In this article, we’re going to explore the definition, operations, and utility of crypto airdrops. Also, we will look at some of the top crypto airdrop methods available for businesses and projects. Plus, we’ll explore some of the popular historical crypto airdrop campaigns. Finally, we’ll evaluate the pros and cons of crypto airdrops and the potential value they could bring to both businesses and token holders.
For readers who have yet to invest in crypto, see our Crypto for Beginners course at Moralis Academy first! Here, we show students step by step how to create an exchange account, trade, and store assets safely offline. Alternatively, save our “Who is Satoshi Nakamoto?” article for further reading on blockchain’s pseudonymous developer(s)!
What is a Crypto Airdrop?
Arising from the developments in blockchain over recent years, a crypto airdrop is a form of distribution and marketing method specific to the cryptocurrency industry. Moreover, there are several different types of crypto airdrops. Akin to receiving vouchers to spend in a store, a crypto airdrop involves an application or platform sending free cryptographic assets to certain wallet address owners. Also, different crypto airdrop models may require users to carry out specific actions to receive their coins. That said, an airdrop of assets to holders is always free. In turn, this often aids in promoting and adopting up-and-coming crypto projects.
The first crypto airdrop was an Icelandic project, Auroracoin, in 2014. The project gave every Icelandic citizen, with a permanent resident ID, 31.8 AUR coins. However, due to minimal strategic planning, the market cap value of the project fell to zero within months. This left the assets worthless. Nevertheless, Auroracoin introduced an unconventional and novel type of guerilla marketing method to be used by countless other projects in the future. Accordingly, the first crypto airdrop website launched in 2017, AirdropAlert.com, aggregating all up-and-coming crypto airdrop events on one site.
The rise in popularity of the crypto airdrop model mainly depends on its advantages for projects and asset holders. It is increasingly commonplace for new projects to airdrop targeted token holder communities with free assets to generate buzz ahead of an anticipated launch. Moreover, platforms may choose to use the crypto airdrop model to reward a certain level of token holder loyalty.
What is a Crypto Airdrop – Different Crypto Assets
Auroracoin (AUR) was the first crypto asset using the airdrop distribution model. As a cryptocurrency, the idea of AUR was to replace the use of traditional fiat in Iceland. Although this particular project didn’t work out, it is mainly cryptocurrencies that are airdropped to users. Furthermore, cryptocurrencies can be of multi-utility value, offering governing rights or access to exclusive content on project platforms. In addition, most cryptocurrencies are tradable and exchangeable for alternative cryptocurrencies or fiat currencies. In turn, users can sell their airdropped assets if they so choose.
Another more recent type of cryptographic asset used in the crypto airdrop models is non-fungible tokens (NFTs). NFTs represent unique pieces of data on the blockchain and, unlike fungible cryptocurrencies, are not interchangeable. As such, with surging popularity, NFTs are becoming one of the hottest crypto trends. Especially with NFT projects offering NFT airdrops to users ahead of launch. Also, some NFT gaming platforms airdrop users NFT assets rewarding them for their loyalty and adoption of the project.
Different Types of Crypto Airdrops
Now we’ve answered the question, “what is a crypto airdrop?”. Below, we’ll explore the different types of airdrop models used.
Standard Crypto Airdrop
A standard airdrop is often the model most people think of when they see the phrase “crypto airdrop.” As such, a standard crypto airdrop is available to anyone. Users may receive free crypto assets native to a platform for carrying out small tasks. For example, this could be creating a new account or signing up for a newsletter.
While the standard airdrop model is theoretically available to anyone, certain platforms or projects may require KYC (know your customer) verification prior to receiving assets. This could involve users giving personal details ranging from an email address to uploading proof of residence. Different projects will outline their own specific parameters.
The bounty airdrop model is specifically for airdropping crypto assets to users actively seeking to promote or support a blockchain project. This extends to various activities, from finding any bugs in the code to sharing content on social platforms. In addition, users could receive assets through the bounty crypto airdrop model for simply following the project on social media.
