A token airdrop is a distribution of free cryptocurrency tokens to a large number of individuals. Imagine a company giving away free shares of stock to its customers - that's essentially what a token airdrop is in the world of cryptocurrency. As cryptocurrency serves as ownership in a network rather than a company, the airdrop behaves as a way to distribute ownership and incentivise adoption of the network.

What exactly are crypto/token airdrops?

This concept is only made possible through the decentralised nature of blockchain technology. Airdrops are typically done through a smart contract, which automatically sends out tokens to multiple addresses at once.

In order to receive the airdropped tokens, individuals must have a compatible wallet for that specific token and often need to perform certain actions, such as following social media accounts or participating in community events. This helps to spread awareness and engagement for the project.

Once the tokens are distributed, they can be traded or used on the network just like any other cryptocurrency. Airdrops often occur during a project's initial coin offering (ICO) or as a marketing strategy to gain traction and attract potential investors.

Sometimes receivers of these airdrops are not required to complete any tasks, and the distribution is done randomly to a large pool of individuals. This can be seen as a way to advertise and increase brand awareness for the cryptocurrency. A public wallet address (which every wallet has) is all that's needed to receive the airdropped tokens, making it accessible for anyone with an interest in cryptocurrency.

What are the benefits and drawbacks of participating in airdrops?

Participating in airdrops can have both positive and negative effects. On one hand, receiving free tokens can potentially bring financial gains if the project increases in value. It also allows individuals to experience using different cryptocurrencies without having to invest any money upfront.

On the other hand, participating in airdrops often requires individuals to disclose personal information or complete tasks, which can compromise their privacy. Additionally, not all airdrops are legitimate and there is a risk of receiving tokens from fraudulent projects. The time might not be worth the potential gain, as some airdrops may only distribute a small amount of tokens or have low value.

Furthermore, the value of airdropped tokens may be low or the project may never gain traction, resulting in no financial benefit for participants. There is also the possibility of receiving tokens that have no real use or value, making them essentially worthless. Luckily we have a solution for you which we will discuss later on in this article.

Why and how airdrops were created?

In 2014, history witnessed the inaugural cryptocurrency airdrop. The pioneering project, called Auroracoin, aimed to establish a national cryptocurrency that would be readily available to the people of Iceland. With the intention of distributing 50% of the total supply to Icelandic citizens, Auroracoin was created to provide an alternative to traditional financial systems. This marked the beginning of airdrops as a means of distributing tokens and gaining adoption for new projects.

It set an example of how blockchain could be used to distribute wealth in a decentralised and fair manner. This was an important step towards the democratisation of finance, as it allowed individuals to directly participate in the creation and distribution of new cryptocurrencies. Soon, many projects followed this model and realised its ability to brand and promote tokens while also increasing awareness and adoption.

What are vesting periods?

The scheduled release of these airdropped tokens is typically structured through vesting periods. Vesting periods refer to the time frame in which the tokens are gradually released to participants. This allows for controlled distribution and prevents market flooding, which could cause price volatility and undermines the value of the project.

Vesting schedules can vary depending on the project, but they usually require participants to hold onto their tokens for a certain amount of time before they can be fully liquidated. This encourages long-term commitment and investment in the project, as well as preventing large sell-offs that could negatively impact the token's value.

How can I participate in airdrops?

As we briefly mentioned earlier, airdrops are generally free and open to anyone who meets the requirements set by the project. These requirements can include holding a certain amount of a specific cryptocurrency, participating in social media campaigns, or simply signing up for the project's newsletter.

Once you meet these requirements and register for the airdrop, you will typically receive your tokens directly into your compatible wallet after the vesting period has ended. It is important to be cautious and only participate in legitimate airdrops of reputable projects to ensure that the effort is worth the reward.