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| April 23, 2024

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What Is An Airdrop?

An airdrop or crypto airdrop is a method of distributing new coins or tokens to current cryptocurrency holders or users completing specific tasks. This strategy is employed by blockchain startups to boost awareness and project adoption.

Recipients of an airdrop incur no costs for the tokens they receive. Airdrops may occur following a chain fork, token upgrade, or as a component of a fundraising mechanism.

As discussed, airdrops occur when a cryptocurrency project deposits digital currencies or NFTs into a digital wallet. Despite appearing as “free money” for recipients, exercise caution due to potential scams and unexpected tax implications.

How Do Crypto Airdrops Work?

Eligibility for an airdrop typically depends on meeting specific project-defined requirements, ranging from simple sign-ups to task completions like promoting the project on social media. Some may necessitate holding a specific amount of the project’s cryptocurrency. Owning a crypto wallet is a prerequisite for receiving the coins in all cases.

Upon an airdrop announcement, two crucial dates emerge. Firstly, the “snapshot” time, when the project captures eligible wallet screenshots; meeting requirements by this date is vital. Secondly, the distribution date, marking when the airdropped coins are anticipated to be received in your wallet.

Types of Crypto Airdrops

There are three types of crypto airdrops.

1. Standard/raffle Airdrops

Typically, these airdrops necessitate your participation in a sign-up or registration process to qualify. This is the conventional setup associated with the term “airdrop,” requiring the least effort from the recipient compared to other types. In essence, they closely align with the concept of “free money.” In instances of high demand, projects may employ a raffle system to select eligible wallets.

2. Bounty Airdrops

To qualify for a bounty airdrop, undertaking specific tasks is essential. These tasks range from promoting the cryptocurrency on social media, joining its online community, subscribing to its newsletter, encouraging friends and family to do the same, to offering software and coding support. In essence, bounty airdrops aren’t entirely free, as they entail a certain level of effort or labor to meet the eligibility criteria.

3. Holder/exclusive Airdrops

Crypto development teams occasionally acknowledge loyal community members by airdropping new tokens into the wallets holding their cryptocurrency. Receivers need not take any action; they merely discover the deposited tokens when checking their wallet. Despite the seemingly effortless acquisition, it’s crucial to recognize that recipients of such airdrops initially demonstrated conviction by purchasing and holding the project’s cryptocurrency through any market volatility.

Crypto Airdrops and its Benefits

While we’ve explored the advantages of a crypto development team in conducting airdrops, let’s dive into the benefits for the recipient.
In essence, airdrops offer a straightforward advantage: the opportunity to acquire free cryptocurrency, or at least in exchange for a relatively minimal amount of effort. As the value of cryptocurrencies fluctuates, recipients of airdrops gain an asset that could potentially appreciate significantly in the future.

For those new to the crypto sphere, participating in an airdrop can serve as a practical introduction to understanding how cryptocurrencies operate. It provides an incentive to learn the intricacies of creating a crypto wallet and managing crypto assets.

NFT Airdrops and its Benefits

Non-fungible tokens (NFTs) stand out as distinctive and non-interchangeable tokens representing tangible or virtual assets on the blockchain. They are available in a wide range, including in form of digital collectibles, artwork, tokenized memes, and brief audio/video clips.

Those developed on Ethereum adhere to unique token standards, specifically ERC-721 and ERC-1155, distinguishing them from fungible tokens. Notably, the year 2021 witnessed a surge in NFT airdrops, allowing enthusiasts to acquire them at no cost.
Engaging in the NFT airdrop process involves securing NFTs in your wallet as a platform opts to deposit cryptocurrencies at no cost. Airdrops serve as a powerful tool for promoting freshly created NFTs and their respective platforms. This practice not only enhances the token’s visibility but also acts as an incentive for attracting new users.

Undoubtedly, within the blockchain and cryptocurrency market, NFTs hold immense value. Certain digital artworks and collectables command prices reaching millions of dollars, with esteemed auction houses such as Christie’s and Sotheby’s actively participating in NFT sales, propelling them into the mainstream. Various platforms are capitalizing on the financial market’s potential by enabling the leverage of NFT values, presenting opportunities for substantial yield multiplication.