Airdrops are a central feature of the cryptocurrency space. The first time I participated in one I didn’t even fully understand what an airdrop was or the value of the tokens I had received in my wallet. I was brand new to the cryptospace and had read something on a social media site about a company giving out “free ETH”. I followed the link and provided my ETH address. In actuality, they weren’t giving out free ethereum. There were airdropping their token and the amount they were giving away was priced to cost .5 ETH during their upcoming Initial Coin Offering (ICO). I received the tokens in my wallet but it wasn’t until a while later that I fully understood I had received an ERC20 token that could eventually be worth something on a crypto exchange. Since then I have participated in hundreds and hundreds of airdrops and received well over 500 different tokens and coins through these campaigns. The point of this article is to share my experience navigating the world of cryptocurrency airdrops, including how I learned to profit from them and some of the scams I encountered along the way.
What are Airdrops?
The concept of an airdrop is simple. It involves a business “dropping” small amounts of free crypto into individual wallets. Being included in an airdrop usually involves registering through a google form, a Telegram bot, or directly on a project’s website. Often an airdrop campaign will also offer the chance to get additional tokens for referring others via a unique referral link that can be posted on social media. The referral system creates an incentive to share the airdrop with as many people as possible and many people hear about airdrops through individuals sharing their personal link.
A subtype of airdrop known as a“holders’ airdrop is when a token is airdropped to wallets that already hold another type of token or coin. For example, there was recently an airdrop of the Ontology token to holders of NEO. Holders’ airdrops are typically not something you have to register for. They are done by taking a snapshot of a blockchain to see which wallets are holding what tokens. In what follows, I am going to focus exclusively on non-holders’ airdrops. This is because holders’ airdrops are not relevant to most crypto beginners. In addition, they take no work to find and no action on the part of the recipient is required to receive them.
What is the Point of an Airdrop?
There are two main reasons a blockchain start-ups and other cryptocurrency projects would hold an airdrop. The first is to generate publicity for an upcoming ICO or token sale. Airdrops are often the first phase of a larger marketing campaign and can be effective in generating initial buzz around a project. The referral bonus structure also motivates individuals to further spread the word, helping provide low cost advertising for the project. Secondly, an airdrop campaign is a good way to build a loyal community around a project, even if it is not holding an ICO. I’ve seen many examples of community-based crypto projects that are not profit-driven use the airdrop model as a way of building community and awareness of their goals.
Where to Find Airdrops?
The first step in profiting from airdrops is finding them. Not long ago, one had to be a frequenter of crypto sites, such as Bitcointalk, to hear about new airdrops. You had to be a bit of a crypto insider. Increasingly, however, airdrops are easier to find. This is largely due to the emergence of dedicated airdrop websites and channels on social media like Telegram and Twitter that track airdrops and post them daily. These aggregating sources make finding airdrops easier, and those who maintain them benefit from people using their referral links.
How Profitable Are Airdrops?
Every once in a while an airdrop can be hugely profitable. The best example in my experience was a recent airdrop of Oyster Pearl. I received over 2000 PRL, which eventually shot up in value to over $5 per token. I sold just under half of my holdings. A slightly more common, yet still not typical, result is like the airdrop I received of Polymath. I got 250 POLY, which has since hovered in value between $90-$225. More often than not, however, the amount of tokens dropped is so small it is barely worth the gas to send them to an exchange. Many tokens will also never be worth anything at all, either because the project wasn’t serious or it just fails as a business.
One factor that can complicate profiting from an airdrop is when a project that has airdropped tokens later conducts a token swap. A common reason this would happen is that the project held an ICO with tokens built on the ethereum blockchain with the goal of raising funds to develop a new blockchain and eventually migrate the token onto it. Once the new token/coin is ready the project will announce a “swap”. In the best case scenario, it will simply take snapshot of your wallet and send you the new token directly. Other times, the project asks token holders to “self-swap” by sending the old tokens to a smart contract that is set up to send back the new ones. Once a token swap has occurred the old token becomes worthless. To take advantage of a self-swap requires keeping tabs on projects through social media and burning a bit of ETH in gas.
Something to consider when beginning to venture into the world of airdrops is there are a number of scams out there. Below, I describe the most common airdrop scams I have come across in my time in the cryptospace and how you can avoid them.
