Crypto airdrops are a pretty popular marketing technique — but can you also make money off of them?
Join us in showcasing the cryptocurrency revolution, one newsletter at a time. Subscribe now to get daily news and market updates right to your inbox, along with our millions of other subscribers (that’s right, millions love us!) — what are you waiting for?
Introduction
CoinMarketCap has over 9,000 listed coins, which means that new cryptocurrency projects looking to attract investors and supporters will need to employ some very creative tactics to make themselves stand out from these other 9,000 projects out there. While it is a given and necessary that crypto developers promote their token projects extensively via social media, press releases and crypto blogs, other marketing methods are also explored.
Enter airdrops. Once touted as an unconventional form of guerilla marketing, airdrops have exploded in popularity since 2017 in the crypto space, with countless projects using the strategy to expedite adoption, encourage the community to help promote a project or as a means of rewarding loyal users.
Additionally, an airdrop may also come as a result of a hard fork, such as what happened when Bitcoin holders received a 1:1 airdrop of Bitcoin Cash back in 2017.
What Are Crypto Airdrops?
A crypto airdrop is usually a marketing tactic that uses the free distribution of new cryptocurrency tokens to drive awareness and build communities quickly, as well as help to put an early value to a token as recipients may begin to trade their airdropped tokens. Airdrops are therefore commonly used by startups looking to bootstrap their crypto projects. News of an upcoming airdrop is usually posted on a crypto project's website or Medium page or third-party airdrop tracker, and shared across social media platforms where many cryptocurrency enthusiasts can see.
An airdrop involves small amounts of newly-minted cryptocurrencies and targets members of a select blockchain platform. For example, cryptocurrency startups may airdrop coins to wallet holders of the NEO, Ethereum or the Bitcoin network.
In some cases, a recipient may be required to hold particular tokens or maintain a minimum balance in order to be eligible for an airdrop. For instance, TRX holders will continue to receive BTT airdrops consistently until February 2025.
In other cases, users may need to perform small tasks such as posting about a project on social media. Note that crypto airdrops are different from initial coin offerings (ICO) — the latter are intended to solicit investments from individuals, which classifies ICOs in the U.S. as securities offerings — while airdrops are broadly used to raise awareness. Oftentimes, an airdrop may be followed by an ICO or other forms of token fundraising.
In May 2021, CoinMarketCap launched its own Exclusive Airdrop service.
Why Crypto Supporters Love Airdrops
Most crypto enthusiasts, especially those with small to no crypto holdings, love airdrops simply because they see them as free money. And in some cases, these free monies could appreciate over time or surge suddenly, providing immense profits at zero capital.
Initially, airdrops usually benefit the issuing company more, but recipients of the free coins can occasionally be in for a treat later on. It’s a win-win situation. Here are three perfect examples of successful airdrops.
3 Lucrative Crypto Airdrops
Uniswap (UNI) Airdrop
In 2020, Uniswap, the world’s most popular decentralized exchange (DEX), airdropped its native asset, UNI, to all wallets that had used its platform and performed at least one transaction prior to Sept. 1, 2020. An eligible account received 400 units of the base asset. During the event, most recipients quickly dumped their airdropped token, and UNI changed hands at $2-$4.
Those who “held on for dear life” (HODL) were richly rewarded for their patience and loyalty as the exchange token’s value soared with others in the DeFi ecosystem, climbing from $2 to a current $30 as of April 2021. As such, those of you with hands of steel are now sitting on a nice little nest egg of $12,000 from UNI alone (Sadly, this author sold his airdropped tokens at $3!).
Ontology (ONT) Airdrop
In 2018, Ontology airdropped its native cryptocurrency, ONT, to NEO investors as well as 1,000 ONT for people who simply signed up for its newsletter. In part, the event wanted to reward NEO blockchain users for supporting it during its fundraising. The total amount of airdropped coins was 10 million, worth approximately $42 million and trading at $4.2 per coin at the time. The token later shot up to nearly $11, amid a deepening bear market no less, bringing the airdropped coins to a valuation of $100 million. Sadly, that was the peak time to sell, kids. ONT has since retraced to a more modest value, and currently sits just shy of $2.
1inch Airdrop
In December 2020, the 1inch DEX airdropped 90 million 1INCH tokens to more than 55,000 addresses. To be eligible, an address needed to have traded at least $20 or made four trades before the airdrop day. At launch, the price of 1INCH was about $2.7. Fast forward to April 2021, and the coin trades at slightly above $6.
There was one particular address that received a crazy 10 million tokens (9,749,686) during the date of the airdrop, as a reward for its support. That stash is presently worth $60.4 million in April, an increase of approximately $33 million in less than five months.
5 Reasons Why Crypto Projects Do Airdrops
Crypto projects give out generous bounties through airdrops because they are the biggest beneficiaries of such events. Let’s explore the fundamental reasons why crypto startups conduct airdrop programs.
- Creating Awareness
Spreading awareness is the primary reason why blockchain startups conduct airdrops. In the early days of crowdfunding, ICOs took center stage. However, problems soon arose. A flood of startups emerged during this gold rush, often with only a flimsy and partially plagiarized white paper in hand, oversaturating the market and jading investors.
Also, countries like China outright banned ICOs and regulators like the SEC began to target ICOs dealing with domestic U.S. investors. Soon, new projects needed a more alluring and legal method to create hype.
The answer was simple. Just hand out free coins. The popularity of airdrops led many crypto supporters to go on a shilling spree, promoting projects in order to get airdrops and “pump their bags.” Anyone active on social media’s crypto scene can probably agree that airdrop recipients are some of the most vocal advocates a project can hope for. For crypto startups, it was a match made in heaven, since it allowed them to grow their community organically by simply shelling out a small portion of their tokens.
