By now, most of us are aware of the many cryptocurrencies around us. While the debate upon their use continues, more and more people are getting involved in the crypto world. With this, come more players in the industry and their need to gain traction for their blockchain-based service. A cryptocurrency airdrop has become a very important tool for the same.
So, what is an airdrop? In essence, an airdrop is just what you have seen in the many games you play online, a promotional giveaway to players to keep them engaged. Crypto airdrops do this by giving away free crypto coins or tokens related to the service. In return, they usually ask the participants to promote their service on various social media platforms.
There have been numerous airdrops to date, with several of them still lined up for the coming weeks. Most cryptocurrency investors have had an encounter with one or the other platform’s airdrop in the past. In case you have too, but are not quite sure what it means, here is your guide to understanding what crypto airdrops are and how they work.
What are crypto airdrops?
As mentioned, airdrops are a marketing strategy being followed by blockchain-based services. To understand it clearly through an example, imagine if a new cryptocurrency exchange like Binance or WazirX is going to open up soon. In order to gain maximum eyeballs within the cryptocurrency world, the platform launches its own virtual currency, like WazirX has WazirX Token or Binance has Binance Coin.
The platform then makes an announcement through its various online channels that it will give away X amount of that currency for free to some early users. In return, it might ask the users to register with the platform, or share its updates on their social media accounts, or perform other such tasks in order to enrol.
Those who complete these tasks then become the participants of the airdrop. Once the date of the airdrop arrives, the platform transfers the promised amount of its own virtual currency to some lucky winners. Note that each platform may have different requirements for participation and that even completing all the listed tasks will not guarantee you an airdrop in most cases. This is simply because the number of participants is too huge, with people actively participating in such deals.
How do you receive an airdrop?
Since the airdrop involves a transfer of cryptocurrencies, it needs the participants to have a cryptocurrency wallet. These are the same wallets where you store Bitcoin, Ethereum or any other cryptocurrency that you may possess already. Platforms usually ask for this wallet address at the time of registration for the airdrop.
So once the due date for the airdrop arrives, the company will transfer the promised amount to your wallet address, that is, if you are among the winners of the lot. Note that different platforms may require you to have a wallet based on the blockchain that they employ for their service. For instance, MyEtherWallet is used for tokens built on the Ethereum blockchain, while StellarPort is a web wallet for XLM and Stellar-based tokens. Most of the blockchain projects are built on the Ethereum blockchain.
Hence, you will have to note the blockchain on which the platform is being built, in order to be a part of its airdrop. As you will need a wallet subsiding with the corresponding token that you intend to get for free.
Why are airdrops important?
One clear reason for airdrops is the promotion that a new platform or a service seeks among the crypto community. As the word of the participants starts going around the crypto ecosystem, the chances of people flocking to the service increase exponentially. This works much like the digital marketing of a regular business.
The underlying reason, however, is that the virtual currency of the platform will need to stay true to its value, and only grow with time. It is the ultimate representation of a platform’s growth in the crypto world. Sand, for instance, the virtual currency for the popular play-to-earn blockchain game Sandbox, started trading at around USD 0.05, before climbing to an all-time high of over $7. This is a growth of 140X since January last year.
A large part of this value is defined by the number of people investing in the currency. As the volume of transactions, as well as the holders of a currency, soars, it gains value in the market. An airdrop is thus, a solid way to kickstart that among a large audience.
Stay aware of airdrop scams
Since there is a large interest in airdrops from those looking to make easy money, scammers have found it an ideal way to dupe people. Late last year, Metamask noted an airdrop scam wherein threat actors sent malicious tokens to random crypto wallet holders. With the account holders curious as to what the token is, they would often search for it online. The search would eventually land them on to the threat actor’s malicious website, where unsuspecting users are phished off their crucial online information.
Users are thus, advised to be aware of such scams and only indulge in airdrops of genuine platforms which may already be listed on authentic websites. Another rule for detecting such scams is if the users are asked to send some cryptocurrencies in exchange for enrollment in the airdrop. Or if the promised amount in the airdrop is way too high. In such cases, it is best to stay away from potentially malicious activity or do thorough research into what the project is all about.