for free.

Coin Airdrop pros and cons

Why are coin airdrops important?

One obvious reason for airdrops is the promotion that a new platform or service is seeking among users in the cryptocurrency community. As the word of the participants begins to spread across the cryptocurrency ecosystem, the chances of people flocking to the service increase exponentially. This works similarly to the digital marketing of a regular business.
However, the basic reason is that the platform’s virtual currency needs to maintain its value and only grow over time. This is the ultimate representation of the platform’s development in the cryptocurrency world.

For example, SAND, the virtual currency for the popular play-to-earn blockchain game Sandbox, started trading at around $0.05, before climbing to an all-time high of over $7.

A large part of this value is determined by the number of people investing in the cryptocurrency. As the trading volume and the number of holders of that cryptocurrency increase, it will increase its market value. Therefore, airdrop is a solid way to kickstart that among a large audience.

Identifying scams and fraud in crypto airdrops

Due to the significant interest in coin airdrops from people looking to make easy money, scammers have found an ideal way to deceive people.