What are Crypto Airdrops?
Cryptocurrency giveaway is a free distribution of pre-mined coins to the blockchain community. Airdrops usually occur after the blockchain launch has completed the ICO, and the token is available for trading on the open market.
Crypto Airdrops: how does the distribution of coins work
When a startup or projects decide to conduct an airdrop, they first take a snapshot of the blockchain on which their project is based. Bitcoin-based projects will take snapshots of the BTC chain, Ethereum-based projects of the ETH chain, and so on. Then, at a predetermined time, the startup will distribute its tokens to the wallet addresses specified in the snapshot.
For coin holders, this process is effortless. The user does not need to do anything to get tokens. They are simply sent to the user’s wallet by the token issuer.
The only requirement is that they must own a certain number of basic cryptocurrencies. The more coins a user has, the more tokens he will receive in the distribution, since the tokens are distributed proportionally.
Why do projects use giveaways?
Airdrops are used by startups and projects to attract new users and stimulate existing participants. These are marketing tools that can be used to increase the popularity of the platform.
Airdrops attracts new users, giving them the opportunity to try out the platform or project. It is hoped that the platform or project will impress the recipients of the distribution, encouraging them to buy more tokens on the open market and use them on the platform.
For existing users, airdrops are a way for startups to express their appreciation, thereby giving them more resources to interact with the project.
In any case, the ultimate goal is to use tokens and increase the price. If the coin demonstrates a genuine utilitarian value and a price increase, non-users will become users by buying tokens on the market, thereby increasing the price. In turn, this will encourage the use of the platform and attract a large part of the crypto community.
The impact airdrops have on users of digital coins
Airdrops encourages users of digital coins to be more active in the crypto community, and diversify their coin holders. Since airdrops usually rewards tokens on a proportional basis, users with a larger share in the underlying cryptocurrency will receive a greater reward.
Thus, users who own Bitcoin, Ethereum and Ripple are more likely to get an airdrop than users who own only Ethereum. A diversified portfolio of cryptocurrencies only increases the chances of receiving tokens issued for distribution.
Possible drawbacks of Airdrops
Not everything in the world of cryptocurrency airdrops is painted pink, and some of them have failed miserably. The company risks sending coins to disinterested parties who will simply ignore the free tokens. Users can also take coins and sell them on the open market to make quick money by lowering the price.
There is also a possibility that users will use free tokens, but will leave the platform without attention. If a sufficient number of users do not approve of a blockchain launch or project, token issuers may prematurely kill their project.
Individuals should also be wary of airdrop fraud, such as bait and switches, or hacking attempts. Users should never give out their private keys, and should always be careful with suggestions that sound too good to be true.
Now you know that Airdrops is just a well-organized marketing ploy.