What Are Airdrops?
By: Coinbundle Team
Tags: Beginnerscoinbundle, Cryptocurrency, Investing, Blockchain, Airdrop

Have you ever participated in an airdrop before? No, not the act of dropping supplies and materials from an aircraft, but a crypto airdrop. These are actually pretty important events across the crypto world and can even end with an increased amount of wealth in your pockets, if you do it right of course. You’d be surprised at how often they take place, which is why many beginners know what they are but not what they do. Let’s discuss what airdrops are, how they work, and how you can get involved.

This is not financial investment advice.

This article will touch upon key aspects of how airdrops function.

In this article

Terminology

Airdrop: In the cryptocurrency world, an airdrop refers to a procedure through which a blockchain project distributes free tokens to community members. To qualify for this free gift, one may need to perform certain tasks that include posting on social media forums, connecting with a particular member of the blockchain project, or writing a blog post.

Blockchain: The easiest way to understand blockchain is to think of it as a fully transparent and continuously updated record of the exchange of information through a network of personal computers, a system which nobody fully owns. This makes it decentralized and extremely difficult for anyone to single-handedly hack or corrupt the system, pretty much guaranteeing full validity and trust in each exchange of information.

ICO: An Initial Coin Offering (ICO) is the cryptocurrency space’s rough equivalent to an IPO in the mainstream investment world. ICOs act as fundraisers of sorts; a company looking to create a new coin, app, or service launches an ICO. Next, interested investors buy in to the offering, either with fiat currency or with preexisting digital tokens like ether. In exchange for their support, investors receive a new cryptocurrency token specific to the ICO. Investors hope that the token will perform exceptionally well into the future, providing them with a stellar return on investment. The company holding the ICO uses the investor funds as a means of furthering its goals, launching its product, or starting its digital currency.

Token: Crypto tokens are a special kind of virtual currency that reside on their own blockchains and represent an asset or utility. For example, one can have a crypto token that represents x number of customer loyalty points on a blockchain that is used to manage such details for a retail chain. There can be another crypto token that gives entitlement to the token holder to view 10 hours of streaming content on a video-sharing blockchain, and so on.

Wallet: A crypto wallet is a software program where coins are stored. To be technically accurate, Bitcoins are not stored anywhere; there is a private key (secret number) for every Bitcoin address that is saved in the Bitcoin wallet of the person who owns the balance. Bitcoin wallets facilitate sending and receiving Bitcoins and give ownership of the Bitcoin balance to the user.

Familiarize yourself with these terms to gain a better understanding of how airdrops function.

What Are Airdrops?

As we mentioned earlier, an airdrop refers to a procedure through which a blockchain project distributes free tokens to community members. These community members can get involved by interacting with the project in various ways. For many blockchain startups, airdrops present a compelling way to generate awareness and build up a strong user base before the actual project goes live.

Essentially, if you hold on to one type of coin, you are eligible to claim other types of coins or tokens because you were holding the parent tokens on which the airdrop is being done. Thus, the concept is called an “airdrop” because free droppings of coins are distributed to those who hold tokens of the project that is going through with it.

Even airdrops with absolutely no strings attached can be a cost-effective marketing tool for up-and-coming cryptocurrency projects. If someone suddenly owns a new token, he or she will be more likely to follow its development and perhaps even spread the word. Now that you know what an airdrop is, let’s go over why they happen in the first place.

An airdrop refers to a procedure through which a blockchain project distributes free tokens to community members. All you have to do is interact with and follow the project t stay up to date with their airdrop plans.

Why Do They Exist?

Airdrops can be employed for a number of different reasons, but mainly to generate awareness for the blockchain project that is running it. One of the more reasonable motives to carry out a free airdrop from the company’s perspective is to evenly distribute their token supply. If airdrops help to evenly circulate these tokens, there’s less of a possibility that someone can hold all of them and centralize all of the power. Afterall, cryptocurrency is tied to decentralization when it comes to how it functions.

Another reason why airdrops exist is to reward any early investors who have been supporting the project since the beginning. What better way to reward your most loyal fans by dropping some free tokens or coins their way? On top of that, it always generates a ton of awareness and hype for people who may be interested in getting involved with blockchain startups.

More than anything, airdrops give the project a chance to interact with the community that it’s been building up. There aren’t many — if any — negatives from executing an airdrop, so it’s actually a pretty cool thing to be a part of if you have the opportunity. When advertising an airdrop, social media accounts are utilized on all fronts to generate leads, which is why projects tend to gain more followers prior to the actual airdrop. Overall, these airdrops have the potential to help out the blockchain project and its loyal followers, providing a win-win situation for everyone involved.

Airdrops are employed for a number of reasons including generating awareness, interacting with the community, and rewarding early investors of the project.

How To Participate

Participating in an airdrop is not too hard if you have all the necessary tools to succeed. Let’s go step by step on how you can take advantage of future airdrops.

Step 1: Create a new Ethereum wallet (MEW). Make sure you store all your passwords in a secure place.

Step 2: Set aside your personal social media accounts and create new ones solely for keeping up with airdrops. This is mainly for Twitter and Telegram but can also be used for emails.

Step 3: Once an airdrop has taken place, Click on “Tokens (Ethplorer.io)” under “Transaction History” in your MEW wallet or go directly to https://ethplorer.io and input your public MEW address.

Step 4: Through your MEW, click on “Tokens (Ethplorer.io)” under “Transaction History” and then click on a token you have received which has yet to be added to your MEW. Locate and copy the token’s contract address, symbol and decimals. These fields of data will then be input into your MEW.

Step 5: In a separate tab or page, open MyEtherWallet and enter your wallet then click on “Add Custom Token” under “Token Balances.” Input the contract address, symbol and decimal number located on the Ethplorer page and click save. It is crucial for the data points to match exactly.

Conclusion

We really hope that didn’t all just airdrop over your head, since it’s actually worth understanding for all crypto beginners. Irrespective of how interested you are in cryptocurrency, you should make sure that you understand how airdrops work and can explain it to someone who may not know what that exactly entails. From the business side to the consumer side, airdrops provide cool opportunities to everyone involved in the innovative process of distributing tokens.

Would you like to stay updated on all upcoming airdrops? Check out websites like https://airdropalert.com & https://topicolist.com/airdrops/ to stay current on the latest airdrop news. As always, happy investing and good luck with your airdrops!