Crypto Airdrops: What Are They And How Do They Work?

Airdrops have become a welcome feature of the cryptocurrency world, giving users a chance to get their hands on free tokens. The more often a crypto user interacts with both new and established platforms, the more likely they are to be the recipient of a crypto airdrop. Blockchain-based projects and their developers send out free tokens en masse to crypto users as part of their marketing strategy.

Newly minted tokens get sent out to hundreds, or sometimes even thousands of unique wallet addresses, with developers hoping that will be enough to entice recipients to interact with their corresponding new project.

Many crypto users will do so, eager to cash out their free tokens. Whether or not people stick around after cashing out, the airdrop did its job and raised awareness around the project.

What Is The Purpose Of Crypto Airdrops?

The primary reason for crypto airdrops to exist is the promotion of blockchain startups, projects, services, or products. The project will send tokens to users in order to incentivize them to interact with the new project.

While you might assume the purpose is to get users to spend money, it’s actually all about project awareness and interaction. The more people interacting with the project and causing hype the better, as that can help the project immensely once it gets to the exchange.

How Do Crypto Airdrops Work?

Crypto airdrops can be done in a number of ways, from just automatically giving everyone with a set balance on the blockchain tokens, or relying on users themselves to complete small tasks in exchange for them. While many airdrops are random, more often than not a blockchain project will require users to complete small tasks, such as:

• Following specific social media accounts.
• Creating an account in order to receive updates.
• Sending or receiving transactions through a specific wallet.
• Sharing or retweeting posts ( including the use of hashtags).

Are Crypto Airdrops Safe?

Just like everything else in the cryptocurrency sector, it’s best to tread with caution. While there are plenty of legitimate crypto aidrops out there, they can be difficult to distinguish from “pump-and-dump” scams.

These pump-and-dump scams start with a creator giving out free coins, hoping there will be enough hype to back them up and make them successful on the exchange, then bailing out with the money at the last minute.

Crypto airdrops open up another possible scamming avenue in the form of dusting attacks. These scams involve sending small portions of cryptocurrency to users in order to de-anonymize the owner of the wallet and steal their money.

Lastly, airdrops are considered taxable income by the IRS. Many users might find themselves frustrated come tax season when they’re forced to pay taxes on cryptocurrency they did not ask for.

In Summary

While more often than not crypto airdrops are relatively harmless, and simply the creator trying to raise hype about their new project, there are plenty of scammers who will take advantage of airdrops to steal users’ money. Pump-and-dump schemes and duster scams are just two of the possible ways airdrops can prove unsafe.

Some users might be frustrated by airdrops, as that money is considered taxable by the IRS whether you wanted it or not. Regardless of how you feel about airdrops, they are an effective marketing strategy that use the same type of incentive stores use when offering “free” gift cards.

Article Link - Crypto Airdrops: What Are They And How Do They Work?

Author - Staff writer

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