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Explained: What Are Crypto Airdrops And How Do They Work?
Investing Basics
August 29, 2022

Explained: What Are Crypto Airdrops And How Do They Work?

In the world of cryptocurrency, airdrops are free tokens or coins distributed by blockchain projects or companies. Airdrops are usually conducted to promote awareness of a new virtual currency and to increase awareness. Unlike an ICO (Initial Coin Offering), where you have to pay to receive tokens, airdrops are free. Want to find out more about airdrops? Let’s take a detailed look at what crypto airdrops are, how to get them, how they work, and the benefits and risks involved.

What are crypto airdrops? 

Airdrops are a genius way to promote a new cryptocurrency project. Think about it, who wouldn’t want to take advantage of free coins? An airdrop has the power to create awareness and get people to start using a new currency, as well as build a community of users and supporters.

To be eligible for an airdrop, you must hold a specific cryptocurrency. For example, you might need to have Bitcoin (BTC) to qualify for an airdrop of a new altcoin. 

Crypto investors and traders can take advantage of airdrops to increase their holdings of a particular cryptocurrency. If you hold BTC and are eligible for an airdrop of a new altcoin, you will receive the airdropped tokens for free. You can then sell these tokens to increase your profits. 

Tips for Getting Crypto Airdrops

There are a few different ways one could possibly get crypto airdrops, the most common one is to hold a specific cryptocurrency. It’s simple: own the coin to be in the running for airdrops.

There’s another way, however, which involves participating in airdrop campaigns conducted by blockchain projects or companies. These campaigns usually require you to perform specific tasks, such as sharing a project’s post on social media or subscribing to a newsletter. 

You can also get airdropped tokens by being an active user of different cryptocurrency services, products, platforms, and blockchains. These programs usually require you to complete tasks such as bug testing or writing articles about the project. 

How do crypto airdrops work? 

In an airdrop, the distribution will usually happen on the cryptocurrency's blockchain – so if you provided your BTC address to an airdrop of a new altcoin, the airdropped tokens will be distributed on the BTC blockchain. 

To receive an airdrop, you will need to provide your cryptocurrency wallet address. Once the airdrop is over, the team behind the project will distribute the tokens to all eligible addresses. 

You Must Know: 

You should never give away your private keys to anyone. Private keys should be kept safe and secure at all times. If you lose your private keys, you will lose access to your cryptocurrency.

What are the benefits of participating in a crypto airdrop? 

The primary benefit of airdrops is that they help increase the awareness and adoption of a particular cryptocurrency or blockchain project. By giving away free tokens or coins, airdrops can help generate buzz and interest in a project which might otherwise have gone unnoticed. 

Airdrops can also be used to distribute tokens to a large number of people quickly and efficiently. They’re an excellent way to build a community around a project. 

If airdropped tokens are distributed to a large number of people, it can create a group of users who are invested in the success of the project. This can be valuable for several reasons, including helping to promote and market the project and providing feedback and suggestions for improvement.

We launched our own NFT collection, in early August, called BOTS ALPHA CLUB. All our NFT owners get various benefits, and exclusive airdrops are one of them! Find out more about the community-focused NFT collection on our dedicated website: https://nft.bots.io/  

What are the risks of crypto airdrops? 

There are a few risks associated with crypto airdrops; as you’d expect, it’s a particularly risky move for companies. Here’s why:

Airdrops can be a significant drain on resources.

It’s true; they often require time and effort to organize and execute. There is always the risk that the airdropped tokens will not be used or adopted by the recipients, which would effectively make the airdrop a waste of time and money. 

Fraudsters exploit airdrops.

A fraudster could create a fake cryptocurrency or blockchain project and then airdrop free tokens to unsuspecting users to get them to invest in the artificial project. 

Once the victims have invested their money, the fraudster will then take off with the funds, leaving the victims out of pocket.

Airdrops can have tax implications.

In some jurisdictions, airdrops may be considered a form of income, which means that taxes may be payable on the value of the tokens received. Therefore, it is essential to be aware of the tax implications of participating in an airdrop before doing so.

Airdrops can be a great way to increase the awareness and adoption of a cryptocurrency or blockchain project. And like any investment option, there are a few risks associated with crypto airdrops. Companies and individuals should be aware of these before participating in a crypto airdrop. 

Disclaimer: 

This blog is for educational purposes only. The information we offer does not constitute investment advice. Please always do your own research before investing. 

Any views expressed in this blog and by BOTS do not constitute a recommendation that any particular cryptocurrency (or cryptocurrency token/asset/index), portfolio of cryptocurrencies, transaction, or investment strategy is suitable for any specific person. 

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