- Rewarding Users
A sad reality is that many investors in the crypto ecosystem are only out for the highest return on investment (ROI) and don’t care about a project’s long-term sustainability. Therefore, they hop from one project to another, dumping their heavy bags after a pump and making huge profits off the back of small-time investors without providing any actual value to the protocol. In fact, this type of behavior can actually damage a crypto platform.
To counter this, some startups conduct airdrops to distribute free coins in order to reward loyal users who either use their platforms or continue to hold a specific amount of tokens in their wallets for certain periods.
- Decentralizing Token Distribution
Deep-pocketed investors may take advantage of their disparate wealth and secure bargain prices during a coin's early days, allowing them to hoard a significant amount of its circulating supply. The problem is that large amounts of coins in the hands of a few create centralization, which is currently one of Dogecoin’s main drawbacks.
In such cases, projects can opt to conduct airdrops in order to balance out a token’s distribution.
- Attracting Investments
Crypto airdrops are followed by token offerings in most cases, whether they be ICOs, IEOs, IDOs, etc. A clever way to boost the funds raised without spending too much on marketing is through airdrops, as this strategy is tied to creating awareness.
When a project launches and conducts an airdrop, the generated buzz, if successful, helps drive the price of a token upwards as most recipients would shill projects that give them free money. Especially in today’s online economy, where every interaction metric can be measured and used to attract investors, such as trending Google search terms, social media brand mentions and community followership count on Twitter and Telegram, big investors or “whales” use these analytics as an investment weathervane to gauge a project’s future prospects. Therefore, an airdrop, which significantly increases community engagement, could seriously boost the company's overall capital for only a proportionally small amount of tokens allocated to the airdrop.
- Learning More About Its Community
As an added bonus, airdrops allow projects to collect data from the crypto community since some of them require recipients to fill a form providing personal details such as email, social media and their views on crypto projects. With this information, a project's team can make targeted marketing campaigns.
Other “Free Crypto” Tools to Use
Of course, airdrops and crypto faucets are not the only way to get free crypto. For example, you can simply hold certain coins like ONT and NEO to claim free native gas tokens such as ONG and GAS at certain intervals.
You can also employ DeFi techniques such as staking crypto or yield farming to earn digital asset incentives in the form of network rewards or new governance tokens.
When joining new exchanges, you can consider looking at various sites that offer crypto referral codes and sign-up bonuses.
However, while all these reward tools give you “free” funds, they do require initially investing and owning certain assets, or making a first deposit to a centralized exchange or trading app.
Then again, if you are going to invest your hard-earned money into crypto, these tools can greatly help to improve or even double the value of your initial investment, risk-free .
Remember, once the value of an initial investment has doubled, you can essentially sell 50% and keep the remaining 50% as a risk-free “freeroll,” to use poker parlance.
(This is not financial advice, and do your own research before making any investments.)
Airdrop Alert: Watch Out for Phishing and Dusting Attacks!
Of course, as anyone who’s ever read the comments sections on an Elon Musk tweet post will know, actors use free crypto methods to exploit and steal. Crypto hacks and scams are becoming incredibly sophisticated in 2021, catching even seasoned investors. Please be very cautious when searching directly for any crypto exchange or project on Google. Fake sites often pay to advertise on both search engines and social media to lure in victims.
Even accidentally mistyping an exchange’s direct URL can direct you to a copycat fake site. When in doubt, bookmark CoinMarketCap.com, search for a project within our website and use a project’s listed URL as a verification tool.
How to Navigate Airdrop Risks
Not all airdrops are benevolent. Therefore, be very careful of which airdrops you sign up for. First off, if an airdrop requires you to send any funds to its project, it is almost certainly a scam. Don’t do it.
Secondly, some airdrops are simply vehicles to get personal information from you and “dusting” attacks are common, in which you receive a fractional amount of crypto into your wallet and thereby reveal your public address to a potential scammer or hacker. Once a project has your public address, its members can easily check your portfolio through blockchain explorer tools.
If you’re holding a valuable sum of crypto assets on that wallet address, you could theoretically get targeted through phishing, SIM swap and other hacking attempts, or real-life extortion and violence.
Therefore, it’s best to create a new wallet specifically for airdrops. This is pretty simple. As most airdrops happen on the Ethereum network as ERC-20 tokens, simply set up a new address on the likes of MetaMask or MyEtherWallet to receive airdrops. This will also enable you to separate that “house money” from coins you’ve actually paid for.
Conclusion
Airdrops are a rather harmless marketing gimmick geared as community incentives to mutually benefit new projects and their early supporters. While they may seem like small fry at first, they could eventually be worth a fortune to crypto beginners or enthusiasts looking to get in early on promising projects without laying out any money.
In fact, if you received these 6 airdrops you could have netted a mindblowing $500,000 by now!
So what are you waiting for? Just remember, be mindful of phishing sites, bookmark trusted sites, use different wallet addresses for your airdrops and never, ever send funds in order to receive an airdrop.
This article contains links to third-party websites or other content for information purposes only (“Third-Party Sites”). The Third-Party Sites are not under the control of CoinMarketCap, and CoinMarketCap is not responsible for the content of any Third-Party Site, including without limitation any link contained in a Third-Party Site, or any changes or updates to a Third-Party Site. CoinMarketCap is providing these links to you only as a convenience, and the inclusion of any link does not imply endorsement, approval or recommendation by CoinMarketCap of the site or any association with its operators. This article is intended to be used and must be used for informational purposes only. It is important to do your own research and analysis before making any material decisions related to any of the products or services described. This article is not intended as, and shall not be construed as, financial advice. The views and opinions expressed in this article are the author’s [company’s] own and do not necessarily reflect those of CoinMarketCap.
