What Are Crypto Airdrops and How Do They Work

A crypto airdrop refers to a marketing strategy used by blockchain-based projects to distribute free tokens directly into users' crypto wallets. This is done to garner attention and increase the user base for their platforms and products.

Types of Crypto Airdrops

There are several common types of crypto airdrops:

Standard Airdrop

In a standard airdrop, users only need to sign up for an account to receive free tokens, with no other requirements. For example, the decentralized exchange RabbitX rewarded new users this way.

Bounty Airdrop

Bounty airdrops require users to complete simple promotional tasks like sharing posts or following social media accounts. For instance, food NFT platform One Rare had users tag friends and add accounts to watchlists for a chance to win $75,000.

Holder Airdrop

Holder airdrops are for users who already hold a platform's tokens above a set threshold. When Ethereum Name Service (ENS) launched its governance token, it airdropped it to ENS domain name holders based on how long they held their domains.

Hard Fork Airdrop

These occur when a blockchain forks into two separate entities. The new fork, ETHPoW, airdropped coins to Ethereum token holders during its split.

Exclusive Airdrop

Exclusive airdrops reward engaged community members despite wallet size. When Uniswap launched, it surprised users by gifting 400 UNI tokens to each active user.

Raffle Airdrop

If overwhelming demand exceeds supply, startups use raffle airdrops to randomly select recipients. Projects like Revv, Wolf Game, and Phantom Galaxies have experimented with giving prizes out this way.

How Crypto Airdrops Work

The process generally follows several key steps:

1. Companies announce an upcoming airdrop and publicize it across forums and social media

2. Interested users sign up and submit wallet addresses

3. On the set date, a snapshot identifies eligible recipients

4. Smart contracts automatically distribute tokens into recipients' wallets

5. Blockchain transactions are published transparently

The main goal is to incentivize longer-term platform usage rather than quick selling. Strong projects with compelling utility for tokens generally see the best results.

Notable Examples

Bitcoin Cash

As a result of forking from Bitcoin, Bitcoin Cash airdropped 1 BCH token for each BTC owned in August 2017. At its peak value, each BCH token was worth over $4,300.

Stellar

In 2018, Stellar partnered with Blockchain.com to airdrop $125 million worth of XLM tokens to millions of wallet users to drive adoption. This was one of the largest token giveaways ever.

Uniswap

In 2020, over 250,000 active traders on decentralized exchange Uniswap were surprised to receive at least 400 UNI governance tokens each. The news created a frenzy that drove UNI up 160% in days.

Ethereum Name Service (ENS)

ENS has done multiple airdrops to reward engaged community members. In 2021, domain name holders received tokens based on the length they'd held their ENS usernames.

Looks Rare

This NFT marketplace stirred buzz when it airdropped tokens to OpenSea users who had traded before. The team later drew backlash when they sold their allocation, tanking value 15%.

ETHPoW

When Ethereum merged to proof-of-stake, it effectively forked off miners who wanted to keep proof-of-work. New chain ETHPoW airdropped tokens 1:1 to ETH holders at the time to gain support.

I've included a diverse mix of influential historical airdrops that showcase different types and impacts. Please let me know if you would like me to detail any other specific examples!

Risks and Prevention

Users should be wary of fake airdrops seeking to steal wallet keys or rug pulls that lack real utility. Check security measures, fee policies, and roadmaps carefully before investing further in any unknown project.

Conclusion

When executed properly, crypto airdrops can be an innovative user acquisition and promotional tool for blockchain platforms. As with any nascent technology, risks exist, but a basic grasp of best practices helps identify quality opportunities.