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token airdrops

An Overview of Token Airdrops in the Cryptocurrency Space

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Airdrops have become more common in cryptocurrency as startups seek to generate interest and liquidity for their tokens. They allow people to try out new tokens without going through the process of buying them on an exchange. In this blog post, we’ll take a closer look at airdrops – what they are and how they work – so that you can decide if participating in one is right for you.

What is an Airdrop?

An airdrop is a marketing method employed by startups to deliver tokens to the wallets of current cryptocurrency traders, either for free or in exchange for a small promotional service. The purpose of an airdrop is to spread awareness and increase ownership of the currency startup. While some are legitimate, other airdrops have been seen as fraudulent when attempting to steal a wallet or personal information. Airdrops may be based on those who express interest, hold existing tokens, are intentionally selected, or win raffles.

How to Participate in an Airdrop?

To qualify for an airdrop, a person may need only to hold a specific type of cryptocurrency or complete a simple task such as following the company on social media. For example, if you hold Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), or another major cryptocurrency in your wallet, you may be eligible to receive new tokens from upcoming ICOs through an airdrop.

Another way to participate in an airdrop is by completing simple tasks such as following the company on social media or subscribing to their email newsletter. In exchange for your promotional help, you will usually receive a small number of tokens that you can then trade on an exchange or hold onto for future use.

Not all crypto projects employ fair practices when distributing their tokens through an airdrop though. Some have been known to commit fraud by phishing emails attempting to steal your wallet details or personal information. It’s important to be aware of these scams and only participate in reputable projects run by experienced teams with good reputations in the community.

When done correctly, participating in a crypto project’s airdrop can be greatly beneficial both for yourself and the project itself. For yourself, it’s free money! And for the project team conducting the airdrop, it’s excellent marketing because it helps them generate buzz and get their name out there while also increasing ownership and liquidity for their token.

Most Common Types of Airdrops

There are a few different crypto airdrops, but the standard airdrop is the most common. In a standard airdrop, a blockchain project will distribute a certain number of tokens or coins to a group of users for free. The users will usually need to perform a simple task, such as sharing a post on social media or subscribing to a newsletter, in order to be eligible. Airdrops are a great way to build hype and engagement around a new project, and they can also be used to reward existing users for their continued support. Standard airdrops are usually relatively small in scale, but they can still have a big impact.

Bounty Airdrops

In this type of airdrop, earned tokens are proportional to the amount of work completed by the participants. Bounty Airdrops usually include social media sharing, creating YouTube videos, or writing articles. Bounty Airdrops are often used as a marketing tool to increase a cryptocurrency project’s visibility and grow its community.

Holder Airdrops

This is a variation of the Bounty concept, where only holders of a particular cryptocurrency can receive the airdropped tokens. For example, if a company is doing a holder airdrop for a new token, only people who already own the company’s token will be able to receive the new tokens. This type of airdrop is usually done to incentivize people to hold onto a particular asset and increase awareness and adoption of a project. Holder airdrops can be a great way to get people involved in a project. They also provide an opportunity for people to earn free tokens just by holding onto an asset they were already planning on holding anyway.

Exclusive Airdrops

This is a more specific type of holder airdrop, where people are individually selected for the airdrop based on criteria such as time spent on a project, most money spent on the non-token activity, or the number of posts in a forum. An exclusive airdrop is an even more centralized way of rewarding those closest to the project and may give airdrops to wallets that may not hold any tokens at all. Some crypto enthusiasts believe that exclusive airdrops are unfair and centralize the distribution of tokens, while others believe that they are a necessary reward for those who are most invested in the project. Regardless of the debate, exclusive airdrops are becoming more and more common, so it’s important to be aware of how they work.

The requirements for an exclusive airdrop can vary significantly from one project to another, but they usually require more time and effort than public airdrops. For example, you may need to provide coding assistance, create graphics or videos for social media, write articles or blog posts about the project, or even give talks at meetups or conferences. 

In return for these contributions, participants usually receive more tokens than they would from a public airdrop. The value of these tokens can also be significantly higher if the project is successful. Therefore, exclusive airdrops can be lucrative for those participating in them. 

Raffle Airdrops

Raffle airdrops work by randomly selecting winners from everyone who has signed up or is eligible to participate. The selection process is usually done using a smart contract on the Ethereum blockchain. This ensures that the process is entirely fair and transparent.

The benefits of raffle airdrops are that they’re easy to enter, and anyone has a chance to win. The downside is that the odds of winning are usually pretty low. For example, if there are 1,000 entrants and only ten prizes, your odds of winning are just 1%.

How do I participate in an airdrop?

Participating in a crypto airdrop is usually pretty straightforward. First, you’ll need to make sure you have a suitable cryptocurrency wallet that meets the requirements set out by the project – often, this will be either an ERC-20 wallet. Once you’ve got your wallet set up, all you need to do is follow the instructions set out by the project to receive your free tokens.

