A crypto airdrop is a way of distributing new coins or tokens to existing cryptocurrency holders or users who perform certain tasks. It is a marketing strategy used by blockchain startups to raise awareness and adoption of their projects. You can also make a lot of money in it like NOTCOIN where some people made huge money after participating in NOTCOIN airdrop!
Now let’s dive into this beautiful thing to understand why crypto airdrop is a one thing that you need to know.
Airdrops, while seemingly a free and easy way to acquire tokens or rewards, are fraught with risks that might not be immediately apparent.
Here's why they can be more risky than they appear:
1. Sybil Attacks: Airdrops are often targeted by malicious actors who create multiple fake identities to claim a disproportionate share of tokens, thereby diluting the value for legitimate participants. This is a significant risk for both the airdrop organizers and the participants, as it can lead to loss of funds or value.
2. Security Risks: Airdrops involve sharing files or data, and this can expose users to security risks such as malware or viruses if the system is not properly secured. The convenience of quickly sharing files between devices also means that the connection relies on the local connection of nearby devices, making it more important to protect yourself while using airdrop services.
3. Airdrop Scams: Scammers can use fake websites, emails, and social media accounts to trick users into claiming a fake airdrop. This usually involves convincing users to connect their wallets to malicious smart contracts or share their private keys, which can result in the loss of funds.
4. Smart Contract Risks: Airdrops often involve interacting with smart contracts, which are susceptible to hacks or vulnerabilities. This is especially true for newer protocols, which may not have undergone extensive security audits.
5. Opportunity Cost and Volatility: Participating in an airdrop requires time and effort, and there is no guarantee of the value or utility of the token received. The value of tokens can be highly volatile, and there's a risk that the tokens could be worth significantly less than the effort or opportunity cost of participating in the airdrop.
6. Unclear Eligibility and Terms: Airdrop eligibility criteria and terms can be unclear or subject to change, leading to confusion or disappointment among participants.
Types of Crypto Airdrops
Crypto projects vary in their preferred choice of airdrop, depending on their end game. Some may be implementing this promotional tool to bring together a community following a hard fork in a network, while others would rather focus on making first-time users feel taken care of. It could also simply be a response to highly competitive market conditions. Luckily, there’s a variety of techniques to parachute guaranteed goods into a user’s virtual estate.
Standard Airdrop
In a standard airdrop, no tasks are required aside from signing up for an account. The key here is to get in quick, as there may only be a certain supply of tokens tied to the release of a new project, doled out on a first-come-first-serve basis. The decentralized exchange RabbitX has used standard airdrops to reward new users who sign up for its platform.
Bounty Airdrop
These service-oriented airdrops are sustained by small favors and voluntary legwork done by recipients. Typically, companies require some low-lift promotional work, with rewards handed out to those willing to sign up for a newsletter, follow specified social media channels across platforms, interact with a project’s recent post or simply log on to a live forum. Foodie NFT platform One Rare listed a nine-step to-do list for eligibility in a $75,000 giveaway, which included following the company’s accounts across social media, tagging friends and adding accounts on a watchlist.
Holder Airdrop
This type of airdrop rewards users who are ‘holding,’ or have accumulated, a certain amount of tokens at the time of the promotion. This is determined by a community-wide snapshot taken at a certain point in time of user wallets, which can occur on a specific date or during a set time span. Whatever the reward, it’s gifted to those who have met or exceeded a threshold amount. NFT-to-token swap platform Sudoswap has yet to launch its own governance token, to be named SUDO. When it does, those holding NFTs of its sister application, Oxmon, or OXMON tokens will be on the receiving end of the first batch.
Hard Fork Airdrop
When a protocol branches off or hard forks from its original code, splitting into two separate platforms, developers airdrop the new coins as a crumb trail to convert native users. An example of a hard fork airdrop would be ETHPoW, a proof-of-work chain going separate ways with Ethereum since it transitioned to a proof-of-stake system in an event known as The Merge. Like holder airdrops, these simply require users to hold the original token.
Exclusive Airdrop
Wallet size isn’t everything. Exclusive airdrops often reward a user’s time logged on a project, money spent on non-token activity or level of engagement within a forum. Exclusive airdrops reach those with empty wallets and deeper extra-curricular investment in a project. A famous example includes Uniswap’s generous airdrop of 400 UNI tokens to each of its long-standing users, regardless of holding status.
