What exactly are cryptocurrency airdrops, and how do they work?
In the world of cryptocurrencies, airdrops are a marketing strategy used by blockchain-based startups to incentivize the use of their platform. It involves providing free coins or tokens to users with public crypto wallets to promote a new virtual currency. It is similar to giving out free samples of an item in a supermarket to promote sales.
Airdrops are often part of a larger marketing strategy that involves social media promotion, blog posts, and varying levels of engagement from cryptocurrency holders. Sometimes airdrops can also be used as tactics for nefarious activities. So users should be careful. Since they are supposed to be promotional tools, you should be on your toes if a project is looking for investment.
How do airdrops work?
Blockchain-based startups first start promoting airdrops for their virtual currency on their website or on a cryptocurrency forum. After raising awareness, the company sends the coin or tokens to established cryptocurrency wallet holders. Now, you may wonder how the company decides who to send the tokens to. Well, there are some factors that can influence this decision.
Many companies and startups send the new virtual currency to the wallets of active users of the blockchain community. Some companies may require the wallet holder to engage in promotional activity, such as tweeting about the new virtual currency or making a post on a reputable crypto forum. In some cases, the holder may also be required to hold a certain amount of crypto in their wallets to qualify for the airdrop.
Many of these companies often send new tokens to holders who have ether or bitcoins in their wallets, as the bitcoin and ethereum communities are the largest in the crypto sphere.
Are ICO and airdrop the same thing?
On the surface, initial coin offerings (ICOs) and airdrops may look similar, but they couldn’t be more different. ICOs are events where a company offers to sell its new virtual currency to investors, who can buy it with alternative coins or tokens. Companies hold ICOs to grow their companies by raising money from investors. They are like initial public offerings in the stock market.
Rather, airdrops are purely promotional where a virtual currency is sent to wallet holders for free to publicize a blockchain project or coin/token.
Why are airdrops essential in the crypto community?
As the crypto universe gains prominence, it has become difficult for startups to stand out in a crowded market. The life cycle of a virtual currency depends on how many people exchange and own it. Airdrops help get the ball rolling by providing some incumbents with coins or tokens to build an initial user base without users spending money on something they may not know about.
Michael J Casey, chairman of the advisory board at CoinDesk and advisor to the MIT blockchain research initiative, said in a CoinDesk blog post: “A coin is nothing if it’s not widely used. can achieve unless people do something. costly effort to encourage widespread use.
Are there risks in airdrops?
All airdrops in the crypto community are not created equal. Some malicious entities take advantage of these marketing tools to commit scams. Untrustworthy sources often advertise an airdrop that requires users to send a certain amount of their own cryptocurrencies like ether and bitcoin in exchange for their tokens. This is usually an attempt by scammers and slapstick artists to steal your money.
These scams can be avoided with research and due diligence on the company that is airdropping. It would be better if you visit forums and official websites to check the authenticity of an airdrop before participating in one.