People have a tough time resisting free stuff, including crypto. Even crypto critics probably wouldn't say "no" to some free Bitcoin (BTC) or Ethereum (ETH). Unsurprisingly, many new Web3 projects use the allure of free tokens to their advantage by issuing "crypto airdrops" to users who’ve either used their products in the past or may be willing to use their products.
Cryptocurrency airdrops can be a legitimate way to earn free crypto, but you must take plenty of precautions. Be sure you fully understand a crypto airdrop and how to distinguish solid projects from scams. Read on to find out.
Jump to section
- What is a crypto airdrop?
- How do crypto airdrops work?
- What’s the purpose of crypto airdrops?
- Types of crypto airdrops
- How to get crypto airdrops
- Staying safe when searching for crypto airdrops
- Wrapping up
What is a crypto airdrop?
A crypto airdrop is a free crypto reward. People who get a crypto airdrop will see fungible or non-fungible tokens (NFTs) appear in their private crypto wallet address. Usually, new crypto projects use airdrops to generate social media buzz or reward early community members by literally sending free assets directly to their wallet.
However, it wouldn’t qualify as an airdrop if you were to pay an exchange, company, or Web3 project to get a token reward. Since crypto airdrops have become immensely popular over time, some projects deliberately mislead new users by claiming they're giving "airdrops" and asking for funds. By definition, crypto airdrops shouldn't cost users anything.
How do crypto airdrops work?
If a project wants to give a crypto airdrop, they'll usually set aside a portion of their total token supply to send to targeted cryptocurrency wallet addresses. The hope is that once individuals have the assets they’ll participate in the product. The project's leaders may announce an upcoming crypto airdrop on social media and detail how they plan to choose who can claim these tokens.
Sometimes, people can get crypto airdrops if they used a dApp (decentralized app) in the past. Others may get a crypto airdrop for holding a specific token at a particular time. It's also common for Web3 projects to send crypto airdrops to early adopters and active community members.
Once the crypto airdrop goes live, anyone who meets the eligibility requirements should see the tokens in their private crypto wallet. Since data is transparent on the blockchain, cryptocurrency projects can easily determine the public wallet addresses that meet their criteria.
What’s the purpose of crypto airdrops?
Crypto airdrops are all about marketing. The competition in Web3 is fierce, and new projects need ways to stand out. Offering free tokens is a tried-and-tested marketing technique that tends to generate considerable attention.
Some Web3 developers use crypto airdrops to steal attention from more popular protocols in their target market. For example, the NFT marketplace LooksRare offered 120 million of its LOOKS tokens to people who used the competing site OpenSea in 2021. The LOOKS airdrop helped bring thousands of OpenSea traders to LooksRare when it launched in early 2022.
However, there are other potential reasons developers might give away crypto airdrops. For instance, some dApps may want to show appreciation to early community members. Others might want to encourage people to use their tokens in DeFi (decentralized finance) or decentralized autonomous organizations (DAOs).
These factors were crucial influences on Uniswap's famous airdrop in 2020. In September, the prominent Ethereum decentralized exchange (DEX) announced it would give away 150 million UNI governance tokens to people who used its trading platform. Any Ethereum addresses that swapped tokens on Uniswap beforehand should’ve received 400 UNI tokens. Those who added tokens to Uniswap's liquidity pools could’ve received even more UNI. Because individuals interact with cryptocurrencies via a wallet, this technology is uniquely frictionless in the crypto space.
Many NFT collections have also given out crypto airdrops to encourage community members to hold their tokens. Most famously, the NFT studio Yuga Labs gave anyone holding a Bored Ape Yacht Club (BAYC) NFT a "Mutant Serum" NFT in the summer of 2021. These Mutant Serum NFTs could transform a holder's Bored Ape into a "Mutant Ape." Some of these Mutant Serum and Mutant Ape NFTs have sold for millions of dollars.
Types of crypto airdrops
While crypto airdrops are free, often a few strings are attached to claiming them. Whether you qualify to receive a crypto airdrop depends on the type of airdrops being issued. Here are the four types of crypto airdrops:
Standard airdrops
A standard crypto airdrop is when a Web3 project asks for interested participants online. In these cases, you only have to submit information like your public crypto wallet address to the team and await your reward.
Since this airdrop is so simple to claim, it attracts much attention and hype. However, these airdrops are likely crypto scams, so new users must diligently research before handing over any personal information.
