What is a Crypto Airdrop and How Does It Work?
What is a Crypto Airdrop?
A cryptocurrency airdrop is an event that is organized by the issuer of a given cryptocurrency or blockchain project. This event entails sending a defined amount of the cryptocurrency supply among investors or members of the cryptocurrency community. The main objective of airdrops is to raise awareness about a given cryptocurrency.
The investors who receive these new tokens in their wallets have the potential to become new investors after collecting more information about the project in question. Crypto airdrops gained popularity during the ICO or Initial Coin Offering boom of 2017.
How do Crypto Airdrops Work?
Cryptocurrency airdrops are announced by the official issuer of a blockchain project or decentralized protocol. However, the issuers first set defined criteria or requirements for the investors who can receive the token distributed during the airdrop.
These requirements can include the determination of a particular period of time when the investors will be able to access the free giveaways.
At the same time, these specifications can ask the investors to join an account on any social media platform such as Telegram. In some cases, investors are also asked to join a newsletter or add a new subscription.
Furthermore, the investors must also have a minimum balance of a given digital currency in their wallet accounts beforehand in order to qualify for collecting the tokens in the airdrop in some instances. The investors must understand that these criteria are not always announced in advance.
Investors can collect information regarding these airdrops by following the defined social media accounts or through other online information boards. The airdrop organizers can set the rules of participation at their discretion.
Importance of Crypto Airdrops
There is a lot of competition among the new tokens that are introduced in the cryptocurrency sector. Potential investors have to filter through thousands of cryptocurrency variants to add a few coins to their trading portfolios. Therefore, new token issuers use airdrop events as a way to raise awareness among investors.
It is a difficult task to convince investors to purchase a token that is introduced recently. However, almost all investors are open to collecting a new crypto coin for free. Airdrops allow investors to collect their newly launched tokens for free in small quantities. The investors who are participating in the event have to follow various steps in order to collect these tokens.
During the participation process, the investors are engaged with the new project and they may subscribe to all the news related to the latest development on the project.
At the same time, the investors may also conduct research regarding the token dynamics in order to decide if they should purchase the coin after its public launch or not. Airdrops are also a way to invite big investors to take up massive stakes in a given cryptocurrency.
If big investors are involved with the project, they can share the information regarding the token with their subscribers or followers on social media platforms lead to awareness and more investment interest in the given token.
Differences Between ICOs and Crypto Airdrops
ICOs stand for Initial Coin Offering that is a distinct concept from cryptocurrency airdrops. Airdrops are free giveaways to raise awareness among investors who are sometimes conditioned to participation. Meanwhile, ICOs is a type of crowdfunding option.
During the ICOs, investors intend to collect funds from the investors in order to develop a given project. ICOs gained popularity in 2014 after Ethereum blockchain organized a successful crowdfunding event. In 2017, ICOs gained wider adoption in virtual currency sector.
Hundreds of new crypto startups employed the method. ICOs grant a chance for new investors to buy substantial stake in a given cryptocurrency as investment.
Types of Cryptocurrency Airdrops
Here are some of the most popular types of cryptocurrency airdrops mentioned below:
Bounty Airdrop
Bounty airdrops are promotional types that allow investors to collect free tokens giveaways by contributing to the advertisement process. The investors may join new social media groups, share posts, or raise awareness about the project with different methods.
Exclusive Airdrop
In this type of airdrop the investors are directed to send their tokens to specified wallets accounts. These wallets are chosen based on a given criteria such as containing a specified amounts of cryptocurrencies or total active trading hours etc.
Holder Airdrop
Holder airdrops sent airdropped tokens to the wallet accounts that already contain a given amount of cryptocurrency reserves. Such airdrops are designed as a gesture of goodwill among the investors and as a way to increase participation and engagement within its niche.
Conclusion
Airdrops grant a great opportunity for investors to interact with new cryptocurrency projects and find potential projects for investment. However, in some cases, investors may have to deal with scammers when interacting with airdrops.
