May 23, 2022

What is a crypto airdrop?

What is a crypto airdrop?

Introduction

Crypto airdrop is a strategy used by cryptocurrency startups to promote their new token and project. It entails providing current and potential users with free copies of their native cryptocurrency. Users may be required to complete simple promotional activities such as following the project’s social media account and sharing their posts before they can claim.

Different types of airdrops exist, and each cryptocurrency project has its own set of requirements. However, most airdrops have a similar goal: to raise project interest and awareness. Some are deposited directly into users’ wallets, while others require a claim to be submitted manually.

An airdrop can be received or claimed by anyone with a cryptocurrency wallet, but be wary of scammers. Many fraudulent airdrops can steal your wallet funds when you claim or transfer free tokens. Before claiming an airdrop, double-check the project’s legitimacy. If you are required to connect your wallet to an airdrop website, you should exercise extreme caution.

With the ever-increasing number of new coins, it’s difficult for crypto investors and traders to keep track of all the new projects. As a result, to differentiate themselves and raise awareness, some cryptocurrency projects use airdrops. While everyone appreciates free cryptocurrency, airdrops aren’t always reliable. Let’s look at how they work and what you can do to avoid falling victim to an airdrop scam.

What Is A Crypto Airdrop?

A crypto airdrop is the distribution of digital assets from a cryptocurrency project to multiple wallets. To raise awareness of the project, coins or tokens will be distributed to current or potential users. These tokens are distributed for free, but some airdrops require users to complete certain tasks before they can claim them. Crypto airdrops became popular during the 2017 ICO boom, and many crypto projects still use them as a marketing strategy today.

How do crypto airdrops work?

Airdrops are a type of cryptocurrency distribution that involves distributing a small amount of cryptocurrency to multiple wallets. Although it is less common, there are projects that distribute NFTs instead of regular cryptocurrency.

Some projects will distribute without asking for anything in return, while others will require you to complete certain tasks before claiming. Following social media accounts, subscribing to a newsletter, or keeping a certain amount of coins in your wallet are common examples of these tasks. In some cases, airdrops are only given to wallets that have interacted with the project’s platform prior to a certain date. Popular examples of companies that used this method to support early adopters include 1INCH and Uniswap. However, unlike ordinary airdrops, these were worth thousands of dollars.

Are crypto airdrop and ICO the same thing?

Even though both involve new cryptocurrency projects, crypto airdrops and ICOs are distinct concepts. An ICO, on the other hand, is a type of crowdfunding that does not require any investment from participants.

A token sale is held by the project team in an ICO to raise funds from investors. When Ethereum held a crowdfunding event to support its development in 2014, ICOs became popular. Hundreds of new projects adopted the ICO method in 2017, resulting in a boom in the crypto space.

Types of airdrop

A cryptocurrency airdrop can be done in a variety of ways, as we’ve seen. We have a few different types of airdrops, in addition to the standard one that simply transfers crypto to multiple wallets. Bounty, exclusive, and holder airdrops are all common examples.

Bounty Airdrop

Users must complete certain tasks in order to receive a bounty airdrop, such as sharing a post about the project on Discord, Twitter, joining the project’s official Telegram, or creating an Instagram post and tagging a few friends. You’ll most likely be asked to fill out a form with your wallet address and proof that you completed the tasks in order to claim a bounty airdrop.

Exclusive Airdrop

Exclusive airdrops only send cryptocurrency to specific wallets. Typically, the recipients have a history with the project, such as being an active member of the community or an early supporter.

Uniswap, a decentralized exchange (DEX), airdropped 400 UNI to every wallet that interacted with their protocol before a deadline in September 2020. Holders of the governance token have the right to vote on future decisions affecting the project’s development.

Holder Airdrop

Holder airdrops give people who have a certain amount of cryptocurrency in their wallet free tokens. The team takes a snapshot of users’ cryptocurrency holdings at a specific date and time on a regular basis. The recipient will be able to claim free tokens based on their holdings at the time of the snapshot if their wallet balance meets the minimum.

How to avoid airdrop scams?

It can be difficult to always determine whether or not an airdrop is legitimate. You should always DYOR (Do Your Own Research) before signing up for any airdrop. Scammers will sometimes airdrop tokens into multiple wallets, but if you try to transfer them to a crypto exchange or another wallet, they will drain your wallet.

Scammers may also publicize a phony airdrop that directs users to a phishing website. They’ll trick you into connecting your wallet to a website that looks almost exactly like the original. Other tokens will be removed from your wallet as soon as you connect it and sign a transaction. This is common with fake Twitter and Telegram accounts that look identical to the official accounts.

In order to receive your free tokens, some airdrop scams require you to send cryptocurrency to an unknown wallet address. Legitimate airdrops will never ask for your money or seed phrase. Sending out airdrop emails or direct messages should be done with caution.

To avoid being duped, make sure to check out the project’s official website and social media channels. Take note of the official links and confirm that an airdrop is taking place. In case you’re not familiar with the project, you should do more research to find out what the crypto community has to say about it. If you can’t find enough information, it’s probably best to ignore the airdrop.

For added security, create a new wallet and email address solely for receiving airdrops. This will protect the funds in your personal wallet from phishing attempts related to airdrops. Most importantly, never give out your private keys to anyone.

Conclusion

Crypto airdrops help cryptocurrency projects stand out and gain market traction. It can also help crypto enthusiasts diversify their holdings by investing in new tokens. However, there are more likely to be scam airdrops than legitimate ones, so proceed with caution and always conduct your own research before signing up.

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