If you dip your toes into the cryptocurrency or NFT communities on Twitter, Reddit, or Discord, you may have seen people excitedly showing “airdropped” tokens or digital images from their wallets.
With increasing competition in the cryptocurrency and NFT space, developers have created a unique method called “airdropping” to advertise their projects when they are launched.
What is an airdrop and how does it work?
What is an airdrop?
Not to be confused with Apple’s AirDrop feature, a crypto airdrop is a marketing tactic where developers on a particular blockchain project send users tokens or NFTs for free. The appeal of this is that it’s free and developers can promote their project before it’s officially launched.
Startups mainly use airdrops to generate community chatter and raise awareness about their cryptocurrency or NFT project. When there is a lot of , airdrops also help increase the price of a token on its Initial Coin Offering (ICO) or first listing on a cryptocurrency exchange.
The Auroracoin cryptocurrency is widely considered to be the first airdrop token. The Auroracoin airdrop took place in March 2014 and was distributed free to the residents of Iceland. Individuals who signed up for the airdrop received 31.80 Auroracoins (AUR), which was about $ 12 per AUR at the time.
Auroracoin was originally developed to become Iceland’s national digital currency. However, a few months after the airdrop, the token lost value and the project was pretty much abandoned. Auroracoin’s Twitter account was no longer updated as of December 2020.
How do airdrops work?
Different startups have different ways of launching Airdrops, but there are some standard practices. First and foremost, users interested in a particular token or NFT must have a wallet to hold the air-dropped item.
Users typically need to join, follow, and share the project’s social media channels, as well as interacting with community groups on platforms like Discord and Telegram. Airdrops usually have a registration window with limited places for attendees who can register and join before a certain deadline. Airdrops can happen more than once, however, depending on reception, so missing the first time isn’t always fatal.
Some memorable airdrops are:
Decred, which aims to develop a decentralized digital currency with better security and scalability, has dropped 258,000 DCR tokens. A DCR token cost around $ 1 to $ 2 back then, but is now around $ 108 each. value CoinMarketCap.
NEO Council’s Ontology (ONT) Airdrop, promoting the migration of the Ontology blockchain into its network, distributed ONT tokens valued at approximately $ 42 million.
The Ethereum Name Service (ENS) airdrop to promote its DAO governance token, ENS, was a huge hit as the token’s market cap is now around $ 1 billion while its backers await a Coinbase listing.
Popular NFT projects, including CryptoPunks and the Bored Ape Yacht Club, previously launched airdrops and continue to do so from time to time to delight their followers.
In October 2021, the Bored Ape Yacht Club team announced on Twitter that it would launch an ERC-20 token in the first quarter of 2022. Given the fanfare surrounding the announcement, it won’t be a surprise when the first batch of tokens is airdropped.
Where do people get airdrops?
Developers who want to launch an airdrop usually post the time, date and other relevant details of the airdrop on their official website, media page, or any other social media platform where the developers are present, such as Twitter or Telegram, known.
Alternatively, cryptocurrency enthusiasts can visit third-party airdrop tracking websites such as AirDropAlert to see which free new tokens or NFTs they would like to receive.
Types of airdrops
Not all airdrops are created equal. There are four main types of cryptocurrency airdrop:
- Standard airdrops: The “general approvals” stream in Airdrop jargon. Everyone is entitled by submitting only the information they need and possibly doing certain promotional tasks.
- Exclusive airdrops: The “VIP” stream. Usually reserved for loyal followers of a blockchain project with nice rewards.
- Bounty Airdrops: Similar to a normal aerial drop, participants are asked to do more promotional work to get the word out about a project, usually on Facebook and Twitter.
- Holder Airdrops: Participants must have an existing cryptocurrency such as ETH or BTC as a prerequisite for receiving a discarded item.
Benefits of airdrops
Airdrops are not only a highly effective marketing strategy, they also guarantee wide distribution. Many cryptocurrency or NFT projects are based on or are a hard fork of an existing blockchain, such as Ethereum and Bitcoin. Holder Airdrops are popular because many in the crypto space already own ETH or BTC (or other cryptos associated with the project) and guarantee a broad distribution model.
The result is a win-win situation for developers and recipients alike.
Disadvantages of airdrops
While airdrops are an exciting promotional activity, they come with significant risks. There are numerous cases of scammers using airdrops as a pump-and-dump scheme. Airdrop subscribers are also vulnerable to phishing attacks and marketing spam if the developer sells their data to an unauthorized third party.
Airdrop scams are getting more sophisticated and difficult to detect, even for seasoned crypto enthusiasts. The general rule of thumb is, when an airdrop (or other project!) Asks for highly sensitive information like your seed phrases or private keys, don’t interfere.
Developers also face some risk when initiating airdrops. For example, if many holders of a newly discarded token suddenly decide that the token is not worth the hype and sell it, the value of the token plummets, putting the startup’s business at risk.
Cryptos and NFT airdrops are building the hype
Many startups succeed by tossing coins or NFTs out of the air before a general launch. It can be an exciting process for recipients of an airdrop, as participating in a technical “soft launch” creates a feeling of exclusivity.
However, as with any marketing strategy, airdrops can be easily manipulated by people who are cheating participants out of their money. If you want to experience the fun of an airdrop, always do thorough research on a blockchain project before investing any money, and double-check the legitimacy of an airdrop site before sharing any sensitive information.
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