Cryptocurrency airdrops are a common terminology among cryptocurrency enthusiasts. However, those who are just getting into the digital asset may not completely understand it. Cryptocurrency airdrops are essentially giving away free money to existing coin owners. This isn’t for no reason, however. In this post, we’re going to break down what exactly an airdrop is, and how blockchain startups benefit from it.
Breaking Down A Cryptocurrency Airdrop
Initial Coin Offerings (ICO’s) are becoming increasingly common. In fact, we’re getting to an overwhelming amount of them. Those that want to stand out may throw money into advertising or any other way of getting noticed, or they can use cryptocurrency airdrops to get the word out.
With an airdrop, a newer cryptocurrency project will take a look at established tokens like Bitcoin or Ethereum. Then, they will make a list of those who have that token in their wallets. Finally, the team will match the amount of the original cryptocurrency and drop an equivalent amount of the new coin into the owner’s wallet. The owner may or may not get any notification of this action, and may genuinely be surprised at the new currency showing up in their wallet.
This often happens alongside a fork. A fork is when someone has an idea to improve a current blockchain project, and they break it off into its chain. Because blockchain technology is open source, anyone can take the code and create their own project. Examples of this include Bitcoin Cash and Litecoin as forks of Bitcoin.
What Is The Point of An Airdrop?
As stated earlier, there is a ridiculous amount of ICO’s on the market right now. Most of them have a hard time standing out and don’t want to spend their limited budget on more advertising. An airdrop serves to make everyone happy. The customer gets free coins, and the startup gains free advertising.
Giving away your product makes a pretty good first impression as well. If one day, you log into your wallet and you find a bunch of a new coin in there, you are much more likely to check out the project and even have positive feelings towards it. Those positive feelings may also lead to you putting more money into the project. You would (potentially) see a return on your investment, and the company would gather more funding.
The goal of an airdrop is to positively grab your attention and increase your emotional investment into the project. They are a brilliant way to avoid traditional advertising spaces as well.
How To Participate In Airdrops
The best way to increase your chances of an airdrop is to invest in newer coins and to have a stake in projects on the Ethereum ERC-20 technology. Otherwise, there are ways to be notified of airdrops.
If you do some searching around, you’ll find that a lot of pre-ICO projects announce their airdrops early on. Some of them release airdrops as a reward for participating in their social networks and sharing the project around. This is to increase the chances of involvement, as the only ones receiving the tokens would ideally be the ones who would invest more into it due to awareness.
You can also join into different groups on Telegram and Facebook. There is a wide variety of groups that focus purely on upcoming ICO’s and projects of interest. Also, a website by the name of airdropalert.com does a great job tracking giveaways and even providing push notifications about them. Other times, projects will giveaway coins to the first 10,000 users to download their wallet or application, alongside payment for promotion on forums and websites.
Fortunately, there aren’t any specific rules around airdrops. Every project will go about them in their own way. Do some searching around to try and get involved.
Avoiding Scams And Danger
As with any online entity, there is always the risk of scams or danger when trying to participate. Some projects may ask you for your private key or even ask for payment in exchange. If this happens, avoid the project. The world of cryptocurrency lives off of deregulation. Don’t let that deregulation become your enemy.
That said, don’t go into airdrops expecting to make a quick buck. Airdrops are designed to generate interest and to advertise. Most of the time, these currencies are at a very low value during the giveaway, and chances are higher than not that nothing will ever come of the project.
As with any investment, do your research before placing money anywhere. Look at the team behind the project. Are their ideas really that revolutionary? Is there positive feedback from fans? If the project is relatively quiet with little information out there, it’s probably in your best interest not to trust them.
How To Store Cryptocurrency Airdrops
A majority of the time, airdrops come from a fork of the Bitcoin or Ethereum blockchain. In that case, you can store those coins with the same wallet you currently use.
In fact, most of the blockchain projects worth checking out will require an ERC-20 compatible wallet. Chances are very high that you have just that. Nearly every exchange supports ERC-20 wallets.
Also, it’s important to note that you will not be eligible for an airdrop unless the relevant tokens are in your wallet. If you’re storing them on an exchange or somewhere else, you will not receive airdropped tokens.
Airdrops are becoming increasingly common, and they are a fantastic way to generate interest in a new crypto project. Both the project and the consumer win in this case, though it’s important to note that these coins won’t always amount to something. Be careful with your time and your information in all cases. Just do your research and do what you can to avoid scams.