What are Crypto Airdrops and How do They Work?

Crypto airdrops, at their very essence, are marketing tactics adopted usually by the issuers of a new cryptocurrency. They deliver some amount of the new asset directly in the digital crypto wallets of some users. It is a good way for crypto investors and traders to get free crypto without actually buying into them.

New crypto projects are keen to make their issue known to a wide number of crypto users. To do this, they often send the new issue to various crypto wallets as an initial offering. This functions both as a publicity and awareness campaign for their issue as well as an incentive for users to buy into the issue. It can be compared to the culture of handing out free samples to potential customers before the actual purchase takes place. If the potential customers like the free samples, they are most likely to purchase the product. Similarly, airdrops are meant to give potential holders a taste of the new coin. If they are satisfied with it, they can buy more of it and tell acquaintances to buy it.

How Do Airdrops Work?

Airdrops are primarily undertaken by blockchain-based companies which have issued a new coin and want to enhance its visibility and promote it in the market. The ultimate goal is to list it on exchanges as Initial Coin Offerings (ICOs) but before that crypto users must be made aware of the arrival of a new coin. This is where airdrops come into play. They help the issuer to stand out and thereby place the new coin in view of a large number of crypto wallet owners. Wallet owners must qualify for a respective airdrop in the sense that, he/she should maintain a specific wallet balance Therefore, airdrops can potentially be the source of earning for those whose wallets are airdropped with new coins. They can book periodic profits on airdropped coins and thus, create a steady source of income.

What are the Different Kinds of Airdrops?

There are a few criteria which a wallet owner must fulfill in order to be eligible for airdrops. Those criteria and their fulfillment determine the kind of airdrop that the wallet is eligible for.

Standard Airdrop : This is the classic case of airdrop, in which a new coin is dropped into a wallet for free for the purpose of reaching out to potential buyers. This is a one-off marketing mechanism and does not involve any third party.
Bounty Airdrop : This kind of airdrop comes with a kind of condition or prerequisite. The new coin is dropped into the wallet only if the wallet owner promotes the coin, either through social media or through any other way.
Exclusive Airdrop : This type is available only for wallet owners who follow a third-party website or resource, e.g. a crypto news portal. These are portals which usually write and share news and updates about new airdrops and similar offerings.
Holder Airdrop : This also includes a third-party involvement. However, in this case, the third-party is not a portal but a cryptocurrency. In other words, wallet owners who evidently hold a certain cryptocurrency only are eligible for such airdrops.

How to Detect Fake Airdrops and Scams?

Airdrops can sometimes be used as tools to scam investors into buying an asset. The issuers might have no intention of increasing the fundamental value of the coin in people’s minds but perform airdrops to artificially pump up the price of the coin. Unmistakably identifying fake airdrops is difficult. So, to safeguard yourself from them, you must adopt a few measures.

Research : Undertaking thorough research about the issuing company or platform is a must before thinking about exposing yourself to a newly issued coin. Try to search information about them, visit their website, look them up on social media and keep an eye on crypto news blogs for any kind of update regarding the airdrop or the new coin. If you find airdropped coins in your wallet which you did not initiate, practise due diligence before taking any action. It might be a potential attempt of phishing and accessing your wallet information and your held assets.
Be Cautious : There are several signs of danger when it comes to airdrops. New coins are issued by blockchain-based companies. If such companies lack on-chain security, it means they can control the movement of investors’ funds. This is a potential signal to be cautious. Developers might take the funds and leave the project. Moreover, you should keep an eye out for the technical aspects and blueprints of the company, like vision, governance, product etc. Absence of these details before issuing a coin might be a breeding ground for malpractice. Apart from that, there should be transparency between the issuer and investors. You can seek the founders and the company on Telegram or Discord in order to clarify your concerns. If you do not get any response, it’s best to practise restraint before engaging further with the coin.
Smart Contract : Smart contracts are indispensable for crypto projects. They are like financial statements of the projects. Checking the smart contract of the new project can be a useful thing to do, in order to find out the quality of the project. However, smart contracts are technical in nature and might seem incomprehensible for the uninitiated. You can seek help from someone who is in the know of it, or knows how to analyse a smart contract. This can give you required clarity over the project.

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