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Airdrops, A Comprehensive Guide

New to the crypto space? You must have come across the word “airdrops” on social media or from a friend. Yeah, it’s really exciting because it involves receiving free crypto gifts or giveaways from newly launched crypto currencies. Who doesn’t like free gifts? In this guide, I will explain what airdrops mean and the benefits and dangers involved in participating in an airdrop. Read on.

What is an “airdrop” in cryptocurrency?

A crypto airdrop is simply a marketing strategy employed by blockchain-based startups that involves sending tokens to the wallets of crypto traders in order to promote awareness of a new virtual currency. Little amounts of the virtual currency are released to the wallets of active members who participated in the airdrop. It is usually for free or in exchange for a small promotional service, such as subscribing to the page of the company issuing the currency or sharing a post sent by the company.

This is just a tool employed by block chain startups so as to spread awareness and increase ownership of their virtual currency. There have been lots of airdrops organised so far, and there are still several of them piled up for the future. You need to understand everything about aidrops so that you can be able to receive your own portion of the token in your wallet. Below is a guide to understanding crypto airdrops and how they work.

Understanding an airdrop and how it works

To clearly understand, imagine if a new cryptocurrency exchange like Binance were about to launch soon. In order to create awareness and get the attention of crypto traders, they chose to launch their own virtual currency, just like Binance Exchange has with Binance Coin.

In order to promote their exchange, the platform makes public announcements, promising a certain amount of the new virtual currency to be distributed freely to early traders or users. In return, the users will have to register and promote the currency on their social media accounts or various online channels. 

Users who complete these promotional tasks become the participants of the airdrop. The platform will transfer the promised amount of its virtual currency to the winners of the airdrop once the airdrop date arrives. 

Note that completing all the promotional tasks will not guarantee you winning the airdrop because it is a giveaway and the active participation volume is usually huge. Receiving an airdrop involves a transfer of cryptocurrencies, so recipients are required to have crypto wallets. The most popular cryptocurrency wallet is the Trust Wallet. Upon registration for airdrops, platforms usually request that participants submit their wallet address.

If you win, the company or platform will transfer the promised cryptocurrency to your wallet address.

The advantages and disadvantages of an airdrop

Just like with every other regular business, there are good ones and bad ones. Likewise, there are good and profitable airdrops and also bad airdrops (scams). You can read about how to secure yourself in the crypto sphere.

The Advantages of an Airdrop

You will agree with me that launching an airdrop is one of the best marketing strategies out there for new crypto startups. For a currency to succeed, it needs to be widely used and promoted. And this can be achieved by making cost-incurring efforts to promote and encourage people to spread the word. As the participants spread news about the platform on all their social media platforms, sooner or later, the platform starts going around the crypto ecosystem, increasing publicity and awareness.

In most cases, the platforms issuing the airdrops are the major gainers from the airdrops. But winners of the airdrops can also see significant profits in the future if the currency rises.

Disadvantages of an airdrop 

There have been several warnings about cryptocurrency airdrops that can be pump-and-dump schemes. This means that the owners of the currency could be manipulating the price actions in order to make quick profits.

In some cases, the recipients of the airdrop might start selling off the allocated currency even before it becomes tradable. If a large number of sales are recorded, the value of the currency will drop, and this can damage the company’s prominence or authority. 

If the promised amount is way too high or if users are asked to send some crypto currency in order to participate in the airdrop, it is best to stay clear from such airdrops as they may be scams. If you must participate, make sure to carry out proper research about the project and what it’s all about.

Conclusion

The major reason for airdrops is clearly to promote a new platform or a service among the crypto community. It is just like the marketing of a regular startup business. I hope this article has made you understand what the term “airdrop” means.

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