Retroactive airdrops
Retroactive airdrops reward wallet addresses that have used a particular dApp in the past. Typically, projects will take a "snapshot" at various times on the blockchain to determine who's eligible for these rewards.
Since the parameters for these airdrops are announced after the fact, you have to hope the dApp you're using will reward early and loyal followers.
Bounty airdrops
You never have to pay for a crypto airdrop, but sometimes you must work for it. In the case of bounty airdrops, you’ll need to perform various tasks to be eligible for free tokens. Often, people have to promote a new crypto project on social media if they want a chance to claim a bounty airdrop.
Holder airdrops
The holder crypto airdrop rewards people who've held (or continue to hold) a particular crypto asset. Projects usually take a snapshot on the blockchain at a predetermined time to determine which wallets will receive the airdrop.
As an example, anyone who held Bitcoin before August 2017 should’ve received free Bitcoin Cash in their crypto wallets. Developers who walked away from Bitcoin to create Bitcoin Cash hoped this airdrop would encourage early crypto users to migrate to their blockchain.
How to get crypto airdrops
First and foremost, you need a private crypto wallet to claim crypto airdrops. You must ensure the crypto wallet you're using is compatible with whatever crypto airdrop you're interested in.
For example, you can’t use a Solana-based wallet like Phantom to claim an airdrop on Ethereum. Conversely, using an Ethereum wallet like MetaMask to claim rewards on Solana is impossible.
After a private crypto wallet, you'll need to search reputable crypto sites for news on upcoming airdrops. It's best to start your search on high-profile crypto price aggregators like CoinMarketCap and CoinGecko.
There's also bound to be a lot of news related to crypto airdrops on social media sites. However, it can be tricky to tell which projects are scams, especially if they don't have a large following. If you're searching for crypto airdrops on social media, it's best to stick with projects with a large ecosystem and a robust following.
When you find a crypto airdrop that you feel is safe, you must follow the eligibility requirements listed by team leaders. This may include interacting with a dApp, signing up for a newsletter, or posting your public address on a project's official website. You may automatically qualify for an airdrop if you're holding a specific cryptocurrency or you've used a particular dApp in the past.
Once you've completed the tasks detailed by a crypto project, you should see the crypto airdrop in your associated crypto wallet on its official drop date.
Many individuals will behave in certain ways to “farm airdrops.” This means that they’ll do the minimum amount possible to qualify for airdrops, many times opening hundreds or thousands of wallets attempting to appear as if they’re multiple people. Worldcoin’s Proof of Personhood protocol can protect projects against this, by having individuals declare their one human address.
Staying safe when searching for crypto airdrops
A few crypto airdrops will make people a fortune. Although there have been a few lucrative airdrops in the past, many of these tokens are worthless. In a worst-case scenario, a crypto airdrop can put your funds and identity at risk.
There are many ways scammers use crypto airdrops as bait for inexperienced retail investors. When dealing with unknown projects, developers can use an airdrop to drain your wallet or lead you to a phishing attack.
It's also possible for people to use airdrops to figure out who owns a crypto wallet. For instance, a dusting attack is a well-known strategy that involves sending small amounts of crypto to numerous wallets. This crypto dust can make it easier for the sender to pin down who's behind a crypto wallet address.
Worldcoin is currently working on developing solutions to many security issues involving crypto airdrops. For instance, we want to create a wallet verification system that can tell which crypto wallets belong to unique people without interfering with their privacy.
Meanwhile, people interested in crypto airdrops must practice extra caution when researching these deals. Remember to thoroughly research crypto projects offering airdrops on reputable sites like CoinMarketCap.
It's also best to have a dedicated crypto airdrop wallet. In other words, create one private crypto wallet you'll only use for coin airdrops. That way, you won't lose all your digital assets if this wallet gets compromised.
Wrapping up
A crypto airdrop is a fun perk for early Web3 users. However, new investors should manage their expectations when researching these rewards. While a few crypto airdrops have become lucrative, relatively few are worth thousands of dollars. Also, plenty of projects promising valuable crypto airdrops are scams.
At Worldcoin, we want to ensure everyone getting into crypto has a safe experience. We aim to put a share of our crypto in the hands of every individual on the planet for free, maintaining their anonymity and privacy. We’re also airdropping free DAI to anyone who downloads our app. Subscribe to our blog to learn more about how we address security risks in crypto.
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