How Does An Airdrop Work In Cryptocurrency
With the advancement of cryptocurrencies, new ways of earning profit continue to appear. One of the latest methods of gaining digital coins is called airdropping. What is this process, and how does crypto airdrop work? All the basics will be covered in the article below.
Crypto Airdrops Explained
Airdropping means distributing assets between multiple crypto wallets simultaneously. The tokens are delivered to numerous wallets at once and completely for free. This is a legit way of earning some crypto without paying for it. Crypto projects are doing it for promotional reasons, just like any other products or services that are given out to receive reviews and increase awareness.
How Do Crypto Airdrops Work
Many crypto users wonder, how do crypto airdrops work? They are actually incredibly simple to join for the most part. Joining an airdrop is a great opportunity, especially for beginners. Here are the things you will need to join a crypto promotion:
· Crypto wallet – this is an essential step as to receive free crypto, you will need a place to store it properly. It is also important to have a separate secure wallet instead of storage on a crypto exchange. This will enhance the safety of your tokens.
· Separate e-mail address – it is not obligatory to have a separate e-mail, but it is recommended for safety reasons. Various projects doing airdrops require signing up with an e-mail to enter the promotion. With a dedicated address, it will be easier to focus on crypto drops specifically.
· Social media profiles – as airdrops are created for promotion, crypto providers often require sharing posts on various social media platforms. You might be asked to tweet something or post your review on Facebook.
· Follow the deadlines – just like all giveaways, crypto airdrops are timed. Make sure to complete all the requirements before the time runs out.
Different Types of Airdrops
Now that we know how an airdrop work in cryptocurrency, it is time to learn about the different types of such promotions. There are a few kinds of airdrops everyone can join.
This is a basic airdrop event that requires minimum effort. Users normally need to join the official website or account of the crypto project that provides this airdrop and sign up. It is necessary to subscribe to a newsletter with an e-mail.
With this type of airdrop, people receive token rewards by doing certain actions. It usually involves sharing a link to the project on Twitter or another social platform. A referral program might be proposed; so users would receive coins every time a person uses the link.
These are airdrops designed by platforms with big communities. This way, only subscribers of a certain website or project are eligible to join this giveaway. However, new users might be welcome as well.
This is a solution for owners of certain tokens. For example, if you have some BTC or ETH in your crypto wallet, you might qualify to join such an airdrop. The airdrop creators set up a specific ratio for tokens every user will receive. For example, with a 1:3 ETH ratio, people can receive three tokens for every ETH stored in a wallet.
Crypto Airdrops Objectives
Of course, crypto projects do not distribute coins for free without any benefits for themselves. There are a few reasons why airdrops are advantageous for crypto projects.
Creating a Community
Building a strong community around your crypto project is key to success. It is easy to attract new users by sharing some tokens with them and making them a part of the community.
People owning certain cryptocurrency tokens usually pay more attention to them to benefit from the increasing value. The price of tokens naturally increases when there is more demand for them.
Everyone knows about Bitcoin, but newer cryptocurrencies can get easily lost in this swarm of tokens appearing on the market every day. Airdropping is a great way of letting the community know about your tokens and their benefits.
Rewarding Loyal Users
Many supportive users in the community might not be able to purchase tokens because of investors that buy large volumes of crypto. With an airdrop, it becomes possible to reward the most loyal community members for their support.
Balancing Token Distribution
With decentralized projects, it is important to provide equal opportunities for all participants. Giving out a certain amount of coins for free is a great way of leveling out the distribution of crypto.
Airdrops vs. Hard Forks
Hard forks and airdrops in cryptocurrency are two completely different phenomena. While airdropping means sending crypto coins to a variety of digital wallets, hard forks are not connected with the distribution of tokens. A hard fork is created when the blockchain is split permanently. To put it simply, creators of a certain digital currency might create a branch of this currency on the blockchain. The same code is utilized with certain adjustments to create a similar yet different cryptocurrency.
