What is a Crypto Airdrop?

Making money using cryptocurrencies can be a risky move; it’s not wholly secure and you never know what exactly you’re getting into. However, there exists a way in which you can genuinely make money, and it is a little thing called ‘Airdrops.

This article will serve as a guide to airdrops by explaining what they are and the reasons as to why so many people use them.

What exactly is Cryptocurrency?

Because cryptocurrency has a big part in the airdrops framework, it only makes sense that we first establish what cryptocurrency is for contextual purposes.

Cryptocurrency is typically defined as being a digital (or virtual) form of currency that utilizes cryptography for security reasons, and it is because of this that the overall system is difficult to counterfeit. A majority of cryptocurrencies are decentralized systems based on blockchain technology, which is a distributed ledger that is run by a diverse network of computers. The defining feature of a cryptocurrency is that it is not supplied by any central authority, which makes it essentially immune to any kind of government interference.

Investopedia editor, Jake Frankenfield, explains the core purpose of cryptocurrency as the following:

Cryptocurrencies are systems that allow for the secure payments of online transactions that are denominated in terms of a virtual “token,” representing ledger entries internal to the system itself. “Crypto” refers to the fact that various encryption algorithms and cryptographic techniques, such as elliptical curve encryption, public-private key pairs, and hashing functions, are employed.”

Now that cryptocurrencies have been defined, we can now move on to finally talking about what airdrops are and dissecting them.

What they are & HODL

Airdrops are a procedure centered around administrating new coins/tokens by presenting them with a particular proportion to existing holders of specific blockchain currency, including the likes of Bitcoin and Ethereum among others.

Before we move forward, the concept of ‘HODL’ should be looked into, as it plays an important role in what is going to be explained in relation to airdrops. HODL first came to be in 2013 on a Bitcoin forum when a member wrote, “I AM HODLING.” It began life as a typo, but over time became the acronym for “Hold on for dear life.”

Since that posting, the term has become increasingly popular both in the Bitcoin area and in the cryptocurrency world in general. It is used primarily whenever an individual says in a conversation that they are ‘hodling’ or suggests to ‘hodl,’ what they mean is that they believe their coin will be deemed profitable someday, if not later today.

With this definition in mind and tying it back to airdrops, if you HODL one certain type of coin, you are instantly considered worthy enough to claim other coins/tokens on account of you being in possession of the parent coins/tokens on which the airdrop is being done. That is the reason as to why this method of coin/token circulation is called “airdrops,” as it indicates “free droppings.”

Every now and then, there are different reasons and intents behind these airdrops. Some of these include forks, marketing, decentralization and distribution, and several others. These “other reasons” will be delved into in the next section.

The Reasons

You might be wondering why free airdrops occur at all, and to answer that inquiry with one explanation would be impossible. In actuality, there are numerous motives that lead to carrying out cryptocurrency airdrops, from building up the hype and buzz to distributing the entire supply of coins/tokens.

Some of the aforementioned reasons for putting crypto airdrops into effect include:

  • The even administration of total token supply

One of the more appropriate and conventional reasons for airdrops is to distribute the total coin/token supply in an equitable fashion so that there is less centralization in terms of ‘bagHODLer’ possessing a substantial amount all for themselves.

To further illustrate this specific reason, Omise (a payment gateway whose operational hubs reside in Thailand, Japan, Indonesia, and Singapore) gave away about 5% of their OmiseGO cryptocurrency to the holders of Ethereum in September of 2017. In this sense, OmiseGO had taken advantage of the already distributed Ethereum economy in order to dispense their own tokens as well.

  • Rewarding the faithful early investors

There are a good number of cryptocurrencies who want to reward both its early supporters and early investors who were the first ones to purchase their tokens or ICOs. Obviously, the best way to reward them for their loyalty is to offer them some more tokens; this time for free.

In addition, this will also provide early investors with the incentive to hold onto their parent tokens for longer durations. All of this accumulating into a very good – and very beneficial – way to repay them for their support.

  • Awareness surrounding the new crypto

A good chunk of the time, simply from just spreading awareness, the airdrops are executed for the HODLers of the more popular cryptocurrencies such as Ethereum, Walton, and many more.

  • The marketing and the hype

This has become the most common trend in recent years. This is essentially airdropping coins/tokens for the sole purpose of marketing and assembling leads for any additional opportunities for the expansion of a business.

Moreover, you will also come across projects that are running schemes similar to these:

  1. A cryptocurrency is airdropping 125.00 CAD in their tokens to the first 10,000 airdrop participants!
  2. Get up to 80 tokens of a certain cryptocurrency for free just by joining the Telegram community!
  3. #ApolloDAE referral airdrop for users who have a Telegram account!
  4. 50 tokens of a specified cryptocurrency will be given to you free of charge when you sign up.

All in all, this particular kind of airdrop garners bounties for partaking in such minor tasks like signing up, referrals, or joining Telegram and following the cryptocurrency on Twitter and/or other social media platforms.

