Namaste Yogis. Welcome to the Blockchain & AI Forum, where your technology questions are answered, mostly correct! Here no question is too mundane. As a bonus, a proverb is also included. Today’s question, submitted by Danny in Los Angeles, and he wants to know about airdrops.
Danny, you came to the right place. If you take the term literally, you might think someone is dropping air on your head which would be absurd! Let’s start with a definition.
Airdrops is a term native to and used exclusively in crypto. You won’t find reference to airdrops in any other market or industry. Best of all, airdrops are free! No charge. Nada. Zero. However, nothing is truly free, meaning we must dig a little deeper.
Let’s start with the obvious; airdrops are a marketing strategy. The point is to raise awareness and adoption of the project doing the airdrop. Holy obvious, Batman! Generally, start-up blockchain companies are most likely to engage in airdrops. The first airdrop occurred in 2014 by AuroraCoin, in Iceland. El Salvador gave every citizen $30 of Bitcoin to those who installed the government built crypto wallet. A government-built wallet from a corrupt government to encourage a decentralized money system. Holy, are you serious, Batman!
Airdrops vary. I’ll explain a few staring with Standard.
Standard Airdrop. Standard Airdrop is the simplest. Participants need only provide their wallet address and basic information. The airdrop quantity may vary depending on several factors, including number of participants, and the amount available, to name just two.
Bounty Airdrop. To earn bounty airdrops, users must perform certain tasks. Tasks vary, but generally revolve around raising project awareness, e.g., posting on social media, tagging a company, retweeting a post. Some projects award airdrops for recruiting other users, think multi-layer marketing, Batman!
Holder Airdrop. Holder airdrops are often automatic and based on a formula of quantities of tokens a holder possesses, and duration held. It is a way to reward commitment and loyalty. Only the financially faithful, Batman!
Exclusive Airdrop. As the name suggest, exclusive airdrops are reserved for selected individuals. Who are the exclusive? Generally, they are people who spend the most time on the project, contribute to the project, post about the project, and/or stake their holdings with the project. Staking is generally the most effective way to get airdrops. Holy, hoity-toti, Batman!
Raffle Airdrops. Raffle airdrops occur when a project decides to give away X number of tokens, based on a lottery. However, the lottery may not be completely random. The lottery may be weighted to give advantage to holders.
If nothing is free nor perfect, what are the downside of airdrops. In a word–SCAMS! I’ll give you two scam types, starting with dusting.
In a dusting scam, the thief will send micro amounts of a valuable coin, e.g., Bitcoin, to a recipient. The idea is to entice the victim to attach their wallet to a crooked phishing website, via a legit service such as Metamask, to claim their airdrop. After a user connects their wallet and enters their password the scammer drains the stash! Holy, where is my money Batman! The second is enticing market participants to invest in a fraudulent, or non-existent project. Either way your money is vaporized! Two more quick points. Tokens from airdrop projects might be worthless because the project fails, and/or token illiquidity. Hence, keep the champagne on ice but the cork in the bottle! Lol!
I end with a proverb from Niger: Ashes fly back into the faces of those who throws them.
Until next time,
Yogi Nelson
Blockchain & AI Forum 