• 06 December, 2024
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What Is Crypto Airdrop, and How Does It Work?

What Is Crypto Airdrop, and How Does It Work?

In the world of crypto, where evolution happens at a rapid pace, capturing the attention of crypto investors and enthusiasts can be difficult. Yet, in this environment, a strategy emerged that can help garner the user’s attention toward the project. Crypto airdrops are a strategy adopted executed by startups to increase the awareness of their project. This article gives a detailed description of crypto airdrop and its workings.  

What is a Crypto Airdrop?

A crypto airdrop is a marketing strategy adopted by most blockchain-based startups with an aim to promote awareness about their new token or coin. In an airdrop small amounts of the new cryptocurrency is sent to the wallets of users. But the tokens will be sent to wallets that are active in a specific blockchain community or hold a minimum quantity of coins. Additionally, it is also issued to users who perform certain tasks like 

  • Retweeting or sharing their posts
  • Following the account 
  • Referring to friends or inviting others to join the project
  • Joining the Telegram or Discord group
  • Sharing content about the project on social media

How Does It Work?

The main purpose of airdrop is to increase awareness of the project by distributing tokens to potential users. There are various steps when it comes to implementing airdrops. They are,

  • Announcement: The first step involves the project team announcing the details of the airdrop through official channels like Twitter, Discord, blockchain community forums, and other areas. The announcement will include details like the eligibility criteria, steps needed to be followed, and more.   
  • Registration: Traders who are interested in signing up for the airdrop need to register their wallet address or sign up by filling out the form. 
  • Eligibility Criteria: Users need to meet the established criteria to be eligible for the airdrop. It can can include holding a certain amount of cryptocurrency, being an active member of the community, or completing certain tasks. 
  • Distribution: After verifying eligibility or task completion, the project team will distribute tokens or coins to the participants’ wallets. Keep in mind that the distribution of tokens will happen immediately after the task is completed or at a specified date. 

Different Types of Crypto Airdrop

There are several types of airdrops, each offering something unique to the traders. The reason for the airdrop varies for each project team. Some teams do it with a motive to gather a community after a hard fork, or build awareness about the blockchain initiative. The types of airdrops include, 

Standard Airdrop

A standard airdrop is a limited-time, first-come, first-served offer. In this type of airdrop, people who are interested in receiving the tokens need to sign up using their wallet addresses. Some airdrops may require additional information. As the tokens are distributed for free, the amount of tokens airdropped can be either be fixed or vary depending on the number of participants. 

Bounty Airdrop

In this type of airdrop, participants need to complete certain tasks to receive the rewards. The tasks are mainly about raising awareness and may include retweeting a post, tagging the company, and more. Although these tasks are easy to do, they require a certain amount of energy and effort to complete. Participants will receive points for the tasks they have completed, and these points determine the number of token they would receive. Sometimes, participants need to earn a certain amount of points to get qualified for receiving airdrops. 

Holder Airdrop

In a holder airdrop, token holders automatically receive tokens or coins if they hold a certain amount of tokens in their wallets. The number of tokens or coins received is determined by the quantity and duration of holding the initial tokens. This is determined through a snapshot taken at a specific point in time of the user’s wallet, on a specific date or within a certain time span. This type of airdrop ensures that those who invested the most in the blockchain receive the largest amount of tokens or coins.

Exclusive Airdrop

An exclusive airdrop is a special type of airdrop where the project team selects a specific group of people individually for the airdrop. The main difference between this airdrop and others is that users are not chosen based on the number of tokens they hold. Instead, they are selected based on criteria such as the time spent on a project, money spent on non-token activities, engagement within the forum, and more. This type of airdrop is often used to attract influencers and partners to the project.  

Raffle Airdrop

A raffle airdrop occurs when the number of users interested in the project exceeds the number of airdrops available. In these situations, a lottery mechanism is implemented, and the winners are selected at random. The winners chosen will receive the airdropped tokens.  

Ways to Earn Income Through Airdrops

There are several ways to earn money using crypto airdrops, and they are,

  • Selling: The most common way to earn money through airdrops is to sell them directly once they are available in your wallet. Based on supply and demand, the token price may increase or decrease over time.  
  • Holding: Another method of earning money through airdrops is to hold the tokens that are received for free. If the project is successful in the long term, then the value of the coin will rise significantly. On the other hand, if it is unsuccessful, its value will drop, or the coin will be irrelevant. 
  • Staking: Some crypto projects offer the option of staking coins in return for staking rewards. By staking their tokens in a smart contract or the platform for a period of time, token holders can receive rewards in the form of tokens while supporting the project’s security.

Advantages and Disadvantages of Crypto Airdrop

Pros

  • Crypto airdrops are a fast method to let traders and crypto enthusiasts know about your project.
  • It is a low-cost marketing method that allows the project team to continue attracting the attention of potential investors.
  • Since airdrops are free and the value of the token could increase over time,  recipients who received them might stay with the project for a long time. 

Cons

  • Since tokens are finite, the project team needs to carefully determine the scale of the airdrop. A few token airdrops might not attract the necessary attention, while too many could lead to running out of tokens. 
  • Once users receive their tokens, there is no guarantee that they will stay with the project. They might sell the tokens once the project launches instead of holding onto them.

Conclusion

Crypto airdrops are a powerful marketing tool for blockchain startups, offering a low-cost way to increase project awareness and attract potential investors. By distributing free tokens to users who meet certain criteria or perform specific tasks, crypto projects can quickly build a community and generate interest. Although airdrops can foster long-term engagement, there is no guarantee that recipients will stay in the community. Furthermore, the rise of airdrop scams highlights the need for vigilance and thorough research to avoid falling victim to fraudulent schemes.

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