What Is A Crypto Airdrop?
A cryptocurrency airdrop is a free distribution of tokens to a wallet to raise awareness, supply, and liquidity for a project.
Small portions of the circulating supply are “airdropped” to various wallets. These can be random, although usually requiring the completion of a small task such as following an account, retweeting, signing up to an email list, etc. This markets the project even further.
How Do Crypto Airdrops Work?
Standard Airdrops require you to create an account of sorts or sign up to a mailing list. In turn, you will receive an email eventually describing further steps on possibly receiving the tokens.
Bounty Airdrops will require users to complete a task/s, such as a promotion or interaction of sorts.
Holder Airdrops require users to have above a certain amount of a token, the tokens are distributed in ratio to your holding size. A snapshot of the blockchain ledger is typically taken prior to the announcement to prevent users from buying the token solely in the hopes of receiving the airdrop.
Exclusive Airdrops are distributed to members, subscribers, followers, etc. of a certain project. There are typically terms you must comply with to be eligible and they will usually be following the same process of taking a snapshot prior to the announcement.
Are Crypto Airdrops Safe?
Although the first cryptocurrency airdrop occurred in 2014 with Auracoin[1]Airdrop Alert – The Very First Crypto Airdrop In Blockchain History, they have only been widely adopted within the last few years. This means they have been a target for hackers and fraudsters to do their thing. Data and private key theft through fraudulent pages and links, dusting scams, and referral scams run rampant in the cryptocurrency world – and through airdrops.
Some developers will also airdrop tokens in the hopes to pump a token before they sell it on for a large profit. Legitimate airdrops will never ask for a prior investment into the project.
Despite this airdrops are relatively safe, although due diligence is a must. Check the legitimate sites, never click any questionable links, and never hand out your private keys.
Are Airdrops Taxable?
Airdrops are generally taxed as income, based upon your personal tax bracket.[2]CoinLedger – Airdrop Taxes 101 Although this is dependent on what country and state you live in. An airdrop should be taxed at the market value of the token at the time of receiving the airdrop.
What Are NFT Airdrops?
NFT airdrops work in the exact same way as cryptocurrencies do, just with a non-fungible token instead. This expands the scope of airdrops, while still promoting and building hype around a certain project.
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