What Is An Airdrop?

Airdrops are a commonly mentioned word in the Crypto-verse. But what are they? How can crypto drop from the air? The term is often the source of some confusion, and unfortunately also scams and aggressive marketing techniques.

But it doesn’t have to be, as you’ll learn in this article airdrops are a great way to build the community and engage it. So without further adieu, let’s get into it.

What's an Airdrop?

The term Crypto Airdrop can give us a clue about what exactly it is, simply put a free transfer of a project's token to a number of wallets. Projects do this to spread their tokens and engage the community that will be more than happy to have received some free crypto. In many ways, it's a marketing tactic, think about it as free samples you see at the store, but only for crypto. 

Usually, airdrops set a free participation for everyone, but sometimes, you might be required to perform some kind of activities, for instance register with a specific wallet ahead from being eligible for your share. As with all things airdrops can be worthy or not, it depends on the project you choose.

Airdrop types

Airdrops come in all shapes and forms. We can highlight 3 types depending on their aims, tasks and other details:

Bounty airdrop

During Bounty airdrops, people are rewarded after the completion of a task, which could be anything from subscribing to the socials to opening up a new wallet. These are great tools, to actually reward the community for participation. This kind of rewarding activity also helps to boost the project as well as build a visual number of community members. To receive a reward from the bounty airdrop, you’ll need to provide your wallet address and to prove the action has been completed, usually with a form or screenshot.

Exclusive airdrop

As the name suggests, exclusive airdrops are intended for various specific wallets. This is usually meant to reward the most active people for supporting the projects with their contributions.

A great example of this is when the DEX Uniswap sent 400 UNI to all wallets that have been active on the exchange from early on.

Holder airdrop

Holders airdrops are meant to reward users that own a specific amount of crypto in their wallet. This is usually done via a snapshot at a predetermined time and date and if the minimum amount required is their holders can claim their airdrop. Holder airdrops are generally done to incentivize the community to buy and hold on to a token, so as to not crash the price. 

It is a market practice to airdrop your newly created token to BTC, ETH, and BSC wallet addresses. An example of a Holder Airdrop is Stellar sending 3 billion XLM to all BTC holders back in 2016.

Airdrop and scam

Airdrops are usually harmless but exceptions unfortunately exist. Scammers are known to extort users' funds using airdrops, by asking gullible users for their private keys instead of their public addresses. 

So if you plan to join the airdrops, stay vigilant. This is particularly true for beginners, and make sure to learn the difference between a public address and your private keys before you do anything. Also, here are a little piece of advice for beginners:

1. Don’t pay for airdrops. Be aware of projects asking users to send their money to become a participant. Remember that it’s you who should receive the tokens.
2. Never share your private key with anyone. This one is essential and doesn’t need any comments. Just don’t do that. 
3. Create a special email. We suggest not sharing the email you use all the time everywhere. Better spend a couple of minutes to make up a new one specially for the airdrops. 
4. Choose different passwords for various websites. This rule fits any situation, but also don’t forget to think of a new password for the airdrop networks or website. 
5. Don’t pass the KYC if you are not sure. That is absolutely your own choice, but if you feel uncomfortable sharing your data to the side organization, just look for any other airdrop not requesting this information. 
6. Create a brand new ETH address. Would be perfect to create an airdrop ETH address so that you will know that your main funds will stay safe in any case. 

There have also been cases where fraudulent tokens were involved in airdrops that turned out to be completely useless. So before you commit, do your own investigation about the project and assets, and don’t believe too good to be true stories.

How do Airdrops affect the loyalty of the project community?

Airdrops are a great way to build a community from the ground up, if your token has a real use case users will love to receive it for free, that’s just simple human psychology. Airdrops are great ways to incentivize participation, however, projects have to be careful to not abuse them. Some projects take it over the top, ignoring that too many airdrops inflate the supply, making all of it useless.  

El Salvador, the perfect example of airdrop

One of the most successful airdrops of all time was when the El Salvadoran government transferred $30 worth of BTC to anyone that installed the government-built wallet. The move has a historical significance like no other, as it comes after El Salvador declared BTC to be legal tender, a huge milestone in the quest for crypto adoption. By airdropping BTC the El Salvadoran government committed to the inclusion of its citizens into the blockchain economy, something unheard of before.

CryptoPunks

Created in 2017, the project called CryptoPunks has touched upon the idea of airdrops, too. FELT Zine, an experimental internet art collective (creators of the world’s 1st digital NFT Zine), and anon collector recently gave away almost twenty five percent of Cryptopunks to more than 400 people in the form of a free airdrop to digital internet communities that support their work. 

Conclusion

Airdrops can like all things, be good or bad. But they also can, without a doubt, be a great method to build a community from scratch, or in the case of El Salvador, an integral part of a huge, wider plan. Anyway, airdrops will undoubtedly continue being an incredibly important part of the crypto ecosystem and a driving force in its adoption.

SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.