Not all airdrops are focused on building value or community. In a dump airdrop, the goal for the developers is to generate short-term buzz about a token so that people will be eager to buy it when it hits exchanges. Once it does, the developers quickly sell (dump) all their tokens for a tidy profit. Once they have dumped as many as possible they simply disappear and the project becomes inactive. Arguably, this is not a straight up scam since the token is real. However, the goal is to create a situation where the token developers can benefit financially from dumping tokens that they have no plans to develop further.
A good example of a dump airdrop was EDOGE. The EDOGE developers claimed to be trying to breathe new life into Dogecoin by creating a version on the ethereum blockchain. The project sent 5 million EDOGE to each person who registered their wallet for the airdrop. The developers succeeded in creating a buzz, but when the token hit exchanges the airdrop recipients discovered their tokens were locked meanwhile tens of millions of EDOGE was being dumped on exchanges. The strong suspicion was that it was the developers selling off all the tokens they had held back for themselves. The price of EDOGE quickly plummeted to a point where it became essentially valueless. The project was abandoned and its social media accounts went dead.
It can be hard to spot a dump airdrop but a good approach is to spend a bit of time with the project’s website and whitepaper. Typically, those behind a dump airdrop will not put much time into either and the superficiality will show through. To not lose money in a dump airdrop, simply do not use your own funds to buy tokens.
Private Key Scams
Private key scams are fake airdrops designed to trick you into giving out the private key to your wallet. A legitimate airdrop asks participants for their wallet’s public address, as well as other info, such as an email address and social media account handles. A private key airdrop scam, however, asks for the private key to your wallet as well. Those who don’t fully understand how a crypto wallet works and/or how little you can trust people on the internet are most likely to fall victim to this scam. If ever asked for a private key, be it on a form, a website, or through direct messaging, do not give it out. There is no reason a private key is needed for an airdrop. The only reason someone would ask for it is because they want to steal whatever is in your wallet.
Another type of scam airdrop is designed to collect your personal information, either to sell to third parties and/or to use for future phishing attempts. These scams claim to be giving away tokens but the projects are fake the goal is just to get your email address, wallet address, social media info, etc. While these are a bit less dangerous than the private key scams, they are still very risky. I participated in some early on in my crypto career and noticed a lot of phishing emails started coming through my inbox. The best way to avoid an information trolling airdrop is to do a bit of research into the project that is apparently behind it. Most do not even have a website, let alone a whitepaper or social media presence. If a project has no website or whitepaper, any airdrop it is advertising should be avoided.
Bait and Switch
I’ve also encountered what could be called a “bait and switch” airdrop. This scam lies in tricking you into signing up for other things so that someone else gets referral credit. Sometimes the referrals are for other airdrops. In this case, you will be asked to sign up for additional “partner” airdrops. The reality is these are not partners. The airdrop form is simply a clever way for the scammer to generate referrals. Another version of this scam asks you to sign up to a specific crypto exchange (so the scammer can benefit from a referral). Yet another version I’ve seen tries to get you to join pump and dump groups, often on discord or Telegram. In these cases, the common denominator is the airdrop is fake and the form just a way of getting you to sign up for other things.
Bait and switch airdrops can be tricky to spot because legitimate airdrops do ask you to join social media accounts or register on their website. A sign an airdrop is a bait and switch is that it will ask you to sign up for other projects, or create accounts on crypto exchanges for no clear reason, or to join a discord channel or Telegram group that is not specifically dedicated to the project supposedly behind the airdrop. Bait and switch airdrops don’t cost anything, they are an annoying waste of time. The best way to avoid them is simply to not participate in any airdrops that ask you to sign up to seemingly unrelated projects or social media channels.
Despite the caveats mentioned above, I think airdrops are a fun way of getting into cryptocurrency and finding out about new blockchain projects, and every once in a while an airdrop can be hugely profitable. My approach is to hold onto to airdrop tokens on the chance that some will become valuable in the future, or at least worth enough during the next major bull market to sell them off for a decent amount of BTC or ETH. Now, I also always take a look at the project behind the airdrop to see if it has any hope of being a success. If the project looks genuinely hopeless, I will pass, no matter how many tokens are being given away.