What are Crypto Airdrops and How to Avoid Scams

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Crypto airdrops are used by a wide range of projects, from start-ups to well-established businesses.

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. They are ‘free droppings’ awarded to existing holders of a particular cryptocurrency.

The Main Reasons for Crypto Airdrops:

  • To generate excitement and create awareness.
  • Reward loyal and early supporters in your network.
  • As an alternative to Initial Coin Offerings (ICOs) which are banned in certain countries.
  • Identify and incentivize users in a fair way.

When Does a Crypto Airdrop Occur?

  • A company might hold a crypto airdrop if they’re new to space. For example, if there’s a project claiming to improve upon Bitcoin Cash, they might airdrop their token to all Bitcoin Cash holders.
  • The other most common example is during a hard fork. Sticking with our Bitcoin Cash example, the network experienced a hard fork in November, 2020.
  • The two new blockchains are Bitcoin Cash Node and Bitcoin Cash ABC, with the former being considered the traditional asset.
  • When this happened, Bitcoin Cash ABC got airdropped into wallets holding Bitcoin Cash Node, ensuring users can utilize the ABC network without issue.

While these are the most popular airdrop methods, here is a simple breakdown of every single one:

Different Types of Crypto Airdrops

1.) Standard Airdrop

With standard crypto airdrops, one needs to sign up for ahead of time. Generally, the project will announce its airdrop and ask users to sign up using various methods. Once the date of the airdrop occurs, the assets will be sent to those who qualify.

ICOs often use a standard airdrop for promotional reasons – often requiring investors to share the project or use it for a certain period to earn rewards. For instance, Ontology airdropped its currency ONT to NEO investors and other existing users who signed up for its newsletter. The project airdropped 10 million coins, trading at $4.2 per coin.

2.) Surprise Airdrop

Surprise airdrops are just that – surprises! Basically, one day a user will wake up to find a new token in their wallet, assuming they hold the previous one required.

The idea is to create awareness to a new asset, hoping free assets will entice the user to use the network.

3.) Exchange Airdrop

Similar to the previous two airdrops, an exchange airdrop differs in that it’s trying to generate trading volume. The 1inch exchange recently held an airdrop, providing its tokens to recent traders on the Uniswap platform.

Their goal? Bring traders over from a competitor’s exchange. If the first trade is essentially free thanks to the airdrop, it’s probably going to bring some users over. At least for a little while.

4.) Smart Airdrop

Smart Airdrops are essentially targeted airdrops. They analyze 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.

BitTorrent airdrop for Tron holders is an ongoing airdrop that has designated about 90 billion BTT tokens to TRX holders for the next six years.,

Drawbacks to Crypto Airdrops

While crypto airdrops sound like a win-win for both parties, there are some drawbacks to such a method. Some are as follows:

  • 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.
  • 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.
  • Some airdrops are pump and dump schemes, where only the original token holders will profit.
Cryptocurrency Tax

Avoid Getting Scammed with Crypto Airdrops

The cryptocurrency space is consistently coming up with new ways to scam you out of your hard-earned cash. We’ve put together a list of things to watch out for.

1.) Protect Your Private Keys

If an airdrop is asking for your private key, it’s automatically not legitimate. Private keys are only to be known by the wallet’s owner. If someone else gains access to your private key, they gain access to your wallet. We don’t want that.

2.) Careful With Your Personal Information

Some airdrops ask for your personal information, such as your email. Now, you’ll probably need to enter personal information for legit airdrops, which is where this gets tricky.

Before signing up for an airdrop, do some background research on the company in question. See what others say about them on social media, and try to read their whitepaper – if they even have one!

Additional Tips to Avoid Getting Scammed:

  • Never send private keys to anyone.
  • Do not send money to any addresses – legitimate airdrops will never ask for this.
  • Go the extra mile and check if the sources are official.

StormGain is the perfect place to store your crypto airdrops safely.
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Jess graduated in the United Kingdom with a Biology degree and then spent several years managing communications for companies in the United Arab Emirates, Africa and South East Asia. She believes that bridging the education gap is a vital step in mainstream understanding of what emerging technologies can offer societies worldwide.

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