Free money, understanding the basics, and how to get onboard
The term airdrop emerged after the first crypto giveaway by a project called Auroracoin. It gave 31.8 tokens to everyone who applied, worth $385 at the time. Not bad for doing nothing. But for those who held onto their tokens, things didn’t work out too well, they are now worth a paltry $6. And that seems to be the case with many of the 3,000 odd airdrops since that first one back in 2014. Although having said that there have been some phenomenal successes which make this area of the crypto space worth serious attention.
Let’s start by taking a look at the definition of an airdrop:
An airdrop, in the cryptocurrency business, is a marketing stunt that involves sending coins or tokens to wallet addresses in order to promote awareness of a new [and in some cases existing] 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. (Source: Investopedia)
There are two types of airdrops, a holder and a non-holder airdrop. Both refer to the method by which airdrops are delivered. A holder airdrop is when the airdrop is transferred directly into a person’s wallet without his or her agreement or involvement. A non-holder airdrop requires a person’s participation in the process. We are focused on non-holder airdrops in this article.
A few key points about airdrops:
- 90% of all airdrops are by Ethereum based projects
- You will need Twitter, BitcoinTalk, Telegram, MyEtherWallet, EtherDelta, and Facebook accounts for many airdrops
- The average value of an Airdrop is around $30, but the figure varies wildly, as you will see below
- Many airdrops offer additional tokens if you refer a friend
- Airdrops are a low-cost way of spreading the word and building a community around a project
- Airdrops can be hugely profitable
What are the benefits of an airdrop?
Airdrops fulfill two purposes for the project that issues these free tokens. Firstly, it aims to create publicity around a new and sometimes existing cryptocurrency, and secondly, it allows the project to build a community very quickly. Let’s look at each of these in a little more detail.
There are thousands of cryptocurrencies, all competing to attract both users and investors. By giving away cryptocurrency, allows the project/cryptocurrency to stand out. The value of the tokens which are gifted range from zero to a few hundred dollars. The mean is around $30. The project usually promotes its airdrop on a few specialist websites (see below). The project team will also market their airdrop on various social media platforms such as Reddit, Twitter, Discord, Bitcointalk, and Telegram. That and word of mouth from their new community provide plenty of low-cost marketing.
Building a community
Many cryptocurrencies launch from a standing start. They have no followers, and in most cases, the platforms they are planning to build require funding in order to realize their founder’s dreams. New platforms require money. And whilst communities are nice to have, they serve a purpose. They are a good source of capital. By giving away tokens, projects are able to build loyalty through engagement with token holders in the form of regular updates, newsletters, and communications via Telegram, Twitter, and Reddit. Of course, the more loyal the followers, the more chance you have of raising money from them later. One thing about the cryptocurrency community is that they are staunchly loyal. They have even been known to lend support when regulators and, in some cases, law enforcement are breathing down the project’s neck.
What is the catch?
Well, nothing is entirely free, is it? The majority of airdrops require the applicant to undertake a few minor tasks in order to ‘earn’ his or her tokens. Some of these can include:
- Download their App
- Follow on Twitter, Facebook. Instagram etc
- Retweet to your followers
- Complete a short survey
- Complete a challenge
- Introduce friends
The airdrop process
As we alluded to earlier, communities are valuable. They can be relied upon to invest in a project when the time comes. In the case of a project launching an airdrop, that time usually comes shortly after an airdrop has been concluded. Now that the newly launched project has built excitement around its cryptocurrency, it usually strikes whilst the iron is hot and launches its ICO (Initial Coin Offering) targeting both its own community and new investors.
READ OUR ARTICLE HERE ON THE ICO
Some of the big winners
As we mentioned earlier, the majority of airdrops have generated little to zero value for the investor. Some of the airdrops cost more in fees to transfer to an exchange than they are actually worth. However, as we always like to point out, by building a portfolio, you have a better chance of hitting the jackpot. In the case of the airdrop, it is worth applying for the ones where you are required to do minimal work and where the airdrop is material enough to be potentially worth something at a later date. This will require you to search a few websites for attractive-looking airdrops, but it is worth the effort for the potential rewards.
