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As the number of projects is growing exponentially in the crypto space, “Airdrop” is a term we hear more and more often.
It is exactly like its name suggests: crypto is dropped into your wallet for free.
Why would someone give away free crypto, you asked?
There are mainly 3 reasons. Let’s go through them.
First…
You know when you walk down the supermarket aisle and there are always some brands giving away samples for you to test and try out their product? Well, they are not doing this out of kindness, it is an advertising technique to increase awareness, and hopefully, you’ll like their product after trying it out, and be converted into an actual customer.
The same happens in crypto: giving away free coins/tokens is a great way to generate awareness. It is a form of advertising, as well as spreading the use of the coin (which might also have a positive impact on the pricing).
If you think about the immense amount of money companies spend on branding and marketing campaigns, comparatively, doing an airdrop is actually a pretty cost-efficient method.
What do you normally need to do?
Most of the time, you would need to complete certain task such as:
Using/trying out their protocol, and/or
Some marketing related ask, such as following them on Twitter, retweeting something, share your email. You get the gist.
Sometimes, developers want people to see that coins have been added to their wallet and hopefully try out their coins, so you might not need to do anything in particular.
Originally, this was quite a novel move. But currently there are too many projects doing it, and most of them are pretty worthless and unlikely to change.
Second…
The relevant airdrops are those that are done by popular projects in the ecosystem, and that can turn out to be quite lucrative.
Most of the time, it is also used to reward early adopters of an app or a protocol, and it normally tends to happen in the DeFi space, where people would have had to interact with a dapp or protocol.
It’s either part of a general incentive mechanism, or part of a retroactive reward to early adopters.
Let’s look at some of the most well known airdrops in this category.
UNISWAP is a decentralized exchange application built on Ethereum, launched in 2018. It had quickly become very popular in the crypto space, and in Sep 2020 Uniswap launched its token UNI, and airdropped 150M UNI to its users.
The minimum rewarded amount of 400 units, which at the launched price of roughly $7~, was almost $3,000. For free.
At all time high UNI was worth $44.97, which would have been almost $18,000!1INCH is another decentralized exchange that did an airdropped on Christmas of 2020, during which over 55 thousand addresses were eligible to claim these tokens, again a minimum quantity of 600.
At a launched price of $2.38, each address would have received at least around $1,400.
At all time high of $7.47, it would have been almost $5,000. Again, for free.
Now, let’s cover a slightly different example, this time an NFT airdrop, which is normally done to create utility for the ecosystem.
The most famous case has to be Bored Ape Yatch Club that happened last year.
Essentially, those who held original Bored Ape were airdropped mutant serums that would allow their apes to mutate into mutant apes. When they hit the market, they were trading at over 10ETH minimum.
No wonder why the BAYC has such as strong communit.
And last reason…
Airdrop also happens when there is a hard fork, which is a when a blockchain causes a permanent change in the network protocol, splitting it into two separate networks.
When this happens, then there will be a new coin created to replace the old one, so it needs to be airdropped to the users who transitioned from the old to the new chain.
A very recent example of it is the LUNA hard fork thanks to the collapse. Those people who held LUNA and complied with a certain criteria established by the Luna Foundation Guard, where airdropped a certain amount of LUNC, the new coin.
Final Thoughts
Beware of scams!
There are a lot of fishin scams. For example, there might be airdrops that would require you to connect your wallet to a fake website, and by doing so they would get access to your private key, and then drain all of your crypto.
So make sure to research the protocol first before doing anything about it.
Focus on the right thing
Normally to be entitled to worthwhile airdrops you have to have been part of a community first, or have used an application. Otherwise it’s more about bonuses for signing up, and acquisition mechanisms.
Free stuff sounds nice. However, I’d say airdrop should be a nice to have, but not a determining factor to holding and/or trying out a protocol.
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