Decoding crypto airdrops: Everything you need to know

Ever wondered what the crypto jargon would be for a “free lunch” ? Well, its an “airdrop”. Often touted as a promotional tactic by up and coming projects, airdrops are essentially the free distribution of crypto tokens aimed at building a community or rewarding it.

In Web3, a majority of projects come with their native tokens. A lot of these projects, especially during their infancy stage, resort to airdrops to generate a hype about their product or service. Investors looking for novelty tokens or simply expecting to bet on the next “to the moon” asset often tap into airdrops.

History of airdrops

As per Gemini, the first crypto airdrop was conducted in March, 2014 for the project Auroracoin. This token was intended to become a national crypto token of Iceland which did not rocket into success and gradually lost its hype.

Later in 2022, El Salvador reportedly became the first country ever to conduct a BTC airdrop to the users of the government-backed wallet.

The biggest crypto airdrop in history was orchestrated by Uniswap in September 2020. The project distributed $6.43 billion worth of its native token, $UNI, to 250,000 wallet addresses. A distant second is Yuga Labs’ massive giveaway of ApeCoin tokens, which totaled $3.54 billion when it was airdropped in March 2022, data by Bitget shows.

Claiming airdrops

Over the years, hundreds of crypto projects have conducted airdrops as part of their sophisticated marketing and advertising strategies.

Crypto airdrops are distributed via multiple routes.

Automatic airdrops: Under this category, the project developers ask interested individuals to sign up and receive their tokens automatically.

Manual airdrops: Here potential accumulators are asked to complete certain simple tasks and fill a Google Form with their wallet addresses. These tasks may include retweeting a post, or joining their community on platforms like Discord or Telegram.

Retroactive airdrops: To avail airdrops in this category, participants have to clear some eligibility criteria. This could be based on their activity on a particular DeFi protocol basis which, the users can tap into airdrops as a form of rewards.

The general steps to claim airdrops could include:

1. Gathering information on airdrops only through established and authentic social networking channels.
2. Ensuring that the wallets preparing to receive the tokens are compatible with the token’s onchain network. Users could prefer a self-custodial wallet for airdrops to add an extra layer of security.
3. Keeping a keen eye on any tasks or activities that the airdropping projects could be updating about and completing the assignments
4. Checking for official “Claim” pages from the official handles of the project developers.
5. Upon the completion of these steps, airdrop receivers would be prompted to connect their wallets to the official project website. Here, they should thoroughly check the URL to identify any suspicious attributes.
6. Receivers may need to sign a transaction in their wallets to claim the airdropped tokens. This may require them to utilise a small amount of the blockchain’s native token as the gas fee.
7. The airdropped token will then be credited into the respective wallets.

Also read: Jeff Bezos sells Amazon stock worth $666 million

Risks to avoid with airdrops

Crypto airdrops are capable of boosting a token’s visibility and trading activity. There are, however, some risks like scams and security threats linked to these activities.

The risks of the tokens losing their viability also prevails in-case the project fails to take off.

As per MetaMask, crypto scammers and phishers regularly use rugpulls to create hype around their scam projects, lure in investors, and then abandon the projects stealing the invested funds. In June this year, the FBI also warned the crypto circle against cybercriminals exploiting the airdrop feature.

Before participating in airdrops, individuals are advised to do thorough research on the tokens they could engage with. Analyzing whitepapers and type of token distributions could be among preventative steps to reduce financial risks.