How Does a Cryptocurrency Airdrop Work?

Airdrops can be a rewarding source of passive income. Don't ignore them when you see them.

By
Ahamdi Abarikwu
on
October 16, 2021
Category:
Tutorials

Airdrops? What Are They?

Airdrops refer to the practice of distributing crypto tokens to many wallet addresses. The owners of these wallet addresses may receive those tokens for free or in return for performing very simple tasks.

Airdrops are traditionally associated with new blockchain projects who use it to promote their platform, but established projects do airdrops too - especially to reward loyal community members. 


Why They're Popular

Airdrops are popular in crypto-space because they are of mutual benefit to the blockchain projects and the recipients. 

New projects aid their take-off by using airdrops to create awareness and quickly raise a community of token holders - who may be required to do some form of simple social media advertisement for the project.

While the new projects benefit from extremely cheap advertising, these holders also become the initial pool of traders when the project lists its tokens on a crypto exchange.

On the other hand, the popularity of airdrops also stems from them being a source of passive income for members of the crypto community. Many airdrop tokens already have a market value at the time of distribution.

Generally, a huge percentage of the community who receive them quickly sell them off. For this economic reason, thousands of people seek out airdrop opportunities daily.


Tools You Need

The basic things anyone interested in airdrops should have include:

  • A Smartphone and Internet

Virtually every airdrop is web-based. You would need an Internet-enabled smartphone to find an airdrop and take part.

  • Crypto Wallet

Most airdrop campaigns will request your wallet address. You would need a crypto wallet to receive and store your airdrop tokens. The wallet could be software-based or a hardware wallet. A word of caution: whichever type of wallet you use, ensure they are reputable. If downloading a software wallet from Google Playstore for example, avoid downloading clones.

  • Social Media Accounts

Crypto projects often require airdrop participants to use social media platforms to promote the project. To take part in airdrops you would typically need a Twitter, Facebook, Telegram etc. account. 

  • Email Address

Some projects may require you to supply your email address which they may use to notify you if you win. They may also send you project updates via email. 

  • Time

To get the juice out of airdrop opportunities needs time, time and time. The duration of a particular airdrop is usually a short period - some airdrops expire within hours, so you will need to make out time to do the required tasks within the validity period.

Typical Tasks

Different airdrops specify different tasks. Some of the common tasks include:

  • Hodl to receive

Be rewarded with token 'E' for simply holding/staking token 'D'.

  • Be rewarded for using a new platform

This type of reward usually comes in retrospect. For instance, after 6 months of being launched a new decentralised exchange may decide to airdrop tokens to people who used the platform within the first 2 months of its launch. In some cases, some projects have announced airdrop campaigns ahead of time for those who would use their platforms. 

  • Perform Social media tasks like retweet, follow, like

Participants are expected to retweet a certain tweet, follow a project's Facebook, Twitter, Instagram, Medium accounts etc.

  • Subscribe to the newsletter

This is a fairly common task. Airdrop participants are required to subscribe to the project's newsletter to receive the project's news and updates. 

  • Learn-to-earn

Learn-to-earn airdrops are a relatively new style of airdrops. Participants watch or read short video clips/text about a project after which they answer a quiz. Some airdrops will require getting all the quiz answers correct, others may require a minimum number of correct answers.


What Not To Expect

So, we have talked about tasks that are common to many airdrop programs. However, some scams disguise as airdrops looking to defraud unsuspecting people. These fake airdrops come in different forms and will ask for tasks that will compromise the safety of your wallet. If an airdrop has any of these features, AVOID IT. 

  • Request for a fee to redeem

No genuine airdrop will require you to pay a fee to redeem your airdrop. So if you get a message saying that you won an airdrop, but that you need to send some crypto (no matter how small the requested amount is) to an address, it is almost certainly a scam. The author of this article fell victim to this kind of scam in his early airdrop years. Do not repeat his mistake.

  • Send 'A', Get '2A' 

Some airdrop scams will promise to give you multiples of the crypto you send to them. This type of scam is plentiful on social media. Do not fall for it. 

  • Submit your private keys/recovery phrase

The private key and recovery phrase of your crypto wallet should be known to you alone. Do not share it with anyone. No genuine project will request them from you. So if you visit an airdrop website and it asks you for that information, you are dealing with a scam.

  • Insecure Website

In general, reputable projects use secure "https" websites. When you visit an airdrop webpage and you see that the web address starts with "http" and not "https", it means that the website is insecure. A hacker may be able to capture your details over the internet through such a website.


What You Could Do With Your Airdrop Tokens

When you win an airdrop, you can:

  • Sell

Selling off one's airdrop tokens is the default option for many airdrop hunters. The price of an airdropped token usually falls because people rush to sell-off.

  • Hold

If you perceive that the project has good prospects, you can keep your tokens and wait for the value to increase. Bear in mind that crypto can be very unpredictable. There is no guarantee that the value of the airdrop token you received will follow your expectation. Much patience may be needed if you decide to hold.

  • Stake

If you decide to hold your airdrop rewards, check if the project has a staking program for the token. If there is, you could stake your tokens and earn more rewards rather than just keeping the tokens in your wallet. 


Where Can You Find Credible Airdrops? 

If you don't know where to look, finding credible airdrops may be a challenge. Some airdrops are scams; some others may end up using your time to their benefit without rewarding you. Having said that, BSCNews recommends Coinmarketcap's airdrop portal. There you can find legit airdrops. You may also take a look at some time-tested airdrop aggregator websites like AirdropAlert and AirDrop.io 


Extra Tip: Airdrop or Bounty?

Sometimes the words airdrop and bounty are used interchangeably. They refer to similar concepts but are not the same. So, to enlighten our readers, we will differentiate one from the other.

The key difference between an airdrop and a bounty is the level of difficulty of the task involved. For example, an airdrop may require you to follow the project's Medium account while a bounty will require you to write an article about the project.

Another project's airdrop may ask you to share a post on your Facebook page, while a bounty will ask you to create a video tutorial on how to use a project's app. Do you see the trend? Oftentimes bounties require the use of a special skill whereas airdrop tasks can be done by anyone because they don't need much effort. However, since bounties are more difficult their rewards are higher than those of airdrops too.


Closing Thoughts

A product that nobody uses will ultimately have no value. There are hundreds and thousands of crypto projects all striving to get the attention of the worldwide community. One way these projects attempt to carve out users for themselves from this one worldwide community is through airdrops.

Through this article, we hope you now have a very good understanding of what airdrops are and how they work. We also hope that you have learnt how to notice scam airdrops when you see one. 

Having said that, airdrops serve the interest of both blockchain projects who host them as well as the recipients of airdrop tokens. And you know what? From time to time you could come across a very valuable airdrop. 

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Ahamdi Abarikwu

Ahamdi Abarikwu is an Electrical Engineer and a lover of anything crypto. He is also an avid writer, proofreader and editor. He loves to play Scrabble in his spare time.