If you’re interested in cryptocurrency, then you may want to know more about cryptocurrency airdrops. Keep reading to understand what a cryptocurrency airdrop is, how airdrops work, and how to participate in a cryptocurrency airdrop.
Definition and Example of a Cryptocurrency Airdrop
A cryptocurrency airdrop is the mass distribution of a virtual currency. Airdrops are usually free to receive, especially if they are designed to promote a new cryptocurrency. A cryptocurrency airdrop may also occur if an existing cryptocurrency is split into two separate versions. Promoters of the BitRewards (BIT) cryptocurrency in 2018 used an airdrop to promote BIT. The airdrop’s organizers distributed 640 BIT tokens, worth about $10 each, to a maximum of 15,000 people. Airdrop recipients, to qualify, were obligated to join the BitRewards Telegram group and follow BitRewards on Twitter, with the opportunity to earn additional BIT for referring friends to the airdrop. The split of Bitcoin and Bitcoin Cash in 2017 is an example of a blockchain event that preceded a cryptocurrency airdrop. The airdrop distributed free Bitcoin Cash (BCH) to anyone who owned Bitcoin at the time of the split.
Types of Cryptocurrency Airdrops
Although there aren’t any restrictions on when a cryptocurrency airdrop can occur, cryptocurrency airdrops generally fit into two main types:
Airdrop to promote a new cryptocurrency: Some promoters of new cryptocurrencies use airdrops to draw attention to initial coin offerings (ICOs). Distributing a new cryptocurrency for free to many users can increase awareness and adoption of a new currency. Airdrop to distribute cryptocurrency after a hard fork: When a cryptocurrency blockchain splits into two separate versions—known as a hard fork—an airdrop can be used to distribute the new version of the cryptocurrency. Just like airdrops for completely new digital currencies, an airdrop following a hard fork can jump-start adoption of the newly forked currency.
How Cryptocurrency Airdrops Work
Although each airdrop is unique, here’s how a cryptocurrency airdrop typically works:
Pros and Cons of Cryptocurrency Airdrops
Pros Explained
Opportunity to receive cryptocurrency for free: A cryptocurrency airdrop can enable you to add to your crypto portfolio at zero cost.Learn about blockchain technology: Especially if you receive a cryptocurrency airdrop following a hard fork, participating in an airdrop can boost your understanding of blockchain technology.Opportunity to participate in new cryptocurrency projects: When a new currency is launched, or one cryptocurrency splits into two, an airdrop can enable you to participate in that new crypto project from the beginning.
Cons Explained
Some cryptocurrency airdrops have special requirements: You may be obligated to post publicly about a cryptocurrency, or own a specific coin, to benefit from a cryptocurrency airdrop.Receiving a crypto airdrop also requires having a compatible digital wallet. Cryptocurrency airdrops may be scams: Some airdrops are ploys to gain access to a large number of cryptocurrency wallets, in order to steal those wallets’ funds. Proceeds from cryptocurrency airdrops are taxable: The Internal Revenue Service (IRS) treats cryptocurrency received in an airdrop as taxable income. Receiving a crypto airdrop may be a taxable event.
Do I Need a Cryptocurrency Airdrop?
You don’t need to participate in a cryptocurrency airdrop. Signing up for crypto airdrops can be a fun way for crypto enthusiasts to engage with digital currency communities and learn about new blockchain projects. But even without receiving any airdrops, you can still invest in or trade cryptocurrency.
