Crypto users that frequently interact with new and existing platforms will likely receive an airdrop at some stage. Airdrops involve blockchain-based projects and developers sending out free tokens to members of their communities as part of a broader marketing initiative.
The main idea is to send newly minted tokens to hundreds or thousands of different wallet addresses with the hope recipients will be more inclined to engage with the corresponding project – even if it’s only to learn how to cash out the free tokens into something else.
This concept is similar to finding a free discount card in your mailbox to encourage you to visit a new store in the area. However, a crypto airdrop isn't predominantly about making the recipient spend money but rather raising awareness for new projects and services.
In most cases, a crypto airdrop is issued to users in exchange for completing a certain task. These tasks often involve things such as:
- Following an account on social media.
- Sharing or retweeting one of their posts, including hashtags.
- Sending or receiving a transaction (using a particular crypto platform or wallet).
- Creating an account and signing up to receive updates.
There are also instances when a crypto airdrop may be issued to users without needing to do anything, as we will highlight below.
Why do crypto airdrops exist?
The primary reason for organizing a crypto airdrop is to promote a blockchain startup, project or service. By issuing tokens to users, the team can bootstrap its project and ensure a fair distribution of tokens among its community from day one. Moreover, recipients of these tokens are incentivized to increase awareness and help the project reach a broader audience once the token begins trading on an exchange. The more interest surrounding the token, the more likely it will rise in price.
Airdrops often gain traction by promoting the launch on a project's website, cryptocurrency forums and social media. This is no different from receiving a HelloFresh voucher in your email with a discount code, as those campaigns are designed to bring more people to the platform through a financial incentive.
Legitimate crypto airdrops will never ask users to make any investment. Instead, it is a way to stand out among competitors that have pursued external funding before issuing their tokens.
How do crypto airdrops work and are they safe?
There are multiple ways to conduct a crypto airdrop:
- Automatically distribute tokens to holders of a particular asset or balance on the blockchain where the airdrop will occur. (For instance, every address with a balance of 0.01 ether or higher gets the airdrop.)
- Taking a blockchain snapshot at a previous date and letting users claim their airdrop tokens from the project's website through a smart contract.
Despite their popularity, however, crypto airdrops aren’t always as risk-free as they seem.