Let’s provide a few examples of some of the most profitable airdrops of the past. Airdrops are like finding pearls. In order to have a chance to find the rare black pearl, you have to be in the game.
In January 2016, a coin called Minereum was airdropped. Each enthusiast received 32,000 MNE. This happened to be the most profitable airdrop ever with the value of these tokens peaking at $440,000 each.
Also, in 2016, Decred airdropped 258,000 $DCR to those who signed up. Each airdrop enthusiast saw their holding reach a value of $32,500.
In 2017 Bitcoin Cash rewarded each holder of Bitcoin with 1 BCH. That BCH was worth $3,785 at its peak.
Also, in 2017, Oyster Pearl airdropped each lucky enthusiast 2,227 PRL. At their peak, the tokens were worth $11,000.
Stellar is a generous donor to the airdrop community, having given $1,000 XLM tokens per BTC in 2017 and then in 2018 airdropping $125m worth of XLM tokens.
Finally, BitTorrent scheduled a monthly airdrop which ended in 2020. That airdrop distributed 26Bn BTT to millions of users.
VIEW OUR WEEKLY MICRO CAP WATCH LIST HERE — A LIST OF SMALL CRYPTOCURRENCIES WITH POTENTIAL
Regulation and airdrops
It does appear that with most things in cryptocurrency, the act of giving away cryptocurrency isn’t as innocent as it first seems. In fact, the US’s Securities Exchange Commission (SEC) has taken action against a few projects which undertook airdrops claiming that the airdrop represented the issue of securities despite there being no consideration paid. Their argument is simple, airdrops are not a gift out of generosity. The true purpose of an airdrop is to ‘advance the network’s economic objectives, including the establishment of a trading market for the tokens.’
This interpretation doesn’t seem to have deterred the many airdrops still popping up, although a few of them purposely do not target the US and Canada. The regulatory cloud, however doesn’t pose much of a risk to the airdrop hunter as he or she is not paying hard cash for them. The only risk occurs if the new token holder decides to participate in the ICO. That is something we must way up when buying into any cryptocurrency — will it at some point be deemed a security and receive the unwelcome attention of regulators?
Below are a few websites that are a valuable source of airdrops:
# of live Airdrops
www.AirdropAlert.com — 23
www.Airdrops.io – 56
A few random airdrops that are currently live include:
Swissborg — Crypto wealth management platform offering up to 100 euros
PancakeSwap — Decentralized exchange offering a free NFT
Bitcoin Black — Fee free instant cryptocurrency — giving 3,600 tokens worth $36 each.
Lindsay Lohan — The actress is giving away $10,000 ETH through an NFT airdrop
Webdollar — Browser based peer to peer cryptocurrency. This cryptocurrency is already tradable. Earn up to 1,500 coins.
Beware of scams
There are a few clever tricks the scammer uses when promoting an airdrop. The main one which we should be aware of is when an airdrop requests your private key. This is a sure-fire way to know you are dealing with a scammer. Never give out your private key, even to your mother.
The only cost of getting involved in an airdrop is your time. Although time is money, the potential rewards of hitting the jackpot on one or more new projects make it worth the effort. The major advantage of getting involved in airdrops is it allows you to get to know a project from an early stage. This could lead to a very rewarding financial investment at a later date. Look at airdrops as a way of gathering intelligence in the crypto market and being paid to do so. Whilst the threat of regulation and enforcement hangs over the airdrop space, it shouldn’t dampen the enthusiasm around it too much, for the time being anyway.
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Not Financial Advice
This article does not constitute financial advice in any way. Always do your own research and never invest more than you can afford to lose. The article should be treated as supplementary information to add to your existing knowledge.