Golden Encyclopedia | What is cryptocurrency airdrop How does it work?

Author: James Smith, CoinTelegraph; Compilation: Baishui, Bitchain Vision

summary

Cryptocurrency airdrops are like surprise gifts, and users can receive free tokens.New blockchain projects often give them to market their tokens, similar to free samples in stores.
To participate in airdrops, users may need to follow the project on social media or join their community.The project team determines the rules, and tokens are usually automatically distributed directly to the user’s wallet using smart contracts.
There are different types of airdrops.Standard airdrops require a wallet address, bounty airdrops involve completing tasks, and holders airdrops reward existing token holders.
Participants should avoid scams by researching projects, being alert to phishing attempts, not sharing private keys, and using secure wallets.

Airdrops are often considered “free lunch” in the crypto world, designed to inspire interest and raise awareness about upcoming projects.Think of them as a surprise gift for a new restaurant in town – a way to spread their delicious food.

In the crypto world, airdrops work the same way.A new blockchain project wants people to understand it, so they “put” free tokens into potential users’ digital wallets.Sometimes all you have to do is hold a specific token or register with interest, voila!You will get some cryptocurrency in your wallet, just like free food samples.It’s an easy and effective way to introduce you to their “style” and encourage you to be more involved in their projects.

This guide will explain how cryptocurrency airdrops work, the different types available, how to claim them, and most importantly, how to safely engage and avoid potential scams.

What is cryptocurrency airdrop?

Airdrops are cryptocurrencies equivalent to surprise gifts.Imagine opening a box and discovering coins inside!This is similar to receiving announcements about free tokens or tokens from a new blockchain project.Crypto airdrops involve distributing digital assets to users’ wallets for free, or in exchange for completing simple tasks, such as following projects on social media or joining their online community.

Airdrops play a vital role in crypto ecosystems.New projects use airdrops as marketing strategies to increase visibility and build user base.They are like free samples in supermarkets, attracting users to try new products.

From a user’s perspective, airdrops offer an opportunity to acquire new cryptocurrencies with minimal effort and potentially deliver huge benefits.These tokens are not just free gifts, but also a way to participate in the evolving digital economy.

How does cryptocurrency airdrop work?

Cryptocurrency airdrops usually start with a project that sends free tokens to your wallet address as part of its market strategy.While the project team determined the eligibility criteria for airdrops and how to implement them specifically, here is the overall picture of how cryptocurrency airdrops work:

announcement:The project team publishes upcoming airdrop events and participation requirements on websites, social media and forums.The team collects the applicant’s wallet address.
qualifications:Users may need to meet certain requirements to qualify for airdrops.These requirements may include following the project on social media, sharing content, signing up for a Telegram group or having the lowest amount of another cryptocurrency in your wallet.
Snapshot:The project takes a blockchain snapshot at a scheduled time and date to identify qualified wallet addresses.This helps determine who meets the eligibility criteria.
distribution:The project uses a smart contract to send tokens directly to the recorded wallet address.Distribution is usually automatic and free.Projects usually use their vault wallet to send airdrops and open transaction blocks to prove that the allocation of tokens is not partial.
Receive tokens:Tokens are usually sent to the wallet address of the airdrop recipient without them claiming the token.
How to use:After receiving the token, users can hold, trade or use the tokens to contribute to the project’s ecosystem and add value.

Types of cryptocurrency airdrops

Projects can be selected from a variety of cryptocurrency airdrops:

Standard airdrop:In standard cryptocurrency airdrops, users can receive free tokens by simply providing their wallet address.There is usually a limit on the number of tokens that each participant can obtain.Standard airdrops are time sensitive and popular because they are easy to join.Some people create multiple wallets to get more coins, which gives them an advantage over others who use a single wallet address.
Bounty Airdrop:Users must meet specific requirements, such as posting tweets about the program or sharing on other social media to be included in the participant list.Incentives may include referring others, subscribing to newsletters, or joining the Discord channel.Complete these tasks to get user points, and the number of points determines the size of the airdrop.For example, a user may need to earn 500 points to be eligible for airdrops.

