With the development of the cryptocurrency market, finding and selecting coins and potential investment projects has become a challenge for traders.
Therefore, airdrop is a method that helps new projects distribute coins/tokens and raise public awareness of the project. In the following article, Ecoinomic.io will provide you with an overview of the airdrop process.
What is airdrop?
Airdrop refers to the free distribution of assets from a cryptocurrency project to various users. Projects often apply two common forms of airdrop: awarding tokens or NFTs of the project.
This is a marketing strategy that helps new projects reach more investors, stimulate transactions, increase the circulating supply of cryptocurrencies, and promote the growth of community.
The process of popular airdrops
Airdrop is one of the most popular and effective way for new projects to spread their brand awareness. Projects often use social media platforms such as Twitter, Telegram, Facebook, CoinMarketCap to announce their events.
First, the project will make an announcement about the airdrop event to the community with specific participation conditions and rewards.
Users will have certain time to participate.
After the event is over, the project will snapshot the data on a specific block to identify exactly participants who meet requirement.
The project will send rewards to lucky users via wallet addresses or will allow users to claim the rewards by themselves.
Retroactive is an airdrop event for participants who use the project’s products from the very first days. These users make an important contribution to the success of the project so the project is willing to reward them.
In the airdrop event announced in advance, there will be a lot of participants and the rewards have to been divided equally among all eligible people. On the other hand, a surprise airdrop will select users who contribute to the project and receive rewards with the right value. Retroactive surprise airdrops are a common culture of projects on Ethereum.
When a project launches, it will need user support and contributions related to the product.
The project after stable operating process will tend to launch tokens, in the initial token allocation there will be a small part to give to users who supported the project from the early days.
The project will announce retroactive event with conditions for receiving the reward at any time. However, the accompanying conditions let users know if they will receive the bonus or not instead of guiding the user to participate. It has selected snapshots of data on the blockchain and has selected valid users.
Users will receive rewards according to the project’s instructions.
Almost like retroactive, a Testnet is an event that asks users to use the product in test versions. This form will be informed about the specific requirements of the project’s features for users to experience and respond. Many projects will reward these enthusiastic users to attract and retain them.
When users discover a real or potential security issues and report responsibly to the project, they will receive rewards from project. However, vulnerability rewards programs usually requires you to have a good knowledge of programming and technology.
Distinguishing between airdrop and ICO
Both airdrop and ICO refer to the distribution of coins/tokens of cryptocurrency projects, however they have certain differences.
ICO is a form of crowdfunding for upcoming coins/tokens. Through the whitepaper, investors can assess the development prospects of the project and decide to buy tokens early to enjoy the discounted price.
Meanwhile, the airdrop does not require any investment from the participants, the developers give away tokens to participants to raise public awareness of the project.
Benefits and risks
For users: Enhance the experience and attract new users to the cryptocurrency market. Users only have to perform some simple tasks to get free tokens. Besides, many people participate in airdrop to make profits as a form of investment because the return on investment (ROI) is quite stable.
For the project: Reach many users, raise awareness of the project, build a community and increase the circulating supply of coins/tokens to help the project develop sustainably. The more users the project attracts, the higher the potential increase of the coin/token price.
Risk of fraud: New users entering the market often have their personal information stolen when accessing link scams, providing passphrase, private key,…
Unattractive rewards: Coins/tokens airdropped from projects usually have negligible value. As the project attracts more users to participate in the airdrop, the more coins/tokens distributed to wallets are fragmented.
Devaluation: When the new project conducts an airdrop, the token/coin price will rise based on investors’ expectations about the project’s prospects. However, after that, the market sold coins/tokens, causing the price to plummet. Therefore, when planning to receive an airdrop, investors need to ensure the earliest possible trade.
Time-consuming: Users participating in the airdrop need to monitor, update information continuously about the project and complete the required tasks to receive free coins/tokens, this process takes quite a long time.
It is necessary to learn and follow reputable sources about the airdrop event, avoiding the risk of being scammed. Users can refer to information on some websites such as CoinMarketCap, AirdropAlert, or telegram communities such as Migoi.io, Fomo Sapiens,…
Users need to prepare multiple wallet addresses for airdrops, do not share passwords for airdrops to avoid the risk of asset loss.
Airdrop is not always free, users can incur a fee during the operation and experience. Therefore, users need to control, evaluate and allocate costs and profits reasonably.
Airdrop not only helps the project build community and gain popularity in the cryptocurrency market, but also provides opportunities to expand the portfolio for traders.
Hopefully, through the above article, Ecoinomic.io has helped you understand the process of participating in airdrop as well as the way to airdrop effectively, avoid the risk of fraud and property loss.