It should be noted that the use of airdrops as a marketing tool has – at least in the US – raised some questions and concerns, mostly regarding tax liabilities and whether they ultimately amount to income or capital gains. Leigh Cuen, a writer for the International Business Times, wrote about this drawback:

“…there are still a slew of other practical issues lawmakers need to tackle for cryptocurrency users to include blockchain-based assets in their taxes. For example, when the bitcoin network forks there is often an ‘air drop’ where users automatically receive new tokens such as Bitcoin Cash. The bitcoin user may not even want BCH. But whether they sell it off or leave it alone, they are still legally liable to report it.

“‘From the IRS’s perspective, whenever you get something new you didn’t have before, it’s accretive—it’s income,’ Elizabeth Crouse, a digital currency expert at K&L Gates law firm, told Fortune. ‘When the Bitcoin Cash shows up in someone’s account, they have a taxable interest. The question is what’s it worth.’ Calculating its worth is quite tricky and might require professional guidance to make an educated guess, because there is no clear guideline for how to handle unique circumstances involving virtual currency

  • Hard Forks

Let us first go over what exactly ‘hard forks’ are. In relation to blockchain, a hard fork is described as being a radical change to the protocol that transforms blocks/transactions that were previously considered to be invalid into something conclusive, and vice versa. Furthermore, a hard fork is a permanent divergence from whatever the previous version of the blockchain was, and any nodes that are running previous versions will not be accepted by the newest version of the chain.

Frankenfield explains these forks by also referencing the DAO attack of 2016:

A hard fork involves splitting the path of a blockchain by invalidating transactions confirmed by nodes that have not been upgraded to the new version of the protocol software. Following the hack on the DAO, the Ethereum community almost unanimously voted in favor of a hard fork in order to roll back transactions that siphoned off tens of millions of dollars worth of digital currency by an anonymous hacker. The hard fork also allowed DAO token holders to get their ether funds returned to them.”

With all that being said, forking the more popular cryptocurrencies like Bitcoin, Ethereum, Litecoin, and Monero became another popular motive over time. From this, a new coin is brought into existence and is set to be distributed to existing holders of the parent coins. Some airdrops that have been supported by communities and platforms, like Bitcoin, through certain kinds of forks including:

  1. Bitcoin Cash (BCH)
  2. Bitcoin Gold (BTG)
  3. Bitcoin Diamond (BCD)
  4. Super Bitcoin (SBTC)
  5. Bitcoin Atom (BCA)

Remaining up to date

Having now gone over the reasons and motivations for why people carry out airdropping and stated the benefits that come out of them, you are now probably asking a different question: how can I stay up to date on these crypto airdrops? Unsurprisingly, this is one of the easiest methods in money-making, so it makes sense that one would want to frequently be updated on it.

There are multiple ways in which you can stay updated, with one of the most effective ways being that you join an active crypto community that works primarily in this area. There are plenty of services and websites to choose from. Through them, you can receive consistent updates regarding airdrops. However, it is important to understand that not all airdrops are worth participation as they can often be fraudulent.

Here are a couple of airdrop services that are worth looking into:

You can also be notified of any announcements pertaining to airdrops on the Twitter page and Bitcoin forum page of any particular project that you might currently be following.

From here, we transition into discussing how you can get your free airdropped crypto.

Claiming free airdropped currency

The action of claiming and maintaining the free crypto coins/tokens that were airdropped can actually differ depending on the project.

Let’s use airdrop fork coins as an example. For these, you either must be in control of your private keys or you should understand how exactly to sign your public address with your private keys.

Private keys are an intricate form of cryptography that allows users to access their cryptocurrency. Their security design protects users from theft and they are an incredibly crucial component of Bitcoin and altcoins. To learn more about private keys, read one of my past articles, “What is a Private Key?

Back to the topic of airdropping, this is why it has been continuously recommended that you always store your cryptocurrencies in these specific types of wallets wherein you are in complete control of your private keys:

  • Hardware wallets (ex. Trezor and Ledger Nano S)
  • Desktop wallets (ex. Exodus)
  • Web wallets (ex. MyEtherWallet)

There are times when you will need to do the following things if you wish to receive or claim your coins/tokens that have been airdropped:

  • Sign up for an account
  • Retweet to spread the word
  • Refer to a friend
  • Join the Telegram platform
  • Complete other tasks on other forms of social media

Scams and what to know

In the end, the best advice that can be given for those engaging – or wish to start engaging – in airdropping is to make sure to stay updated on what is being changed, and above all, be safe.

With the popularity of cryptocurrency as a whole constantly growing with each passing day, so too are the scams surrounding the field. With this in mind, if you were to come across a scam around cryptocurrency airdrops in your travels, then do not be alarmed by it and absolutely do not fall for it.

Quite honestly, the only method for overcoming these scams and getting rid of them is simply educating yourself on the subject of airdrops. If you really want to go the extra mile in protecting yourself, you best dig even deeper into the subject of cryptocurrency in general.

The scams that occur around airdrops will be carried out by asking you for your private keys to be entered at certain places and they will sometimes fool you so that you will enter your ‘seed words’ (a list of words that store all of the information that is required to recover a Bitcoin wallet) into a malicious software. You will occasionally see these specific types of ill-mannered tactics in hack slack channels, Telegram channels, or even Twitter accounts that have been tweaked and will try to impersonate the original account in some sort of way.


Airdrops are a sure-fire way to make money on cryptocurrency. There are layers to it, of course, but it is all for the strength of its stability and the overall reliability of how its system works.

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