Holder airdrop:Holders of specific cryptocurrency tokens can automatically receive free tokens from their holders’ airdrops.The number of free tokens depends on the tokens the user already holds.The public ledger of blockchain makes it easy to see who owns a specific token.However, some people holding tokens may not want airdrops.Sometimes, eligibility may be limited to a specific number of tokens, or the number of tokens may determine the total reward.
Exclusive airdrop:Exclusive airdrops are given to selected individuals.Standards may include time to work on projects, money spent on products other than tokens, or participation in forums.Projects usually reward active participants, regardless of whether they own tokens or not.
Lottery airdrop:The draw airdrop combines various airdrop types.The project that provides a draw airdrop will inform participants of the number of airdrops they will distribute and require anyone interested to receive a draw voucher (a lottery-style system).Users can earn tickets by holding tokens or earning points.Sometimes, just expressing interest is enough to qualify.Usually, the number of people seeking to drop tokens exceeds the distribution intention of the project.In this case, the airdrop will be sent to a limited number of randomly selected wallets.

Benefits for the project

Expand user base:Airdrops bring projects to more audiences, thus gaining more users.
Awareness of the project:Airdrops send free tokens to users, inspiring them to spread information about the project.
Build a community: Airdrops can encourage users to participate and create a sense of community around the project.

Benefits for the recipient

Free cryptocurrency:You can get free tokens via airdrops that may add value over time.
Learning Opportunities:Participating in airdrops can provide information about valuable projects that are coming soon.
Early access:Airdrops allow users to get the first look at the project.

Risks and challenges of cryptocurrency airdrop

Although airdrops are beneficial, they also have certain risks and challenges:

For the project

Attract non-committed users:Some participants may be interested only in the free tokens, not the project itself.
Sybil Attack:Malicious actors may create multiple accounts to claim more tokens than expected, thus undermining fair distribution.
Regulatory uncertainty:The legal status of airdrops varies by jurisdiction, which can lead to compliance challenges.

For the recipient

Scam and fraud:False airdrops may lead to economic losses or personal information leakage.
Dust Attack:A small number of tokens sent to the wallet can be used to track the user’s transaction history.
Tax Impact:Under local regulations, receiving airdrop tokens may induce tax liability.
Security risks:Downloading malware or interactions with phishing links related to airdrops can endanger the security of the device.

How to avoid airdrop fraud?

Scams damage the reputation of airdrops and participants need to know how to avoid airdrop fraud.Here are ways to avoid airdrop fraud:

Do a good research:Before participating in airdrops, research the project and the team behind it.Look for comments from other users and check if the project has been reviewed by reputable security companies.
Beware of phishing scams:Phishing scams are designed to trick users into revealing their personal information or private keys.Please be careful of any links or emails you receive about airdrops and never click on links shared by unknown sources.
Say no to the unsolicited proposal:Projects usually announce airdrops on their website or social media channels.Stay skeptical about any airdrop you’ve never heard of before or one that looks too good to be true.
Never share your private key:Never share your private key.Never share them with anyone, even if they claim to be from a legitimate project.
Use a secure wallet:Store your cryptocurrency in a secure wallet you control.Don’t leave your cryptocurrency on the exchange, as exchanges are a common target for hackers.

How will airdrops evolve?

Cryptocurrency airdrops help blockchain businesses raise awareness and succeed in their projects.As the crypto ecosystem develops, future airdrops may make significant progress.

Targeted distribution:Future airdrops may focus more on improving efficiency and specific user groups.Projects can use data analytics to find potential users who are more likely to interact with the platform.
Better regulation:Airdrops may need to comply with stricter compliance requirements.There may be clear guidelines regarding airdrop procedures.
Motivation-based model:Airdrops may eventually transform into an incentive-based model where users receive tokens to perform specific tasks, such as providing liquidity or participating in governance.This strategy promotes the platform’s ongoing and active participation.
Enhanced security:As fraud and phishing attempts increase, projects may develop safer airdrop programs to protect participants.

Most importantly, these advancements will help airdrops become more efficient, secure and attractive to users.