Foreword

With the popularity of cryptocurrency, new blockchain projects are emerging one after another, with currently thousands of different cryptocurrencies in the market. Some projects may be particularly favored by the market as they are endorsed by celebrities, or due to their unique operating mechanism, well-designed tokenomics, or comprehensive services provided. However, there are also many projects that lack extensive attention or do not yet have a suitable token distribution mechanism, making it difficult for the community to expand. Hosting airdrops may be a choice for these projects to overcome these challenges.

Cryptocurrency airdrops are a marketing strategy that typically involves sending free tokens to users’ wallets to generate awareness for the project. In some airdrop promotions, tokens are distributed to active community members’ wallets for free, while others may require users to complete specific tasks before they can claim the tokens, such as retweeting the project’s tweets.

In this lesson, we will explore the basics of cryptocurrency airdrops to give you a deeper understanding of this event.

What Is an Airdrop?

In the blockchain sphere, an airdrop refers to the distribution of cryptocurrencies or NFTs to users’ blockchain wallets, with a view to promoting new cryptocurrencies or NFTs. Airdrops are typically distributed to recipients for free, but there are also airdrops that require users to pay gas fees to claim the tokens, such as the famous Bored Ape Kennel Club airdrop.

Users often need to meet specific conditions to be eligible for an airdrop. The project party holding the airdrop event will set criteria to select those who have actively contributed to the development of the project. But some airdrops may also be randomly distributed, and anyone who has a cryptocurrency wallet may get a surprising bonus.

The main difference between airdrops and Initial Coin Offerings (ICOs) is whether users directly use funds to buy tokens. If the token issuer promotes its tokens and attracts users to invest capital, this way of token distribution is an ICO instead of an airdrop.

The Bitcoin faucets introduced in 2010 can be considered the earliest crypto airdrop, which allowed users to earn BTC rewards by completing ReCAPTCHA on the website according to the instructions. But the first project to launch new tokens through airdrops was Auroracoin in 2014, in which Baldur Friggjar Óðinsson, a pseudonym geek, airdropped 10.50 million Auroracoins to 330,000 Icelandic residents as a call to the community to revive Iceland’s sluggish economy.

Airdrops have become even more popular since the ICO boom that started in 2017. Speculators began to collect as many cryptocurrencies as possible in order to get airdrops, and the repeated buying behavior caused the price and market capitalization of the cryptocurrency to skyrocket.

Airdrops are generally used as a strategy to stimulate the loyalty of participants by distributing token rewards to foster an active community and promote the sound development of the project. However, many airdrops are carried out for advertising and marketing purposes, or simply for fun. Hackers can also exploit airdrops to disguise their fraudulent behaviors. Therefore, it is important to identify the motives behind an airdrop before participating in one to avoid scams.

How Airdrops Work

Airdrops can be categorized into open airdrops and undisclosed airdrops based on the level of information dissemination. In terms of frequency they happen, airdrops can also be classified into one-time airdrops and continuous airdrops.

• Open Airdrops vs Undisclosed Airdrops
  Open airdrops refer to airdrops clearly announced and promoted by the project party, which usually generates widespread community awareness and participation. Undisclosed airdrops refer to those that are not explicitly announced by the project party, and information is only released when the airdrop is about to take place (or has already taken place). Users need to have their own information resources or sound judgment to participate.

• One-time Airdrops vs Continuous Airdrops
  One-time airdrops are conducted within a specific period of time determined by the project team. Once the airdrop ends, users can no longer obtain the tokens. On the other hand, continuous airdrops allow multiple participations. For example, users may be able to claim tokens on a monthly or quarterly basis by fulfilling certain conditions. Continuous airdrops are also often referred to as “X to Earn”, implying that users must work to make money.

Most airdrops use a snapshot mechanism to verify whether the user meets the airdrop conditions. The snapshot date is the deadline for the airdrop activity. Some project parties will proactively distribute the airdrop tokens to the user’s blockchain wallet, but there are also airdrop activities that require users to claim the tokens themselves through channels specified by the project. Airdrop tokens that need to be claimed by users themselves may have a designated claim period, and unclaimed tokens will be taken back by the project team.

Common Types of Airdrops

There are various different types of cryptocurrency airdrops in the blockchain space, which can be classified as follows based on the purpose of the airdrop and the conditions for claiming the tokens:

• Bounty Airdrops
  In bounty airdrops, recipients are required to complete certain tasks in exchange for free tokens. For example, they may need to retweet a tweet, make a post on Instagram and tag their friends, follow their community accounts, subscribe to newsletters, sign up on their websites and use their services, etc. These tasks are intended to increase the exposure of the project, attracting more people to know about it and become users of its services.

• Exclusive Airdrops
  Exclusive airdrops distribute cryptocurrency tokens only to designated wallets. Users who get airdrops are typically early contributors, users, or community members of the project. The recipients of exclusive airdrops have a verifiable history of involvement and have played an important role in the development of the project.

• Hard Fork Airdrops
  Hard fork airdrops are different from regular airdrops because they create a new token from the blockchain. Assuming that token X is the cryptocurrency of blockchain A, when a hard fork occurs, token Y is created on the same blockchain. For hard fork airdrops, existing token X holders will receive an equal amount of token Y in their wallets. Generally, the purpose of a hard fork airdrop is not to reward users but to facilitate project upgrades or changes.

