What`s an airdrop?

Since 2012, the number of cryptocurrencies in existence has multiplied and there are now thousands of digital currencies on the market. These include tokens – a type of cryptocurrency that can be created and issued by anyone using a particular blockchain. 

Ethereum, for example, is the second largest cryptocurrency after Bitcoin. Like Bitcoin, it runs on a blockchain network, but instead of BTC, its native cryptocurrency is called Ether (ETH). Unlike Bitcoin, the Ethereum blockchain can support other cryptocurrencies that are known as tokens.

Many cryptocurrency projects release their own token on Ethereum and make it available to cryptocurrency users, who can buy it using ETH. Such projects face the age-old chicken and egg dilemma: they need to capture attention, but there is no incentive for users to do so until a community has formed and its token is widely distributed.

To solve this problem, some projects give away a portion of their tokens for free in what’s called an ‘airdrop.’ This involves sending a small amount of cryptocurrency to the wallets of existing cryptocurrency users. 

To qualify for an airdrop, you might need to hold an existing cryptocurrency in your wallet (e.g. ETH), or to have completed certain tasks such as following the project’s social media channels and registering on their website.

Airdrops can be a great way to receive crypto for free, while learning more about how the cryptocurrency economy works. 

$700,000
Did you know? In 2020, an Ethereum token called MEME 
was airdropped to the community, each of whom received 
355 tokens for free. Today, those 355 tokens are worth 
around $60,000 – and at their peak were worth over 
$700,000!

Some cryptocurrency exchanges award airdropped tokens to their users. For instance, in December 2020, Coinbase was one of many exchanges that supported an airdrop for Spark tokens, a new token that was airdropped to XRP holders. Popular crypto Telegram channels and Twitter accounts also publicize forthcoming airdrops.

Defi users have hugely benefited as protocols look to gain users with the promise of token rewards, as happened with Uniswap and 1Inch, to name but two.

Blockchain.com provides a good example of how loyalty and patience can be rewarded with Airdrops. They are one of the most respected names in the crypto space – both an exchange and popular wallet provider – giving reassurance that schemes they promote are legitimate. 

To date they have supported two Airdrops Stellar (XLM) Airdrop – which they distributed $125,000,000 worth of XLM – and more recently Blockstack. 

In order to qualify for Airdrops, Blockchain.com requires you to complete Gold Level verification in part as an anti-Spam measure. This does mean providing KYC – remember there is no such thing as a free lunch – but once verified you are eligible for Airdrops. 

With the Blockstack campaign, there was a one year lock-up restriction, but in that time the value of the STX token has increased roughly twenty times, so the $10 freebie has turned into a $200. Not a bad return on your patience. 

$200
The value of the Blockstack airdrop for users of 
Blockchain.com

Airdrops may sound like money for nothing, but as we keep underlining, there is no such thing. 

There is no guarantee that an Airdropped token will be worth anything, and you may have to participate in multiple airdrops until you strike gold and find one that is worthwhile. 

Also, because it takes time to grow a community, you may need to be patient to discover whether the airdropped tokens you receive will gain any value.

If you are eligible for an airdrop, the tokens may be sent to your personal crypto wallet, or credited to your account  (if you are using a centralized exchange) but in some cases the process of claiming can be arduous. 

Scammers are constantly monitoring Airdrops and trying to trick users into sharing private keys. They will create fake websites that will promise to airdrop you free tokens, but ask you to enter the private key to your wallet. Do not do this. 

No one but you should ever see your private key, and any site or crypto user who requests it is attempting to scam you. You wouldn’t give a stranger your bank card and PIN. It’s the same with your private key, which is the password to your wallet.

Follow cryptocurrency exchanges and projects on social media to learn of legitimate airdrops, and the criteria for entry.

If you are eligible, either because you own existing cryptocurrency or have completed the micro-tasks required (e.g. joining the project’s Telegram group), you will automatically receive tokens for free. 

If these become tradable, you can sell them for other cryptocurrency like ETH, or hodl in the hope that the tokens increase in value.

Keep up to date with some of the latest airdrops via Coinmarketcap.

Advantages of airdrops:

• Anyone with a compatible cryptocurrency wallet can participate.
• If you hold cryptocurrency on an exchange, you may also be eligible for certain airdrops.
• Airdrops occur regularly, providing a steady supply of free tokens.

Disadvantages of airdrops:

• There is no guarantee of profit as the new tokens may be worthless or illiquid, meaning they cannot easily be sold.
• Identifying and participating in airdrops can be time-consuming.

Airdrops are just one way to earn within the crypto economy leveraging the risk you have taken-on in purchasing other coins. They’re a great way to learn more about how cryptocurrency works, and to become involved with communities at an early stage. 

As you do so, you may find that you form online friendships with individuals who share the same interests and motivations, while gaining the satisfaction of being part of a community that is aligned to achieve mutual goals for the common good.

Even if airdropped tokens don’t make you rich, they’ll provide a stepping stone to more advanced earning opportunities as you increase your knowledge and grow in confidence.