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What are Airdrops in Cryptocurrency and How to Avoid Scams

Illustrations by A. Gnetova and G. Phan

In This Article

Bitcoin (BTC)
   
Ethereum (ETH)
   

Crypto is a rapidly expanding space and new ways to distribute tokens are continually being developed. Airdrops are used by a wide range of projects, from start-ups to well-established businesses. An airdrop is giving away new coins or tokens to users for free.

…But Why Would an Organisation Want to Give Away Free Cryptocurrency?

Projects are only successful if they can attract and maintain an active user base. An airdrop is basically a marketing strategy to raise awareness of a new currency.

 

The Main Reasons for an Airdrop:

  • Generate excitement and create awareness (many airdrops ask people for a small
    promotional service in return, for example; share the post with other people).
  • Reward loyal and early supporters in your network.
  • Offer an alternative to Initial Coin Offerings (ICOs) which are banned in certain countries.
  • Identify and incentivise users in a fair way; airdrops can be announced or happen by
    surprise.

Different Types of Airdrop:

1.Announced Airdrop – Usually created to create a ‘buzz’ around the crypto community for a
particular project, with a fixed release date. These are usually announced on websites such as airdropalert.com. Many of these kinds of airdrops will require the user to participate in certain tasks like joining a telegram group or following a social media page.

2. Unannounced Airdrop – Random wallet addresses are selected for tokens to appear in, this
could be from using a particular exchange, holding a particular coin or being signed up to a
particular project.

Limitations with Airdrops:

  • Some airdrops could be scams trying to collect your data, and it’s easy to get carried
    away in a clicking frenzy with the promise of free coins.
  • Airdrops are not so good at creating an active, engaged community once the initial
    ‘buzz’ has worn off.
  • The US has raised questions about whether they are liable for tax. Regulations
    could make it difficult for projects in America to offer tokens via airdrops.

Cryptocurrency Tax

What are Smart Airdrops?

Smart Airdrops are essentially targeted airdrops. They analyse the type of user that would be most
interested in the project, looking at things like demographics and user interests before distributing the tokens in a more directed manner.

Avoid Getting Scammed with Airdrops:

With the crypto space growing every day and new ways for tokens to be distributed being
developed continuously. Although you can significantly profit from crypto airdrops, it’s essential to do your research when taking part in cryptocurrency airdrops.

cryptocurrency theft

Tips to avoid getting scammed:

  • Never send private keys.
  • Never send money to any addresses – legitimate airdrops will never ask for this.
  • Go the extra mile and check the sources are official.

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