Some projects may require you to complete additional tasks, such as joining their social media channels or signing up for their newsletter, so make sure you read all the instructions carefully before proceeding. Once everything is done and dusted, sit back and relax – your free crypto should arrive in your wallet within the next few days to a few weeks. 

How to Avoid a Crypto Airdrop Scam

What is an Airdrop Scam?

An airdrop scam is when someone posing as a legitimate cryptocurrency project offers free coins or tokens in exchange for your personal information or private keys. These scammers will often create fake websites or social media accounts that look identical to the real thing. They may even go so far as to copy the real project’s branding and marketing materials.

How to Avoid an Airdrop Scam

The best way to avoid an airdrop scam is to do your due diligence before joining any airdrop. Make sure you only join an airdrop from a reputable source, such as the official website of the cryptocurrency project or an official announcement on their social media channels. Also, be wary of any project that asks for your private keys in exchange for free tokens. There is no reason why a legitimate project would need your private keys, and this should be considered an immediate red flag.

If you’re ever unsure whether an airdrop is legitimate, reach out to the team behind the project and ask them directly. A legitimate team will always be happy to answer any questions you have.

Crypto Airdrops: Pros and Cons

Advantages of Cryptocurrency Airdrops

  1. Free Money: One of the biggest advantages of cryptocurrency airdrops is that they give you the opportunity to earn free money. All you have to do is hold onto your existing cryptocurrency or complete simple tasks like subscribing to a newsletter or following a social media account, and you could be rewarded with free tokens.
  2. Easy to Participate: Unlike other methods of earning cryptocurrency, like mining or staking, airdrops don’t require any special equipment or expertise. Anyone with a basic understanding of cryptocurrency can participate in an airdrop.
  3. No Risk: Crypto airdrops are also relatively risk-free. Since you’re not investing any money into the project, you don’t have to worry about losing your investment if the project fails. The worst that can happen is that you don’t receive the free tokens you were hoping for.

Disadvantages of Cryptocurrency Airdrops

  1. Scams: Unfortunately, because crypto airdrops are so easy to participate in, they’re also easy for scammers to exploit. There have been numerous cases of people losing their hard-earned cryptocurrency to scams posing as legitimate airdrops. Be sure to do your research before participating in any airdrop!
  2. Low Potential Returns: While making good money from crypto airdrops is possible, the potential returns are usually quite low compared to other methods of earning cryptocurrency. This is because the supply of most cryptocurrencies is limited, so the chances of receiving many tokens in an airdrop are slim.
  3. Time-Consuming: Finally, participating in crypto airdrops can be quite time-consuming, especially if you’re trying to earn tokens from multiple projects. You’ll need to track all the tasks you need to complete and submit them in a timely manner if you want to receive your tokens. 

Real-World Examples of Successful Cryptocurrency Airdrops

The Stellar Development Foundation’s “Free lumens” program

The Stellar Development Foundation (SDF) is a nonprofit organization that oversees the development of the Stellar network. In 2017, the SDF launched a program called “Free lumens,” giving away 2 billion lumens (XLM) – Stellar’s native token – to people worldwide. 

The program had two goals: to get XLM into the hands of as many people as possible and to grow the Stellar network by getting those people to use XLM in their everyday lives. To achieve these goals, the SDF designed the program so that it would be easy for people to participate and easy for them to use their XLM once they received it. 

The program was successful on both fronts. Over three years, 5 million people from 188 countries signed up for the program and received their XLM. And according to the SDF, those 5 million people have used their XLM to send over $5 billion worth of transactions on the Stellar network. 

Ethereum’s “cryptoeconomic bootstrapping protocol” airdrop 

In 2014, Vitalik Buterin—the founder of Ethereum—proposed an innovative way to bootstrap a new network or ecosystem: what he called a “cryptoeconomic bootstrapping protocol.” Essentially, this was a plan to use an airdrop to distribute tokens in such a way that it would incentivize people to use and grow the network. 

Buterin proposed giving away ether (ETH) – Ethereum’s native token – to every person who completed simple online tasks like taking surveys or providing proof of age. The more valuable the task, the more ETH they would receive. Importantly, he also proposed capping the total supply of ETH so that it would become more valuable as demand increased. 

This proposal was realized in 2015 with the launch of Ethereum’s “cryptoeconomic bootstrapping protocol” airdrop. Over 25,000 people participated in the airdrop and received ETH in exchange for completing tasks like sharing links on social media or participating in online forums. 

Conclusion

Airdrops can effectively generate buzz around your project and get users involved from day one. As we’ve learned today, a well-designed airdrop can jumpstart your network or ecosystem by getting tokens into the hands of users who will use them. If you’re thinking about doing an airdrop for your project, keep these examples in mind as you design your program.

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