All you need to know about Crypto airdrops

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May 17th, 2022 | ± 5 minutes

CONTENTS:

  • What are Crypto airdrops and what are they used for
  • Why are they so popular and what are the benefits
  • How to get airdrops and how to avoid scams

Let’s go!

What is a Crypto airdrop?

If you’ve explored defi, altcoins, or NFTs, there’s a good chance you’ve seen the term “airdrop” be thrown about.

Airdrops in the crypto world have nothing to do with air and everything to do with distributing cryptocurrency tokens or coins for free to multiple wallet addresses.

Wait, what?

Investopedia offers an extensive definition:

An airdrop is a marketing stunt that involves sending coins or tokens to wallet addresses in order to promote awareness of a new virtual currency. Small amounts of the new virtual currency are sent to the wallets of active members of the blockchain community for free or in return for a small service, such as retweeting a post sent by the company issuing the currency. (there’s more)

But essentially, an airdrop is when web3 projects send free tokens or NFTs to their communities.

This is a brief overview of the Airdrop distribution.

Why airdrop?

Giving away free crypto or NFTs on the blockchain might sound counterintuitive at first reading – after all, these projects are trying to be legitimate businesses and make money, right?

Well, here are a few good reasons why airdrops are so popular:

1. Airdrops drum up hype

In many cases, airdrops can be seen as a form of advertising – like promotional giveaways, free SWAG, etc. The excitement of a pending airdrop gets communities excited and can generate a lot of publicity (remember the airdrop distribution circle?). However, airdrops aren’t just for PR.

Airdrops in the form of tokens can also promote adoption, especially for projects tied to more utility. Not everybody is willing to invest in a new project, let alone participate in the project’s ecosystem. However, if the project gives away some tokens for its ecosystem, this can convince a lot more people to participate for free or actually notice the community:

A good example of that tactic.

Looksrare.org ($LOOKS on CoinMarketCap) is an NFT secondary marketplace and competitor to Opensea, which is currently the largest NFT marketplace. They airdropped their tokens to OpenSea users, which generated buzz amongst the community and incentivized active NFT traders to use their platform.

That way, people who might not have otherwise engaged with the project can end up liking the ecosystem and becoming ambassadors for the project.

And those who are token holders might want to promote the project to pump up their own bags. (It’s not the best reason, but it happens, so it’s good practice always to be careful of people who are shilling projects).

2. Airdrops can reward the community

Like anything free, airdrops can also be seen as rewards for a project’s community – Yuga Labs wanted to reward members of its valuable community by airdropping $APE to holders of Bored Ape Yacht Club and Mutant Ape Yach Club (two of Yuga Labs’ famed collections).

Bored Apes. A single one is currently worth ~100 $ETH or about $200,000
Mutant Apes. A single one is currently worth ~20 $ETH, or about $40,000.

Bored Ape NFT owners were able to claim 10,094 $APE. Mutant Ape NFT Owners were able to claim 2,042 $APE.

Owners of both a Bored Ape NFT & a Kennel Club NFT were able to claim 10,950 $APE; owning a Mutant Ape NFT, or a Kennel Club NFT allowed you to claim 2,898 $APE.

The value of $APE since the airdrop:

$APE has hovered between roughly $5.00 and $26.00 since inception.

Even if Bored Ape NFT owners sold all of their 10,094 $APE at its lowest price, they would have made more than $50,000.

The rewards increase the community’s loyalty to the projects and increase the value of the projects. After all, who doesn’t want to participate project in which you get free things (in the form of airdrops)?

3. And sadly… Airdrops can be used as scams

Unfortunately, not all airdrops come from the pure of heart. Bad actors can also airdrop tokens and NFTs.

Curious individuals might then interact with these tokens and NFTs, engaging in smart contracts that might give these nefarious airdrop senders access to their wallets.

It’s a clever web3 scam – many people can’t help but be drawn to free things, no matter how suspicious they might be.

We won’t go into the details here, but if you don’t recognize an airdrop, then don’t trust it. It’s best to ignore it.

Here are some additional tips on avoiding airdrop scams.

It’s all memes and games until you get scammed.

How to get airdrops

Legitimate airdrops sound pretty cool. After all, some of them can be worth five figures, as we saw in the case of Yuga Labs and $APE coin.

The biggest tip in getting legitimate airdrops is to support quality projects. Don’t go after the flashiest project that promises to 10x your income in 2 months. Instead, go for the older projects with a promising roadmap and a history of delivering.

As a rule of thumb, if it sounds too good to be true, it’s often too good to be true.

Lists of ongoing airdrops

You should keep a skeptical approach even with the most trustworthy places that list airdrops, such as CoinMarketCapp’s list:

You can find plenty of airdrop sites online, but we wouldn’t trust most of them.

And if you do engage with defi apps or look to claim free airdrops, then make sure you do it with a wallet that holds very few assets in case of a vulnerability or a hack.

Conclusion

Airdrops can be an enticing reward for project supporters.

Getting free tokens or NFTs can easily amount to thousands of dollars… but don’t get lost in the sauce.

Remember that not all airdrops are legit – there are plenty of bad actors who will give airdrops in an attempt to steal your valuable NFTs or cryptocurrency. While it’s not admittedly common, it’s always better to be more careful than not. Always DYOR.

That’s it for this week’s Crypto Insider. Did you find it useful?

If you have any questions or would like to discuss anything about this issue (or about crypto in general), please don’t hesitate to head over to my Twitter, where I can respond to all of your questions, comments and suggestions. Just @ me – seo_colinlma, and click Follow if you like what you see.

You can also email us if you prefer. We read everything, as always.

Thanks, Colin

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Author

Colin Ma

Colin Ma

Colin Ma is an Alts contributor. He has bought, managed and sold multiple digital businesses across various sizes, including high 5 and 6 figure deals, and is active in crypto communities. In the past he has worked with investing.io, Domain Magnate, and founded Makujin Media, a digital marketing and asset holding company. His strengths lie in analyzing various market opportunities and growing businesses with several different models, including ad-based websites, affiliate marketing blogs, and successful e-commerce brands across a variety of niches. In his spare time, Colin can be found breakdancing around Southern California and cooking up a storm in the kitchen.

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