What is an "Airdrop" ? - Crypto Whiteboard 101
cryptocurrency airdrop image

What is an "Airdrop" ? - Crypto Whiteboard 101


A cryptocurrency “airdrop” is a promotional tool in which crypto teams give users crypto in exchange for completing certain tasks. One of the most important lessons that my grandpa taught me is there is no such thing as a truly free lunch. Although users don't “pay” for cryptocurrency in the sense of spending cash, users have to pay for this cryptocurrency by completing various social media tasks such as following a social media handle, re-sharing an article, registering on an exchange, or tagging a certain number of people. In this article, I'd like to discuss the basics of cryptocurrency airdrops including what they are, how they work, and a few of the different ways in which they are implemented.

One of the most popular forms of cryptocurrency airdrops is the promotional airdrop. Under this form of airdrop, users receive a certain amount of crypto in exchange for sharing a Twitter article, re-posting content, or tagging a certain number of people. This is typically done by the cryptocurrency team in order to boost awareness of their cryptocurrency. From a business perspective, these forms of airdrops are quite effective as they are high-reward, low-risk proposals. A cryptocurrency team is able to get free exposure for their cryptocurrency without having to spend a lot of “real” money purchasing Facebook/YouTube/social media ads. They simply have to give away a certain amount of crypto that they already have. 

The second form of cryptocurrency airdrop is what I'm calling the “reward” airdrop. Under this type of airdrop, a new crypto-currency is given to people who already hold an existing cryptocurrency. For example, the Refund token completed an airdrop in which they distributed the Renew token to people who already held RFND. Similarly, the Ghost cryptocurrency was airdropped to people who already held ESH. These types of airdrops serve two purposes. First, they provide an incentive to hold the existing token. If I know that I will get new crypto simply for holding ESH, that increases the value of ESH. At the same time, airdropping a reward coin to holders of an existing coin boosts awareness of the new crypto. 

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Though some forms of cryptocurrency airdrops require you to complete a task before receiving your crypto, other forms simply send you a certain amount of cryptocurrency and then require that you complete tasks afterward in order to unlock it. The KICK token is a great example of this type of airdrop. Without asking for it, many cryptocurrency users were sent a payment of 888,888 KICK tokens. However, these tokens were sent to users in a “frozen” state which means that they could not be unlocked, traded, or sent out of the wallet until the user has completed the KYC verification process on the KickEX exchange. 

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Cryptocurrency can also be air-dropped as part of a fork. For example, people who held Bitcoin prior to the fork with Bitcoin cash received an equal amount of Bitcoin Cash after the split. In contrast to the other forms of airdrops, this is less of a promotional stunt than a reality of the way that forks and splits work. 

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Summary

After reading this article, I caution you not to come to the conclusion that all airdrops are scams. At the same time, I caution you not to believe that airdrops are “free” crypto. Rather, airdrops are a marketing tool that crypto teams use to create an incentive for users to act a certain way. The main takeaway is that airdrops will require a bit of work on your part to claim your crypto. For some people, the crypto reward will be well worth the effort of sharing a few articles and registering on an exchange. Other people will find that it simply isn’t worth their time or that it feels spammy. Either way, each of us has to make our own decisions regarding which (if any) airdrops we decide to participate in.  

 

Thanks for reading

 

References

 

https://blog.bitcoin.com/how-to-participate-in-the-ghost-airdrop/

https://www.uptrennd.com/post-detail/refund-token-update-airdrops-token-burn-price-increase-and-more~NTI0MTQ2 

https://www.forbes.com/sites/laurashin/2017/10/23/will-this-battle-for-the-soul-of-bitcoin-destroy-it/#17a3a30d3d3c

https://support.kickex.com/hc/en-us/articles/360012199739-Unlock-conditions-and-FrozenDrop-details

Image Credits

https://freesvg.org/

 

 

 

 


The Part Time Economist
The Part Time Economist

Hi everyone. I'm just a simple man trying to make my way in the universe. I am passionate about cryptocurrency and hope that I can make at least some small contribution towards promoting wider crypto adoption and understanding.


The Part Time Economist
The Part Time Economist

Hi everyone. This is just a place for me to post some of my thoughts and analysis. I hope that someone finds them useful.

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