Hard forks usually occur after thorough discussions between developers, investors, and community members. Developers might have different ideas about the future of a certain currency, which leads to splitting it into two separate cryptos and going in different directions. This way, the initial crypto continues to develop the old way, and the new one includes different protocols and changes in the code. However, hard forks occur not only because of some disputes. Sometimes, developers want to create a different coin on the basis of the original one. In cryptocurrency history, hard forks are always most anticipated, especially if they are created based on popular cryptos, such as Bitcoin. This always attracts numerous investors and people hurry to join the new community.
Despite these two being different occurrences, there are special hard fork airdrops. These specialized airdrops are made to deliver newly created coins that appeared after a blockchain split. The owners of the original crypto can receive the same amount of the new coin.
Are Crypto Airdrops Safe
The crypto community offers tons of secure solutions, although scammers with hacker attacks are also present, just like everywhere. It is up to every person to not ignore their safety and engage in reliable and secure airdrops only. Knowing about potential fraud schemes with crypto airdrops might help you avoid making these mistakes.
Certain token developers might create their cryptos with the only goal of scamming people for money. A new crypto project might appear and offer an airdrop to raise awareness. If this cryptocurrency becomes somewhat known and popular, its creators might hype it up and sell all their tokens to receive tons of money and evaluate the crypto.
Despite the high protection of crypto wallets, hackers know many tricks of breaching this security and continue to invent new ones. People with malicious intents might arrange an airdrop to send currency to a wallet and then track it down and breach its privacy. This might lead to the leakage of the private data of the wallet owner.
Advantages and Disadvantages
Airdrops are great for many reasons. But free crypto giveaways can also have certain cons for both creators and users. Here are some of the key advantages and disadvantages of cryptocurrency airdrops.
· Free tokens – of course, the biggest advantage for crypto users is the opportunity to receive free crypto. The most popular cryptos can be sold for millions of dollars, and even the cheapest ones can be very lucrative.
· Cheap marketing – cryptocurrency projects can receive the necessary exposure by simply sending some free tokens to users. Community members will share links to the project on various social media and attract people that are already interested in crypto.
· Increasing the value of tokens – thanks to expanding the community of a certain cryptocurrency, its value can go up because of high demand. Creating a buzz around certain tokens is necessary for the success of this crypto.
· Sending too many tokens – this is not one of the biggest threats, but this could happen. It is important to manage your tokens carefully so as not to give out all the assets and be out of stock.
· Hacker attacks – hackers are a threat to any digital project, and crypto airdrops are not an exception. All crypto enthusiasts should be careful not to attract hackers to their digital wallets and not to follow suspicious links.
Joining a cryptocurrency airdrop is one of the best ways of earning crypto. This is a great solution for beginners that do not have a lot of money for investing in crypto. With a few free tokens, anybody can boost their cryptocurrency investment journey. One of the biggest advantages of cryptocurrency airdrops for users is that only a few simple requirements have to be met to receive freebies. Besides, not only crypto community members receive great benefits. Digital currency developers can kick-start their projects or expand the community. With airdrops, it is possible to grow a strong follower base for your cryptocurrency and ensure its steady growth.
Frequently Asked Questions
How Do You Receive Crypto Airdrops?
Every crypto airdrop has a set of unique requirements or no requirements at all except for owning a digital wallet to store your coins. To receive tokens via an airdrop, it is usually necessary to own a crypto wallet, verify your e-mail to enter the promotion and follow some rules, such as promoting the airdrop on social media platforms.
How Do Airdrop Scams Work?
Like with any promotions online, there are airdrop scams. People might request your private information, such as a private key to your digital wallet or certain personal data. It is crucial not to give out private information as reliable crypto projects can only ask you to register with your email and follow a few simple requests. Be careful of clicking on suspicious links as well.
What Are the Tax Implications of a Crypto Airdrop?
Although coins received via an airdrop are absolutely free, they are still considered a regular source of income. Their value is calculated based on their price at the moment of receiving them. In the event of selling these coins, the taxes can be calculated based on the difference in their initial and current values.