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What is a crypto airdrop and how are people earning money from it

What Is A Crypto Airdrop And How Are People Earning Money From It

Airdrop is becoming an increasingly common word in the world of cryptocurrencies. With many rushing to take part in these, here are the main things you should know about airdrops so you don’t feel left out.

Airdrops are a way to acquire digital currency without buying it. Read more details below.

What is a Crypto Airdrop?

A crypto airdrop is a distribution of free cryptocurrency from a crypto project to users’ wallets.

Crypto users who have a tendency to interact with new and existing platforms will likely receive free airdrops at some steps. Airdrops include blockchain-based projects and developers distributing free tokens to eligible members in their communities who did requirements correctly as a part of a broader marketing campaign.

The main purpose of these project developers is to deliver newly free tokens to hundreds or thousands of different wallet addresses with the hope members will be likely to introduce their friends, or other people to participate Airdrop in the new projects.

How do you receive an airdrop?

In most cases, a crypto airdrop is distributed to users in exchange for fulfilling a certain task. These tasks often include things such as:

  • Following an account and joining groups, and channels on social media.
  • Retweeting or sharing one of their posts, including hashtags.
  • Sending or receiving a transaction (using a particular crypto platform or wallet).
  • Creating an account and signing up to receive updates.

There are also situations when a crypto airdrop may be delivered to users without needing to do anything, as we will highlight below.

Why do crypto airdrops exist?

The key reason for organizing a crypto airdrop is to support a blockchain startup, project or service. By issuing tokens to users, the team can start its project and ensure a fair distribution of tokens among its community from day one. Furthermore, recipients of these tokens are encouraged to increase awareness and help the project reach a broader audience once the token begins trading on an exchange. The more interest surrounding the token, the more likely it will rise in price.

Airdrops often get traction by promoting the launch on a project’s website, cryptocurrency forums and social media. This is no different from receiving a HelloFresh voucher in your email with a discount code, as those campaigns are designed to bring more people to the platform through a financial incentive.

Legitimate crypto airdrops will never ask users to make any investment. Instead, it is a way to stand out among competitors that have pursued external funding before issuing their tokens.

How do crypto airdrops work and are they safe?

There are multiple ways to conduct a crypto airdrop:

  • Have users complete one or multiple small social tasks to qualify for receiving the airdrop at a later date.
  • Automatically distribute tokens to holders of a particular asset or balance on the blockchain where the airdrop will occur. (For instance, every address with a balance of 0.01 ether or higher gets the airdrop.)
  • Taking a blockchain snapshot at a previous date and letting users claim their airdrop tokens from the project’s website through a smart contract.

Despite their popularity, however, crypto airdrops aren’t always as risk-free as they seem.

Because recipients receive “free money” in their wallets, there will be airdrops that are nothing more than pump-and-dump schemes. More specifically, the creator issues a token and hopes there will be enough hype surrounding it to have it listed on an exchange. Once tokens begin trading, the creator sells their sizeable portion of tokens, crashing the price.

Another potential attack vector is the so-called dusting attack. A scammer will send a small amount of cryptocurrency to an unsuspecting user to erode their privacy. Then, the attacker will track down the transaction activity of the wallet tokens distributed to de-anonymize the person or company operating the wallet.

Finally, since airdrops are considered income by the U.S. Internal Revenue Service, it means whenever you received an amount of “free tokens” you’ll actually need to pay tax on them – whether you wanted the airdrop in the first place or not.

Stay aware of airdrop scams

Stay aware of airdrop scams.

Since there is a large interest in airdrops from those looking to make easy money, scammers have found it an ideal way to deceive people. Late last year, Metamask noted an airdrop scam wherein threat actors sent malicious tokens to random crypto wallet addresses. With the account holders curious as to what the token is, they would often search for it online. The search would eventually arrive them on to the threat actor’s malicious website, where phishers will steal unsuspecting users’ confidential information.

Therefore, users are advised to stay alert against such scams and only indulge in airdrops of genuine platforms which may already be listed on official websites. Another rule for detecting such scams is if the users are asked to send some cryptocurrencies in exchange for enrollment in the airdrop. Or if the promised amount in the airdrop is way too high. In such cases, it is best to stay away from potentially malicious activity or do thorough research into what the project is all about.

Disclaimer: Information is current as at the date of publication. This is general information only and is not intended to be advice. Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of future returns. Please do your own research.

Learn more: Blockchain 101: Play To Earn Games And Promising games in the near future

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