May 29, 2023
By Murtuza Merchant
Airdrops are a promotional tool used in the crypto world to create awareness and facilitate the adoption of new tokens before their official release. Auroracoin (AUR) pioneered the concept of airdrops in 2014.
Although the project ultimately failed, airdrops have continued to prove their worth as a marketing strategy.
In the blockchain sphere, an “airdrop” refers to the distribution of free digital assets to a broad audience.
Companies, whether new or established, employ this tactic to incentivize token holders and investors to spread the word and boost the circulation of tokens.
To participate in an airdrop, individuals must fulfill certain requirements, which may vary depending on the type of airdrop.
Airdrop Types and Their Characteristics
Standard Airdrop: A conventional airdrop involves the distribution of a project’s native tokens to all community wallets. Sometimes, promotional requirements are necessary to qualify for the airdrop, but this is not always the case.
Bounty Airdrop: A bounty airdrop is similar to other airdrops in that tokens are distributed to participants. However, to be eligible, individuals must perform specific promotional tasks, such as sharing a social media post or subscribing to a newsletter.
Holder Airdrop: This type of airdrop requires participants to hold a certain token in their wallet at a specified time. A snapshot, which is a record of all the cryptocurrency wallets in a community at a given moment, is taken. Typically, the amount of airdropped tokens is proportional to the number of tokens held in each wallet.
Exclusive Airdrop: Exclusive airdrops are reserved for key community members who have been actively involved in a project for an extended period. An example of this is the Uniswap UNI token distribution in September 2020, where long-term supporters received 2,500 UNI tokens as a token of appreciation.
Hard Fork Airdrop: When a network’s protocol undergoes a hard fork, previously valid transactions may become invalid, or vice versa. A hard fork results in the creation of a new blockchain that shares a common origin with the original chain. In these cases, all holders of the original cryptocurrency at the time of the hard fork receive an equivalent amount of the new cryptocurrency in their wallets. The 2017 Bitcoin hard fork that led to the creation of Bitcoin Cash (BCH) is a prime example.
NFT Airdrop: NFT airdrops are not limited to cryptocurrencies. NFT holders can receive native platform tokens or even other NFTs as airdrops. The process, however, might differ slightly. For instance, the Loot NFT airdrop in September 2021 rewarded holders with 10,000 Adventure Gold (AGLD) tokens. Similarly, the ApeCoin airdrop provided Bored Ape Yacht Club NFT holders with 150,000,000 APE tokens. In some cases, one NFT can be airdropped to holders of another NFT to enhance the value of the original collection or to serve as a standalone collectible.
Precautions to Take When Participating in Airdrops
A genuine NFT or cryptocurrency airdrop will never require participants to invest financially or share their seed words. Nevertheless, gas fees might apply. It is crucial to conduct thorough research (DYOR) before engaging in any NFT airdrops, as scammers may create fake airdrops to deceive unsuspecting individuals.
The Future of Airdrops in the Evolving Crypto Landscape
As the popularity of NFTs continues to grow, so does the frequency of NFT airdrops. These airdrops provide collectors and enthusiasts with new opportunities to acquire unique digital assets but also present potential risks and challenges. Here are some key considerations for navigating the evolving world of NFT airdrops.
Research the project and team behind the airdrop
Before participating in an NFT airdrop, it’s crucial to thoroughly research the project and the team behind it. Look for information about the developers, their background, and their previous projects. Assess the credibility of the project by considering factors such as the quality of the artwork, the strength of the community, and the potential use cases for the NFTs.
Assess the value proposition
It’s essential to understand the value proposition of the NFTs being airdropped. Are they part of a broader project with a well-defined roadmap and utility? Or are they simply marketing gimmicks designed to generate hype and short-term gains? Be cautious of projects that appear to have no long-term vision or those that seem to be relying solely on celebrity endorsements or promotional tactics to drive interest.
Be mindful of potential scams
Unfortunately, the NFT space has attracted its fair share of bad actors looking to exploit the enthusiasm around digital collectibles. Be cautious of airdrops that require you to share personal information or send funds to unknown addresses. Always double-check the legitimacy of the project by verifying the website’s URL, social media accounts, and contract addresses.
Monitor gas fees
Participating in NFT airdrops often involves claiming the NFTs by interacting with a smart contract. This process can incur gas fees, which are the costs associated with executing transactions on the blockchain. Be mindful of these fees, especially during periods of high network congestion, as they can quickly add up and diminish the value of the NFTs you receive.
Keep an eye on the secondary market
After claiming your NFTs, it’s essential to monitor the secondary market to gauge their value and liquidity. Platforms such as OpenSea, Rarible, and Foundation facilitate the trading of NFTs and provide insights into their market value. It’s also important to track any updates from the project team, as new developments and announcements can significantly impact the value of the NFTs.
About the author
Murtuza Merchant is a senior journalist and an avid follower of blockchain and cryptos.