Cryptocurrencies have transformed the financial industry, opening a new gate for perceiving digital transactions and investments. The increasing popularity of cryptocurrencies has increased the competition in the market, necessitating the need to adopt new and innovative ideas to stay in the limelight. A crypto airdrop is such an innovative approach where new currencies gain traction in the market by offering rewards to users. Continue reading the article to know more about the Crypto Airdrop Strategy.
Table of Content
- What is a Crypto Airdrop?
- How does Crypto Airdrop serve as a Strategy?
- How does Crypto Airdrop Work?
- Different Types of Crypto Airdrops.
- Limitations of Crypto Airdrop.
Crypto Airdrop
A crypto airdrop is a process in which crypto tokens are distributed to different wallet addresses free of cost. It is a strategy adopted by developers of new cryptocurrencies to increase the awareness and circulation of new crypto tokens.
Small amounts of new tokens are sent to active members of the blockchain mostly for free or in return for small services. Airdrops are prompted on social media platforms and the currency’s official website. The tokens earned through an airdrop can be held, traded, or sold.
How Does Crypto Airdrop Serve as a Strategy?
Crypto companies offer free crypto tokens to their active members using the airdrop feature. How this benefits the company, let’s see.
1. Create Awareness
When a new coin is launched in the market or about to launch, it won’t gain traction easily. An airdrop spreads news of the launch of a new currency. Receiving tokens for free creates excitement among people and they spread their excitement among others. This acts as a marketing tool.
2. Boast Decentralization
By distributing the tokens across members of the blockchain, companies ensure their cryptocurrencies are decentralized. A decentralized currency eliminates the concentration of power and distributes authority among all the participants. The decentralization feature attracts investors as they gain complete control over their assets.
3. Providing Loyalty to Users
An airdrop is mostly received by active members of a crypto blockchain. The airdrop acts as a royalty reward which increases the engagement of investors in the network and keeps them retained in the platform, resulting in reducing market volatility.
How Does Crypto Airdrop Work?
A crypto airdrop is mainly utilized when a new cryptocurrency is launched. however, it can also be applied to incentivize existing customers and increase engagement. The company decides how the airdrop must be facilitated and who is eligible.
1. Announcement
The company posts information on the upcoming airdrop and participation requirements on its official websites and social media platforms. Interested members can participate in the airdrop by filling out applications. The wallet addresses of the applicants are collected.
2. Perform Tasks
The applicants are asked to perform certain tasks like sharing posts, creating a telegram group, or owning some cryptocurrencies in the wallet.
3. Eligible Applicants are Selected
Blockchain snapshots of particular times and dates are taken to identify the qualifying wallet addresses.
4. Tokens are Distributed
Utilizing smart contracts, the tokens are automatically delivered to the selected wallet addresses. The companies utilize their treasury wallets for airdropping to the member’s wallet address. The transactions are free of charge and visible in the blockchain.
Crypto Airdrop Different Types
Understanding the different crypto airdrops allows users to choose the best according to their preferences. Major types include,
1. Standard Airdrop
In a standard airdrop, a user can receive the token by providing the wallet addresses and no additional formalities are involved. The number of tokens received is limited in this airdrop. Since the process is simple, they are time-sensitive.
2. Bounty Airdrop
A bounty airdrop involves specific requirements for availing the tokens. It includes tweeting about the project, sharing it on other social media platforms, etc. Once the tasks are completed users receive points, which is a corresponding value of the token they receive. A certain number of points must be earned to be eligible for airdrop.
3. Holder Airdrop
In holder airdrop, holders of a cryptocurrency receive free tokens automatically. The number of tokens received in an airdrop depends on the amount of tokens the user already holds. In holder airdrops the user who owns the largest number of tokens gets the highest number of tokens as an airdrop. Sometimes, a certain number of tokens must be required to become eligible for a holder airdrop.
4. Exclusive Airdrop
As the name suggests, exclusive airdrops are exclusive to selected individuals. In this airdrop, the users are not selected on the basis of the number of tokens they hold, but by considering the time spent on a project, money spent on non-token activity, and participation in a forum.
5. Raffle Airdrop
A raffle airdrop is a combination of other types of airdrops. In raffle airdrops, the operators will inform the participants of the number of airdrops distributed and encourage users to earn a raffle ticket. A ticket can be obtained by earning points or holding tokens. When the number of applicants exceeds the intended number of tokens to distribute, tokens are sent to limited random wallet addresses.
Crypto Airdrop Limitations
1. Vulnerable to Scams
Some airdrops aim to collect personal information and wallet addresses of the users and utilize them for making fraudulent transactions.
2. Tax Regulations
Airdrop transactions are subject to tax. In some countries airdrop tokens are considered as income, necessitating the need to pay tax.
Final Thoughts
Crypto airdrops act as a marketing strategy for increasing the popularity of new crypto tokens and also rewarding loyal investors. It allows investors to diversify their portfolios and increase their token holdings free of cost. However checking the legitimacy of airdrops is necessary for preventing scams, some airdrops are made to collect wallet addresses for use for illegitimate transactions.