Raffle Airdrop
If a startup announces a fixed number of rewards but receives an overwhelming response, it may choose to implement a lottery mechanism to deliberate the winners selected at random, dubbed a raffle airdrop. This option can also be utilized as an add-on to any of the previous airdrop methods. Gaming platforms Revv, Wolf Game and Phantom Galaxies all recently gave out $500 worth of their native coins to 100 lucky winners.
How Do Crypto Airdrops Work?
Once a startup decides that an airdrop is the way to go, the first step toward making it happen is to launch a public campaign. Most commonly, widespread outreach is achieved across forums and social media platforms such as Discord and Twitter. Ideally, the news energizes commotion around a platform’s debut or a newly launched feature — as well as the size of the prize.
As the campaign picks up traction, companies compile a list of potential token recipients. This can be done in different ways, such as collecting the wallet addresses of interested parties or snapping a screenshot at a set point in time to qualify a users’ eligibility by specified, metric-based criteria. If an airdrop is specified to users of a platform prior to September, for example, then the screenshot would include the wallet addresses of active users from that designated timeframe.
Sometimes companies gather additional information, like an email address, at this stage — especially if the company hosting the airdrop is seeking to expand its contact list.
After determining a batch of recipients, companies typically facilitate the airdrop through a smart contract,or a self-executing program that automates transactions. This program transfers tokens from the company’s treasury wallet and distributes it to select participants, with no action required on the recipient’s end. At this stage, companies typically publish their transaction block results to further promote the project and prove that the airdrop actually happened.
Pros and Cons of Crypto Airdrops
Crypto Airdrop Pros
Fast and Instant
Since they’re built to appear in users’ wallets automatically, crypto airdrops make for a quick and instantaneous solution to make users informed of a new project. This is all with no prior action necessary from recipients and are self-executed thanks to smart contracts.
Low-Cost Marketing
Free products, especially when distributed at specific times, events or to enough users, will get buzz of a project going quickly. Recipients may be naturally inclined to learn more about the token and affiliated project, and discuss these stakes with other curious recipients or crypto exchange users.
Establishes Loyalty and Userbase
Airdrop tokens could increase in value over time, providing long-term incentive for early recipients who stick around with the project. As value rises, this may even give reason for users to buy, sell and trade additional tokens with others and subsequently grow a project’s userbase.
Crypto Airdrop Cons
Tokens Are Finite
The amount of tokens a project will be able to distribute will depend on each project’s budget and goals. While too few airdrops could mean publicity remains low for the project, too many airdrops could lead to it running out of tokens completely.
Loyalty Isn’t Guaranteed
Upon receiving airdrops, some users may immediately decide to sell their tokens for profit and not engage further with the project. Even with enough airdrop distribution, a project may not be able to properly lift off from low engagement.
Airdrops May Decrease Token Value
If a majority of airdrop recipients decide to sell their tokens in a certain timeframe, this can cause a project’s tokens to significantly drop in value. This instance will not only hurt current investors, but also the project and its brand as a business.
How to Avoid
Do your own research on an airdrops’ source before engaging with any sudden tokens. “If you have a crypto wallet and notice any new NFTs or crypto in there, it’s generally best to not interact with those if you do not know where they came from,” Keogh explained. “Malicious airdrops can take over your wallet if you interact with their smart contract to transfer them out or to try and sell them on a marketplace.”
Rug Pull Scams
In a rug pull scam, a Web3 startup may offer crypto airdrops to prospective investors and make promises on long-term value or perks for those who buy more tokens — though with no real follow-up or intent to keep the project. Instead, investors may see a quick drop in value on their tokens as the startup is abandoned, and left with wasted investment.
How to Avoid
If a startup provides crypto airdrops, check its on-chain security measures, token fee policies and project goals before making any further token investments. Be aware of any code issues in token smart contracts, non-transparent trading or selling fees or a lack of product outline overall from these entities.
While airdrops can offer the potential for free tokens or rewards, they also come with a range of risks that participants should be aware of. These include security risks, scams, smart contract vulnerabilities, and the potential for loss of value or opportunity cost.
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