• Staking/Holding Airdrops
  Staking/holding airdrops will distribute tokens to users who hold specific tokens in their cryptocurrency wallets or have their liquidity locked in specific smart contracts. Broadly speaking, all staking mining can be regarded as staking/holding airdrops.

• Raffle Airdrops
  If the project has achieved success to some extent or wants to further motivate the community, a raffle airdrop may be held to distribute free tokens to randomly selected users. There are no conditions or tasks required to get the raffle airdrop. You only need to have a corresponding wallet and follow the latest information of the raffle airdrop.

• Scam Airdrops
  Scam airdrops abound in the blockchain world, where scammers launch fraudulent projects that masquerade as airdrops and send users shitcoins while asking them to sign problematic smart contracts. In this way, scammers could obtain users’ keys to their wallets or other personal information. Scam airdrops are often advertised through social media groups like Telegram and Discord, enticing users to click on links and join the groups with promises of lucrative rewards.

Why Hosting Airdrops

The main reasons that cryptocurrency projects distribute airdrops are to promote the project and reward users. In the early days of ICOs, participants had to buy tokens from the start-up team, which came with significant risks and did not guarantee good returns. This inevitably led to numerous scams. However, the emergence of airdrops signifies a more benign interaction where the token value grows alongside the community network. Airdrops could not only enhance the popularity of projects but also provide users with alternative ways to obtain tokens, which reduces the risk of investment losses. Many projects even regard airdrops as operational expenses and establish reward mechanisms to engage users in various types of promotional and developmental activities.

Famous Airdrops

• Bitcoin Cash
  Bitcoin Cash, a well-known fork of Bitcoin, conducted a hard fork airdrop in August 2017, where every blockchain address holding 1 Bitcoin (BTC) was eligible to receive 1 Bitcoin Cash (BCH). During the airdrop boom in 2017, the value of one BCH surpassed $4,000.

• Uniswap
  Uniswap went live in September 2020 and airdropped 60% of the supply of its governance token, UNI, to community members. Over 250,000 early users were eligible for the airdrop and received over 400 UNI tokens. All users who had used Uniswap services before the airdrop were eligible to claim them. During the cryptocurrency bull market in April of the following year, the value of the airdrop exceeded $15,000.

• Ethereum Name Service
  Ethereum Name Service (ENS) launched its native ENS token on November 8, 2021 and conducted an airdrop for early ENS holders and contributors. Anyone who had registered a .eth domain with a validity of at least six months before October 31, 2021 was eligible to claim a minimum of 100 ENS tokens, whose value reached $7,000 based on the closing price on the airdrop day.

• Optimism
  Optimism conducted its first airdrop in June 2022, distributing 5% of its tokens to active users in the Optimism and Ethereum ecosystems. Nearly 250,000 addresses were eligible to claim the tokens. It also held two more airdrops in November 2022 and March 2023, in which eligible users could receive over 4,000 OP tokens, worth nearly $5,000 if calculated at $1.2 on the airdrop day.

• Aptos
  Aptos held an APT airdrop event in October 2022. Users who have applied for an Aptos incentivized Testnet or minted NFTs received 300 APT rewards. Approximately 110,000 addresses were eligible to claim the airdrop. Due to the loose conditions and lack of measures to prevent users from gaming the system, many individuals obtained a significant amount of tokens overnight. To be calculated at the price of $7 on the airdrop day, the value each address received exceeded $2,000.

• Arbitrum
  On March 23, 2023, Arbitrum airdropped about 1 billion tokens to over 600,000 wallet addresses. Users who had used services on the Arbitrum network prior to the snapshot in February were eligible to earn points. A single wallet could receive up to 10,250 ARB tokens. The airdrop used a Sybil attack to filter out airdrop farming behaviors. To be calculated at the price of $1.3 on the distribution day, users that completed all tasks earned over $13,000 worth of airdrop tokens.

Conclusion

In this lesson, we have introduced the basics of cryptocurrency airdrops. In a word, cryptocurrency airdrops are a marketing strategy that typically involves distributing free tokens to users’ wallets. Users who want to receive airdrops need to meet certain conditions, participate in communities, or complete specific tasks.

Cryptocurrency airdrops operate in various ways and have enabled some users to accumulate a significant amount of crypto assets. In the next lesson, we will take you through some of the skills and common tools necessary to obtain cryptocurrency airdrops, facilitating you to discover profitable airdrops that you might be interested in.

Highlights
Cryptocurrency airdrops are a marketing strategy that typically involves sending tokens directly to users’ wallets to attract market attention within a short period.
The purpose of airdrops is to attract community members and promote the development of a project. Users typically need to meet certain conditions to be eligible for the airdrop.
The major difference between an airdrop and an Initial Coin Offering (ICO) is whether users directly use funds to buy tokens.
Some airdrops are publicly announced, while others are undisclosed. They can be classified into one-time airdrops and continuous airdrops in terms of frequency.
An airdrop is a strategy to incentivize loyalty among participants, but it may also be used as a marketing or scam scheme. Be sure to make wise judgments when receiving an airdrop to avoid falling into a trap.