In some ways, cryptocurrency is like any other collectible–there are different types of virtual currency, and different levels of enthusiasm for them. Some may be perceived as knock-offs of more popular brands while others may seem like mavericks or outliers.
But one thing all cryptocurrencies need? Market visibility. And that’s an area where, in spite of the newness of virtual commodities and coins, the innovators who develop these platforms turn back to modern-day updates to tried-and-true marketing tactics designed to build interest in a product.
In this case, the product is virtual currency, cryptocurrency, etc. The name of one popular technique used to market crypto is called “airdrop” and it’s the 21st century equivalent of handing out free samples door to door or in the grocery store.
What Is An Airdrop?
Boiled down to its essence, an airdrop happens when a user gets free cryptocurrency deposited in their digital wallet, exchange account, etc. It’s typically done on a promotional basis, assuming the airdrop is for legitimate purposes and is not intended to harvest personal data for future exploitation.
You may be offered the chance to participate or benefit within an existing group or online community or you may learn about an opportunity by accident. Whatever the context, you’ll want to be leery of giving away too much in exchange for crypto.
The Benefits Of A Crypto Airdrop
Giving away free crypto makes a lot of sense if you are trying to expand your user base and grow the number of people interested in collecting a certain type of virtual currency. Free crypto isn’t usually “free” as mentioned above–you may be required to participate in certain projects or follow certain steps to earn your coins.
The benefit, in this case, is that you can trade your “labor” for crypto rather than trying to purchase it yourself.
A typical fear among newcomers to cryptocurrency is being ripped off or having the credit card or debit card data they used to purchase Bitcoin or Ethereum sold to hackers and thieves.
So what better way to learn about digital investing than to earn free coins without the worries of what’s happening to your account data? Newcomers who persist in the marketplace soon learn who they feel they can trust or not trust with their personal data; what better way to entice people to give crypto a try than with an airdrop?
And if you participate and learn that you aren’t really into this type of high-risk investing, you’ve only lost the time it takes to follow the airdrop instructions for that project (assuming it’s a legitimate one).
Types Of Crypto Airdrops
The nature of an individual airdrop will vary depending on who’s running it and why but among the different types used we find the following:
Reward Airdrop / Bounty Airdrop
Perform a task, earn a token. That’s the basic procedure for a bounty airdrop. You could be asked to do something simple such as adding a “Like” or subscribing to a social media channel. You could also be required to do something a bit more involved like writing and posting on Facebook, Twitter, or Instagram.
Some free tokens are offered to loyalists for their consistent interest in that type of crypto. These offerings may come with conditions but some do not. If you’ve been a devotee of a certain type of crypto you may have a chance to gain some more if the company is doing an exclusive airdrop for its subscribers or customers.
“Stock Split” Airdrops or “Hard Fork” Airdrops
In the stock market, a stock may split and investors may find they have more shares after the split than before–the individual stock has a lower value but the owner of that stock gains enough shares to represent the financial stake they put into the company.
A similar phenomenon can happen with crypto–if a digital currency experiences a hard fork and a new digital coin is minted as a result, those who benefit from the airdrop get an amount equal to their original investment in the coin.
So if you spent a hypothetical $500 to buy three coins and the coin splits or forks, you would ideally receive an additional three coins (worth half the original value of the coin before it split). Before the fork, three coins = $500. After the fork, six coins = $500.
That sort of thing has happened specifically with Bitcoin–the hard fork there resulted in the original Bitcoin plus the addition of Bitcoin Cash. Bitcoin investors got an equal amount of Bitcoin cash (after the fork) as compared to their original Bitcoin holdings.
A similar airdrop is possible–several sources report Ethereum offering its users tokens in cases where new projects were started on the company’s blockchains–new coins were offered as a result of these new projects.
The Cons Of Crypto Airdrops
Airdrops can be helpful for those new to crypto and they can benefit long-time investors, too. But what are the drawbacks? They include the mundane, such as being asked to give a bit too much time in exchange for not enough reward.
Another mundane risk? Having your social media feeds clogged with posts from the accounts you were required to subscribe to in order to get your free tokens.
But they also include darker risks–are you being asked for a bit too much personal data? Are you being asked for information with little to no actual return? That’s an important one to pay attention to.
And then there are, of course, the scammers. Cryptocurrency is not a regulated financial landscape the way stock market investing and futures trading is regulated. And that opens the door much wider for bad actors, scammers, and hackers to operate freely in the crypto space. Investor beware!
Finding A Crypto Airdrop
You’ll find plenty of Bitcoin-focused blogs and digital currency investing blogs offering the same advice: “Just Google it”. It isn’t bad advice, all things considered–after all, airdrops are basically marketing for digital money so there are sites and blogs dedicated to all aspects of the industry including those that cater more exclusively to airdrops themselves.
But the landscape isn’t as safe as some want to believe; scammers and fraud in any unregulated space are common and this is very true for airdrops. It is necessary to review cybersecurity best practices and brush up on the latest phishing scams so you can protect yourself against unfamiliar versions of them in the cryptocurrency investing space.
You’ll want to pay close attention to anything that looks like a crypto pump-and-dump scheme. Pump-and-dump refers to online communities (offline, too) that have a small number of people hyping an investment in hopes that the hype leads unsuspecting investors to purchase a risky stock or coin.
Once the hype has done its job, the small group of investors who generated the hype dump the entire investment, take profits off the inflated value of the (soon-to-be) worthless coin or stock, and disappear leaving the people they influenced into buying holding the bag.
This is done in a variety of sectors including cryptocurrency. Pay close attention to the warning signs of a pump-and-dump scam which include artificial urgency, an appeal to your greed or fear of missing out, and high-pressure tactics.
Joe Wallace has covered real estate and financial topics, including crypto and NFTs since 1995. His work has appeared on Veteran.com, The Pentagon Channel, ABC and many print and online publications. Joe is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News.