What is a Crypto Airdrop?

In the cryptocurrency industry, a crypto airdrop is a marketing tactic that uses coins or tokens to drive awareness of a new virtual currency and build communities rapidly.

An airdrop is simply a free crypto token to countless wallet addresses.

It is a promotional activity accomplished by blockchain-based startups and developers to bootstrap a new virtual currency project and services.

Airdrop Existence

Crypto users that usually engage with new and current platforms will highly receive an airdrop at some point.

The main reason why crypto airdrop exists is to help blockchain startup projects or services to reach a broader audience, attract potential investors and gain followers once the token begins trading on an exchange. The more interest you invest in the token, the higher the chance of increasing the price.

Awareness is one of the initial steps in marketing. The airdrop concept is similar to receiving a discount coupon or free voucher to encourage you to buy or visit the store.

Free minimal amounts of the new virtual currency send a transmission to the wallet of active blockchain community members in exchange for doing small services.

To avail of the gift, the recipient must have a minimum quantity of the coins or tokens in their wallet. Aside from that, they will do specific tasks like sharing about the crypto brand, posting about the projects or services in any social media forum, writing a blog post, and connecting with a member of the blockchain project.

Legitimate crypto airdrops will never seek capital investment but solely promotional.

Types of Airdrops

• Standard Airdrop – The most basic of airdrops that sends a specific amount of coin or token to the current wallets as a reward is a good technique for beginners or new members by creating an account with the new project and providing the wallet address during the distribution event. One example is a decentralized autonomous organization (DAO).
• Holder Airdrop – It is another simple airdrop awarded to wallets that involve tokens or non-fungible tokens(NFTs). Some crypto projects typically set a specific date and claim an airdrop in those holding days. Stellar is the perfect representative of holder airdrop.
• Bounty Airdrop – Bounty Airdrop is generally a marketing strategy that pays to promote via Social Media platforms like Instagram, Twitter, and Meta Platforms such as NASDAQ and Facebook. It may also be used to share the post, subscribe to the project, and participate in forums. Unlike the standard airdrop, bounty airdrops require a bit of work. Binance is a famous example of this.
• Exclusive Airdrop – Exclusive airdrop is where a group of cryptocurrency developers or verified community members who follow an aggregator collects crypto coins. Usually, as a reward for being a loyal user, Uniswap, an Ethereum Name Service (ENS) Domains, have projects that airdropped thousands of dollars exclusively to early users for free.

Most crypto users love airdrops, especially the no crypto holdings or beginners because it is equivalent to free money. It’s a win-win situation for the company to attract investors and recipients who will benefit from the free tokens.

Importance of Airdrops

The airdrops are a significant part of the web community since they act as a marketing tool for brands, allow startups to offer additional value and utilities to their holders, and empower blockchains to start without losing the trust and relationship with their users.

Moreover, it allows users and brands to encourage new relationships, nourish the existing ones and boost their products and services quickly and most cheaply.

Airdrops Risks

Typically, airdrops are considered a safe and efficient way to advertise the brand and build community. However, crypto airdrops are not always risk-free, and there have also been incidents of fake airdrops.

These fake airdrops or fake key scams will demand you to enter your secret phrase or sign the transaction through a web3 wallet where you can receive your airdrop that eventually compromised your account and everything inside it.

If an airdrop asks you to send funds to projects, it is more likely a scam. Phishing, SIM swap, and hacking attempts can happen anytime.

In addition, some scammers will send a small amount of Cryptocurrency to users and deteriorate their privacy. That is the time that they can track down the wallet’s previous activity, which leads them to de-anonymize the user or the brand. This modus is known as a “dusting attack.”

Take note to use different wallet addresses and never share your private key and send funds to receive the airdrops.

Airdrops Affect Taxes

Commonly, airdrops are taxable when they are received as ordinary income. In other words, if they sent airdropped tokens, at the time of the airdrop, for example, it is worth $50, then this $50 will be inserted into your taxable income.

Airdrop Requirement

The primary requirement for receiving crypto airdrops is a cryptocurrency wallet with a balance. No one can claim an airdrop without a wallet address. Users or members should have various cryptocurrency wallet solutions to store the funds.

The famous and the most trusted wallet to use is the MetaMask.

Without a doubt, Cryptocurrency is constantly making its way in the financial market. Furthermore, terms like Crypto Airdrop are popular and valuable in this area. It is essential to learn the concept behind it.

Airdrops tend to have many benefits and are an excellent way to earn additional income at some point. Be mindful that if it is too good to be true, it probably is.