What Is A Cryptocurrency Airdrop?

Airdrops are becoming more popular in the world of cryptocurrency. An airdrop is a distribution of free tokens to individuals who already hold assets in a specific blockchain like Ethereum or Bitcoin. In some cases, individuals may also be required to complete specific tasks in order to receive the free coins. One of the most popular airdrops in 2017 was conducted by Omise. Five percent of the total OmiseGo tokens initially created were awarded to those who held Ethereum.

History of Cryptocurrency Airdrops

In 2018, airdrops have assumed the role of a trend. It is common for most new coins to announce an airdrop as part of an ICO, or initial coin offering. The goal is to achieve free promotion on social media platforms. It is hoped that crypto enthusiasts will spread the word about the possibility of free tokens, thereby shining a light on the ICO and encouraging token purchases. As a strategy this seems to be working well for many new altcoins.

Airdrops aren’t new. They’ve actually been around since the first ICO for Ethereum, but many people didn’t even know about them. As a result, it is possible that holders of Bitcoin or Ethereum have tokens in wallets that they are unaware of. In the beginning, qualifying for an airdrop often involved nothing more than possessing units of Bitcoin or Ethereum. Today, things are a little bit different. The developers of most new coins will require registration to participate in an airdrop, or at the very least the user will be required to join a Telegram channel or follow a Twitter feed.

For those who are interested, there is a service called Etherscan which allows you to check your Ethereum wallet. If you have tokens from airdrops, they will be displayed in a feature of the service called Token Tracker. This is a good way to see if you’ve received an airdrop you weren’t aware of.

Why would the brain trust behind an ICO choose to give away digital tokens for free? The answer is an economic one. Offering a few digital tokens in exchange for promotion is a cost-effective way to generate excitement about an ICO. It is also way for new tokens to circumvent the ICO advertising restrictions of Google, Facebook, and Twitter which were enacted in 2018. The other reason is that sometimes an airdrop can pump up the value of a coin once it is released. Individuals that have been given tokens for free may be more likely to purchase tokens during the ICO. Heavy interest in a coin can drive up its market value.

An airdrop can also entice individuals to buy Ethereum, Bitcoin, or other cryptocurrencies prior to the airdrop. Only those who hold tokens on a specific blockchain can be rewarded, so some people will buy units just so they can receive the free tokens. The buying of digital assets is, in an overall sense, good for the crypto market. If you spread the word to your friends about an upcoming ICO and airdrop, the developers will consider their free coin distribution a good investment.

There is some controversy about cryptocurrency airdrops at the moment, especially in the United States. Questions have been raised about the tax liabilities investors should incur on free tokens. It has yet to be decided whether these free distributions constitute income or capital gains. The remaining years of the 2010 decade are sure to be interesting ones for cryptocurrency speculators in the United States as the country tries to harness some form of regulation on digital assets.

What is Required to Receive a Cryptocurrency Airdrop?

Getting in on an airdrop isn’t hard. We’re going to focus on airdrops related to the Ethereum blockchain for this discussion because this is the most popular platform for free distributions. Ethereum’s Smart Contracts are being used for most of the ICOs that are appearing today. To qualify for most airdrops you must hold Ether. You can purchase Ether on any number of cryptocurrency exchanges. Here are the other things that you will need.

You must have an Ethereum wallet. The wallet cannot be one that is hosted on a cryptocurrency exchange. The wallet must have a personal address that is compatible with ERC20 tokens. Most of the tokens released in an airdrop will be of this variety. This means that they are based on the Ethereum blockchain. There are several options for a wallet, but hardware wallets like the Ledger Nano S offer premium security features and protection for your cryptocurrency.

Your wallet must also be active. It has to show use. The reason for this is to prevent individuals from creating multiple wallets to receive extra airdrops. Most developers have enabled security checks for their airdrops that will prevent this kind of abuse. Most ICOs will require a balance to be held in the wallet. No activity in the wallet will almost certainly disqualify you from the airdrop.

Most ICOs today are using Telegram as a chat tool. It is likely that you will need to download Telegram and join the coin’s chat channel. The download is free and the program runs right from the desktop. You don’t have to open a browser to use it. If you leave the Telegram chat channel before the airdrop is delivered, you probably won’t receive any free coins.

New coin offerings will also want you to follow the coin’s Twitter account. It is even possible that you might have to make some retweets in order to receive the airdrop. Finally, you will probably be asked to provide an email address to the development team. If you don’t want to provide the email address you regularly use, you can create a disposable one with a number of different providers. Just make sure it is valid so that you can verify it if asked to do so.

How to Get and Withdraw Cryptocurrency Airdrop Tokens

An airdrop usually occurs after the ICO has been completed. There is then an additional period of 1-2 months before tokens will actually appear in your wallet. Tokens cannot actually be distributed until the end of an ICO token sale. Once the sale is complete and a reasonable amount of time has passed, you should see the tokens in your wallet.

Be aware than airdrops are free distributions of coins. No one should be asking you to send money to a wallet in order to receive coins. If you are asked to send money, this is a sure sign that you have become the target of a scam. Sadly, these scams are occurring far more often these days. You should also be verifying the airdrop through Twitter and other official channels. The ICO will be providing plenty of official information if an airdrop is planned.

Remember, the tokens you receive will be units of the new coin even though they are held in an Ethereum-based wallet. To withdraw them, you will need to use an exchange service where the tokens can be sold for fiat or exchanged for other digital coins. This can be tricky. Not all coins are immediately available on cryptocurrency exchanges. You may have to hold the coins for a while before they are available on exchanges.

Where Can You Find Airdrop Information?

Your best source of information about upcoming airdrops is to join and participate in cryptocurrency communities. You can sign up for free message boards and forums, Facebook groups, and follow Twitter accounts of crypto experts. All of these can be great sources for information about an upcoming airdrop. Just be sure that the source providing your information is reliable.

Any level of cryptocurrency investing demands that you remain informed. Those who have knowledge are those who have power. This is very true when it comes to digital currencies. Reading cryptocurrency websites often will give you an inside track on upcoming ICOs, the state of the market, and blockchain developments that can affect your investment.