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What Is an Airdrop?

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An airdrop is a marketing stunt used to promote a new virtual currency by sending coins to wallet addresses. Active members of the blockchain community receive small amounts of the new virtual currency for free or in exchange for a small service, such as retweeting a post sent by the company issuing the currency.

Summary:

  • Crypto airdrops are a marketing method employed by startups in the cryptocurrency space.
  • By using it, you deliver bitcoins or tokens to the wallets of current cryptocurrency traders, either for free or in exchange for a small promotional fee.
  • To spread awareness and increase ownership of the cryptocurrency startup, the airdrop is being offered.

Cryptocurrency Airdrops: What You Need to Know #

Typically, blockchain startups perform airdrops as a promotional activity to help bootstrap their virtual currency projects. By listing on an exchange as an initial coin offering (ICO), the platform hopes to spread awareness of the cryptocurrency project and attract more investors.

Airdrops are usually advertised on a company’s website as well as on cryptocurrency forums, and the coins or tokens are distributed only to holders of crypto wallets, usually bitcoin or ethereum wallets.

A recipient may need to hold a minimum amount of the crypto coins in their wallet to qualify for the free gift. Additionally, they may be required to do a certain task, such as posting about the currency on a social media forum, connecting with a particular member of the blockchain project, or writing a blog post.

Legitimate crypto airdrops never require capital investment in the currency. Their purpose is purely promotional. In what is known as a dusting scam, some crypto scams send micro amounts of bitcoin or other cryptocurrencies to unsuspecting recipients. Crypto wallets should always be vigilant about unsolicited deposits.

Benefits and Drawbacks of Cryptocurrency Airdrops #

An airdrop is an attempt to stand out from the crowd in an environment of extreme competition among cryptocurrency startups. A number of businesses devoted to crypto airdrops offer alerts and listing services to users, as well as marketing services to help startups promote their airdrops. There are always good and bad businesses in this field.

A coin’s success is tied to marketing, according to Michael J. Casey, chairman of CoinDesk’s advisory board and advisor at MIT’s blockchain research initiative. According to him, a currency would be worthless if it were not widely used. And that can only be achieved if people make some cost-incurring efforts to promote widespread use.

Others in the industry have, however, issued warnings about cryptocurrency airdrops. Pierre Rochard, the founder of Bitcoin Advisory, warned that crypto airdrops might be pump-and-dump schemes. Essentially, owners of the cryptocurrency may be inflating its value artificially to make a quick profit.

“Watch out for give away scams like this: 1. Instantly pre-mine tokens for yourself and your friends 2. Trade pre-mined tokens between each other to pump the price 3. Bait retail investors with a ‘give away’ of the tokens 4. Retail evangelizes the token for you, dump.”

Conclusion #

Airdrops are a marketing strategy used by blockchain-based startups to incentivize the use of their platform. It involves providing free coins or tokens to users with public crypto wallets to promote a new virtual currency.

Yet some Airdrops incentives are there for users who use Web 3 in the intended manner. One of those projects is OpenDAO. The OpenDAO shared $SOS tokens with anyone who used Opensea to conduct transactions, including those who had been scammed and victimized by fraud. Although Web 3 is still considered unsafe (for now), they were compensated for the encouragement.

My thoughts are that we will see more of these Airdrops that encourage people to get a lot more familiar with the Web 3.0 Networks.

References:

Thurman, A. (2021, December 28). OpenDAO’s SOS Token Hits $250M Market Cap Despite Unclear Goals, Security Risks. CoinDesk.Com. https://www.coindesk.com/business/2021/12/28/opendaos-sos-token-hits-250m-market-cap-despite-unclear-goals-security-risks/

Updated on January 22, 2022
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