The idea of earning freebies always attracts the massive attention of users worldwide. It is the significant reason behind the festive season’s discounts, freebies, and other offers, which are considered great marketing tactics for the brands. From the users’ perspective, freebies or discounts never hurt. It’s always good to earn or get more rewards. Similar to other industries, the crypto industry has its own way of tapping the potential of freebies, known as “Airdrops.”
As the name suggests, it offers coins or tokens for absolutely free, as if they emerge out of thin air. Let’s understand in detail the concept of airdrops & their significance in the crypto industry.
What is an airdrop?
Airdrop is a popular marketing strategy in the crypto industry that is utilized by start-ups to promote their projects & to enhance the circulation of their newly minted coins/ tokens. It involves sending out free tokens or coins to the existing members of their communities or to potential investors. Sometimes users can receive the tokens or coins without any effort, whereas in a few cases, users are required to do some small tasks in return, such as retweeting or sharing the social media post of the company, etc.
The main idea behind the airdrops is to provide potential investors with free coins with the hope that it will generate inclination in the recipient to engage with the project. The ultimate goal of the airdrops is to enhance awareness about the project.
Timeline: History & Popularity
The first airdrop in the history of cryptocurrency occurred on 25th March 2014. The project Auroracoin(AUR) was intended to be the national cryptocurrency for Iceland. 50% of the total Auroracoins was airdropped to the citizens of Iceland. Every citizen who has submitted their national ID received 31.28 AUR. The ICO phase in 2017 gave a boost to the popularity of airdrops. The companies used to circulate their coins/ tokens by airdrops before heading to public listing. Airdrops were considered instrumental in establishing the legitimacy of the projects.
What are the various types of airdrops?
On the basis of eligibility and the process of distributing tokens, airdrops are of the following types:
- Standard Airdrop: These are the simplest type of airdrops. Any interested individual can express interest and can receive an airdrop by simply providing their valid wallet address. In standard airdrops, companies often decide the limit of total tokens to distribute as airdrops and the maximum limit of tokens an individual can receive.
- Holder Airdrop: In these airdrops, tokens/coins are sent to the users who are already holding the native crypto of the project. It primarily rewards individuals in the ratio of their holdings. It aims to incentivise the largest holders in the community & inculcate loyalty to the project.
- Bounty Airdrop: These airdrops require users to perform certain tasks in order to receive the airdrop. These tasks are mostly of promotional nature and are aimed at raising awareness about the project, such as sharing the company’s post on social media or retweeting, tagging friends, or referring friends to join the discord channel of the company, etc.
- Raffle Airdrop: In these airdrops, users are encouraged to earn raffle tickets by performing various activities like holding tokens, earning points or expressing their interest in the airdrop. Once the number of users exceeds the number of airdrops, the random wallets are selected to receive the airdrop through the raffle.
- Exclusive Airdrop: These airdrops are also for the holder community, but these are distributed based on different criteria such as the amount of time spent on the project, the amount of money spent on non-token activities or maybe the number of posts in the discord forum, etc. The company can create its criteria to reward people who are actively engaged in the project
Are airdrops taxable?
The airdrops are not considered taxable income until they are locked or in a vesting schedule. It can only become taxable once an individual has control over the tokens or coins. The taxability of airdrops is completely dependent on the jurisdiction of the individual’s residence.
How to avoid crypto airdrops scams?
- Never fall for lucrative airdrops without verifying their authenticity.
- Do not link your wallets to unfamiliar or suspicious websites.
- It is recommended to create a separate wallet to receive airdrops. Never link your primary wallet to receive airdrops.
- Keep track of all your transactions; beware of unsolicited transactions to your wallet, as they can lead to dusting attacks.
- Always verify the team behind the project and interact with their discord community to understand more about them.
- Only participate in the airdrops, which are announced by official and verified sources.
We hope this article will help you understand all about crypto airdrops & staying away from scams. If you enjoyed reading this article and looking forward to exploring more about the crypto world, don’t forget to join our Telegram community & follow our social media handles. Have a provoking thought on this topic? Share with us in the comment! We always love to hear from you 🙂