Cryptocurrency Airdrops: What Are They and How Do They Work?

The global cryptocurrency market experiences constant ups and downs. And with that, new projects are launched on the market all the time. In the midst of this sea of ​​news, it is increasingly difficult for companies in the sector to stand out and win over users, who are the target of any business.

And that’s where the cryptocurrency airdrop comes in. In short, it is a marketing action that distributes tokens – usually free – to attract the public. Therefore, we will explain below what these actions are, and how they work.

In addition, we will present you with the necessary precautions to avoid falling into scams that are associated with this action.

What are cryptocurrency airdrops?

The airdrop is a distribution, usually free, of tokens or cryptocurrencies to users. The action is part of a marketing strategy adopted by new companies and projects in the blockchain sector.

The goal is to attract those interested in the brand, as well as generate engagement, create liquidity for an asset and increase its long-term value.

As an example, think of the following example: you pass a perfume store, and a saleswoman offers you a spray of a perfume she sells.

Or, you go to a supermarket and there is a promoter handing out free samples of a certain product. This is exactly how an airdrop works, in a very similar way.

However, there is a difference: the person who wins the token can make a profit if the project grows and the asset appreciates. This occurred, for example, with the recipients of the airdrop of the decentralized exchange Uniswap (UNI).

In 2020, distribute 400 UNI tokens to each eligible participant. And amazingly: In just 6 months, the crypto asset appreciated by 1,000%.

Finally, it is important to note here: not all digital asset distribution events are true. Some are scams created to take money from users. So it’s important to stay tuned.

How does cryptocurrency airdrop work?

In general, airdrops work in two ways:

  • Announced: Projects announce a date for the distribution of tokens. In addition, they publish information and rules on their websites, blogs or social media, and this generates a buzz around the action.
  • Unannounced: There are also cases of companies that do not make any announcements, and send tokens only to selected wallets. The idea, with this type of strategy, is to win users through surprise.

What are the types of airdrops?

In short, there are at least 4 main types of airdrops. Are they:

  1. Pattern: This is the most basic type of airdrop. In general, the project transfers cryptocurrencies to several wallets, and there are not many pre-defined rules.
  2. Reward: In this airdrop modality, users must do some established tasks. Such as sharing a post or following the project on a social network. At the time of earning the tokens, the person must prove that he has completed what was requested, and present some proof.
  3. Exclusive: Exclusive airdrops are intended for specific groups of users. In general, the communities chosen are made up of people loyal to the projects.
  4. For holders: In this airdrop style, projects give tokens to holders, that is, people who hold their assets in their wallet. To participate, investors must have a specific amount of a certain cryptocurrency in their wallet.

How to earn tokens?

To be able to participate in cryptocurrency airdrops, it is necessary to have a wallet to earn the token. If the distribution is done on the Ethereum (ETH) blockchain, for example, the interested party must have wallets compatible with the network. Two examples are MetaMask and Exodus.

If the action is intended for the general public, it is necessary to send the wallet address to the person responsible for the distribution and wait for the assets. In the case of other types of airdrops, users must carry out the stipulated tasks, and have in their wallets, the amount in cryptocurrency stipulated in the organizers’ rules.

To find cryptocurrency airdrops, it is necessary to follow platforms and social networks, such as Twitter, through the hashtag #airdrops. In addition, you can access an alert website (by clicking here).

In addition, you can follow the forums, digital asset price aggregators and some exchanges that also publicize these events. An example of this is CoinMarketCap, which has a calendar with airdrops that are taking place.

What scams are there on the market?

In short, the airdrop boom has also attracted scammers. So, here are some of the main scams:

pump and dump

In this scam, criminals issue tokens, expect most of them in their wallets, and distribute some tokens to some people. Then, they use groups and social networks to generate a buzz around the project, inflate the value, and get them listed on some exchange.

And this is how tokens start to be traded: cyber criminals trade their crypto assets, earn good value, and bring the price down. And so, the victims are at the loss.

spoofing

In short, it is a type of scam in which the scammer impersonates another person, government, company or project to reach data, or take advantage of users. That’s how it happened with the Ukraine airdrop.

Phishing

Another available scam is the phishing. In general, a cyber criminal creates a fake website of a known project, and starts to publicize a supposed airdrop on social networks.

In the disclosure, it asks the user to enter the created electronic address, register, and connect to their wallet to participate. As soon as a walet is connected. However, all the person’s cryptocurrencies are stolen.

dusting attack

Finally, in this fraud scheme, the scammer sends a small amount of cryptocurrencies to a wallet. As the amount forwarded is minimal, many investors, especially the big players, do not pay attention to the “Greek gift”, and leave cryptocurrencies in their wallet. Thus, however, scammers are able to track the recipient’s movements and break their privacy.

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