Cryptocurrency Airdrop

A cryptocurrency airdrop is a marketing strategy employed to promote a crypto project or product where the virtual currency or product is distributed as tokens for free. It is usually done in small amounts to make the project known to more people and/or attract a consumer base.

Giving away freebies garners attention in the market space, especially on social media. The momentary popularity provides a window to add new customers and develop a consumer base. It significantly reduces advertising costs and may even entice new investments. Airdrops are a means to enhance the circulation of the currency before their public listing.

• Cryptocurrency airdrops are a type of marketing technique that business employ by providing tokens to active crypto traders either for free or in exchange for little to no promotional activity.
• Airdrop provides coins for free. However, some may require a small number of advertisements, such as posting, sharing, or signing up on a platform from the participants of the blockchain community in exchange.
• Airdrops help investors boost their investments and easy profit. However, one must exercise caution as these can be scams and schemes from the initiators to make a quick profit.

Cryptocurrency airdrops are part of marketing tactics that involve sending a small number of coins or tokens to the digital wallets of crypto investors. Most of the time, crypto airdrops are a component of a broader marketing effort that includes blog posts, social media advertising, and various levels of crypto holder participation. To promote projects, new blockchain based companies give out free cryptocurrency airdrops and publicize them on their social media platforms or websites.

Following its awareness-raising and advertising campaigns, the company transfers the coins or tokens of the latest cryptocurrency airdrops. These tokens land in the wallets of owners of an existing cryptocurrency. The company, through this, can significantly reduce advertisement costs, get publicity and make people aware of the project.

In general, the value of currencies depends upon their utility. Values further increase when people use them more and more for trading. Many cryptocurrencies are already flooding the market, and new projects need to market their projects extensively to reach people. As more and more people learn about the project, the more attention it garners and the further its usage spreads.

New cryptocurrency airdrops aid the whole process. First, they spread awareness about the project, its uniqueness, and the business philosophy behind such a venture. They eventually go on to build a community or consumer base.

Airdrops can be classified into the following types:

#1 - Standard Airdrops

These are airdrops where a small amount of cryptocurrency is transferred to users' wallets for free. They may require providing wallet addresses or signing up with the project's new crypto platform.

#2 - Bounty Airdrops

Bounty Airdrops require interested people to either participate in the promotion or complete tasks associated with the project.

#3 - Exclusive Airdrops

An exclusive airdrop is sent to designated users only. They are usually part of the community that has supported the project from its early days. These individuals actively associate with the project community, and these airdrops are more like rewards for them.

#4 - Holder Airdrops

Holder airdrops are for existing holders of the cryptocurrency. If these individuals have the necessary amount of cryptocurrencies the owners require and meet the project's minimum standard, the latter gives them free tokens.

Check out these examples to gain a better idea of the topic:

Example #1

Following is one of the biggest airdrops in the cryptocurrency world.

Sologenic is built on XRP (a native cryptocurrency of Ripple, known as XRP. ripple, a real-time gross settlement system). The present NFT marketplaces on the Ethereum blockchain have expensive and slow transactions. The new market is designed on the XRP ledger to address these issues. The airdrop was initiated to engage its community and make them participants in the ecosystem. And it was proposed that around 200 million SOLO be given away as part of an airdrop to the holders of XRP and SOLO worldwide.

The value of SOLO was USD 4.27 at the time of the announcement. During the introduction of the ecosystem in early 2020, the SOLO Community Fund (SCF) and SOLO Expansion Fund (SEF) started to foster the SOLO community's growth. These funds are the source of tokens for the airdrops. As a result, users could either build a trust line straight from their wallets to claim the latest cryptocurrency airdrop or hold their assets with centralized exchanges that support it.

Example #2

Auroracoin is one of the first serious initiatives to establish a new cryptocurrency inspired by Bitcoin. It was planned to be formally handed over to the 330,000 inhabitants of Iceland in 2014. Each citizen had permission to claim 31.8 auroras during the distribution procedure, or "airdrop."

The event was planned to work in stages over the following year. First, qualified Icelandic residents registered for the airdrop would receive the coins. It is said that the Auroracoin Foundation distributed a majority (around 50%) of the coin's supply during the airdrop events in 2014.

Here are the main advantages and disadvantages of crypto airdrops.

Advantages

#1 - They build brand value

Any market campaign helps to show a product or project in good light. Attention toward the project increases as more and more people become part of the process. This can bring new investments and insights to develop projects, and the company's value grows.

#2 - Reduced marketing costs

A significant portion of the marketing cost is reduced when people become associated with crypto and take the initiative to share it. In this way, the people who the company can reach increase multifold without it putting in the extra effort. This can be true, especially in social media platforms where it is easier to reach a larger mass of people.

#3 - Easy way to profit

Making a profit on their investment is the top priority for most crypto investors. The volatility of the market can aid quick profits. Investing in cryptocurrency airdrops is a low-cost option to increase the profits of crypto investments.

Disadvantages

#1 - Unreliable

Airdrops are a simple marketing tool. Hence, innocent people can fall prey to scammers. Fraudulent parties can ask for payment, which regular airdrops do not. In addition, there can be identity theft, phishing, or hacking attempts. They also may be a part of pump and dump schemes. Therefore, not every airdrop is reliable.

#2 - Government Regulations and Taxes

Governments are stating they will regulate the crypto space even though many laws are still in their early stages. Regulations may keep evolving as the popularity of cryptography increases. The government may tighten these regulations and increase taxes. Airdrops increase the amount of native currency held, and the cumulative value may result in high profit. This income may be taxable depending on the country.

#3 - Unpredictable

The blockchain industry is relatively new. Therefore research for investment is time-consuming. Not to mention that the results are yet to be seen. If people do not accept cryptocurrencies in the future, all may go downhill, resulting in losses, especially if heavy transaction fees are paid.

This article has been a guide to what is a Cryptocurrency Airdrop. Here, we explain the topic in detail, including its types, examples, advantages & disadvantages. You may also find some useful articles here-

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