What is an Airdrop?
Many of you already know the term airdrop. For example, Apple users use Airdrop to share files across devices. In the crypto world, however, the word has a completely different meaning. Airdrop is a marketing strategy used especially when launching new cryptocurrencies. It involves sending out coins or tokens to a large number of crypto wallets.
Distribution is usually free, or in return for a small service such as sharing a post or registering on a website. You may be asking, “why would anyone give something away for free?” The answer is quite clear. The goal is to get the attention of a lot of people, enlarge the user base, and thus earn more profits by selling more coins or tokens later.
There are several types of airdrops, so you may come across terms such as:
- Bounty Airdrop (the recipients must perform an activity).
- Holder Airdrop (the recipients must already hold a certain amount of the specific cryptocurrency).
- Exclusive Airdrop (only selected recipients are eligible).
- Raffle Airdrop (the recipients are more-or-less randomly selected from a certain number).
There are two problems associated with airdrops. The first is airdrop scams, where recipients are, for example, asked to connect their wallet to a fraudulent website. Airdrops are also being used for ‘dust attacks’, which are attempts to obtain information about users’ wallets.
Another problem, which is particularly related to the US, is tax liability for the currency received.