What is a cryptocurrency airdrop?

12.04.2022

Intermediate

What is an airdrop?

A cryptocurrency airdrop (from the English “airdrop”—dropping supplies from an aircraft) is a common tactic in the crypto industry: projects distribute their tokens or coins for free to draw attention.

To take part and receive a reward, users usually have to meet one or more conditions—for instance, follow a project on social media, hold a specific cryptoasset or use a particular application.

How did airdrops evolve?

This form of marketing became popular during the 2017 ICO boom. Token-sale organisers offered small rewards for minor social-media activity, helping spread the word about ICOs to a mass audience.

In 2022, DeFi projects widely used airdrops to distribute governance tokens to users of decentralised protocols and applications. The goal was to expand their community quickly while creating demand for their digital assets.

NFT projects also employ the approach, distributing free non-fungible tokens from their collections, sometimes via contests.

How do cryptocurrency airdrops work?

Developers send free tokens to users who meet certain criteria or perform specified actions. Startups often enlist the support of well-known crypto-industry resources for their airdrops.

For example, the Coinbase exchange has a dedicated Earn section with short videos about cryptocurrencies. After watching, users can take a test and, by answering correctly, receive a small amount of coins. CoinMarketCap also maintains a section with past and current airdrops (link below).

Today, most startups simply credit cryptoassets to user addresses based on certain criteria. Early users of a decentralised exchange, for instance, may receive its governance tokens for free. This lets DeFi teams distribute tokens to active community members while attracting attention to their projects.

What types of token airdrops are there?

Each crypto project sets its own requirements for participants, but several common types stand out.

Classic

Participants earn cryptocurrencies for completing specified actions—posting in chats, registering on a website, or publishing on social networks. Each action has a set value. Participants must record their actions and then submit proof to the project team.

Once organisers verify the actions, they send the earned tokens to the participant’s wallet. Traditional though it is, this format is now used less often because it demands considerable effort from both organisers and users.

User airdrops

Tokens can also be credited for free to those who use a particular blockchain application. This is most common in decentralised finance.

For example, a protocol might airdrop its governance tokens to all registered users or to those who have performed certain actions, rewarding its community.

Such airdrops can also result from collaborations between a crypto project and a well-known industry service, such as a wallet.

Airdrops for cryptocurrency holders

As large ecosystems emerged, projects began distributing tokens to holders of native coins of “infrastructure” networks. A startup launching on the Ethereum blockchain, for instance, might airdrop its tokens to all holders of the second-largest cryptocurrency.

How to take part in a cryptocurrency airdrop?

Regardless of type, participants must have a relevant address on the network of the coin or token they want to receive—that means a non-custodial wallet whose keys they control (for example, MetaMask or Trust Wallet). An exchange account usually will not do.

Some projects run promotional campaigns and openly announce the terms of participation. Often these are little-known companies whose tokens have low value and are not listed on major exchanges.

Others announce airdrops unexpectedly to reward a defined group of loyal users and keep out “free-money” hunters. This is typical of popular or hyped projects that distribute sizeable sums of tokens whose prices may rise sharply. Such events are hard to predict.

Notable airdrops

In 2018 the foundation behind the Stellar blockchain distributed XLM worth about $125m over several months to users of the Blockchain.com wallet.

In September 2020 the decentralised exchange Uniswap unexpectedly gave everyone who had used it at least once 400 UNI tokens. The price per UNI reached $7 at the start of trading, instantly handing hundreds of thousands of people digital assets worth several thousand dollars.

In 2022 the team behind the largest NFT project, Bored Ape Yacht Club, airdropped ApeCoin (APE) to holders of non-fungible tokens from the Bored Ape and Mutant Ape collections.

We covered the most profitable cryptocurrency airdrops of 2021 in a separate piece.

Where to find cryptocurrency airdrops?

The internet offers plenty of resources on current and upcoming token giveaways.

Popular sites include CoinMarketCap, CoinMarketCal and Airdrops.io, as well as Twitter channels — Airdrop, DeFi Airdrops and Cosmos Airdrops. Many of these resources maintain calendars of past, current and future airdrops.

We report the most important airdrops in our Telegram channel.

What are the risks of taking part in token giveaways?

New investors often see airdrops as an easy way to make money. In reality, participation either requires substantial effort or carries risks. Scammers often exploit the promise of “free coins”.

Some tips to stay safe:

Never share the private key or seed phrase of your wallet with anyone.
Be vigilant and research every project you plan to join. Look for information online and on trusted resources—such as ForkLog. If little information is available, the risks rise.
Be especially cautious if an airdrop promises quick, high returns.
Never hand over personal information or login credentials.
If you are asked to send a small amount of coins in exchange for a larger payout, it is a scam. Airdrops are free; you do not need to buy the coins.

There have been cases of scammers sending a fake token to a wallet that mimics a popular coin. The forgery may go unnoticed until the user tries to sell or swap it. Error messages then prompt the user to visit a malicious phishing site. The page’s interface looks like that of a decentralised application (dapp) and invites the user to connect a wallet. By confirming the transaction, the user unwittingly authorises the transfer of their tokens to the scammers.