Although this is not a very common distribution model of platform tokens, it aids in incentivizing the community to share in the marketing activities of a project. Plus, with the bounty airdrop model, users can often earn more tokens through referrals of friends and family.
This particular crypto airdrop model operates as the name suggests. With an exclusive airdrop, new project tokens are sent out to an exclusive number of participants. Often, this is the case for early adopters of a platform before the project releases a token. With a community-centric approach, exclusive airdrops are popular for existing platforms aiming to generate hype around a token launch while simultaneously rewarding loyal users.
Furthermore, users of a project do not need to do anything more than simply interact with the platform and its protocols. The exclusive airdrop distribution model was used by some of the leading exchanges and aggregators, which we’ll discuss further in the article.
“Hodl” is a common saying among the crypto community as an abbreviation of “hold(ing) on for dear life.” This is in reference to not selling a crypto asset, particularly in times of a bearish market. Accordingly, projects can use a holder airdrop method to distribute freshly minted platform tokens to long-term holders.
Often, projects will airdrop their cryptocurrency tokens to holders of other tokens using the same blockchain. Alternatively, as projects expand their operations, they can use the hodler crypto airdrop model to try and onboard existing users to their new platforms. For example, long-standing NEM’s XEM coin holders received free Symbol (XYM) tokens upon its public Symbol blockchain launch. Another popular hodler airdrop example is the crypto airdrop of HEX tokens to Bitcoin and Ethereum wallet holders.
Hard Fork Airdrop
As the least common crypto airdrop model, projects may choose to use the hard fork airdrop model to offer coin holders the introduction of new blockchain assets during an update. In short, a hard fork update is when a blockchain project “splits” in terms of how it operates. The chain splits when a new update is implemented, and a team cannot decide on one way forward. One chain continues to use its original asset. Then, the new chain will develop a new coin adhering to the new blockchain protocol standards.
With a hard fork airdrop, holders of the original coin usually receive an equal amount of a chain’s new coin. These will be directly deposited into users’ wallets.
Popular Crypto Airdrops
Some of the most successful decentralized finance (DeFi) platforms have used crypto airdrops to distribute their native tokens. Some of the largest crypto airdrops in history include the likes of Stellar, dropping $125,000,000 million worth of XLM tokens. Also, the Bitcoin fork project, Bitcoin Cash (BCH), airdropped tokens to holders that peaked at around $4,300 per BCH. Plus, the smart contract mining project, Minereum, airdropped 32,000 native MNE tokens to each of the 1,197,634 million genesis addresses it collected. The wallet address owners who held on to their free MNE tokens would have seen their MNE token balance peak at around $440,000.
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On September 17th, 2020, Ethereum’s leading DEX, Uniswap, surprised its early adopters with a crypto airdrop of its ERC-20 governance token, UNI. For approximately 250,000 early-bird users of the pioneering DEX and automated market maker (AMM), the project distributed 400 native UNI tokens. During the time of the airdrop, the assets were worth around $1,400. This was one of the most significant initial values of a crypto airdrop, with Uniswap setting aside $350 million for the airdrop campaign.
Using the exclusive airdrop model, the Uniswap airdrop event was notable for two reasons. First, Uniswap was one of the first projects to introduce a retroactive distribution model. Until 2017, crypto airdrops were usually used as a marketing tactic ahead of a project launch. However, as the Uniswap project began to expand, the project released a governance token, ensuring decentralization and direction from its community. In addition, the dollar value of the UNI token airdrop at the time was significant. Most projects until this point were airdropping users a more modest token value amount, which then often grew in dollar value as the project gained adoption.
Several months following the Uniswap airdrop on Christmas day, 2020, the leading exchange aggregator, 1inch, quietly made its first 1INCH token airdrop to early platform users. Within 24 hours, over 26,000 wallets had claimed more than 67 million tokens, worth around $120 million at the time. As a result, some of the frequent early crypto traders on the aggregator became crypto millionaires overnight!
Following the success of its airdrop, 1inch decided to carry out another one to new users (and users eligible for the previous airdrop) commemorating the Chinese New Year. As such, the platform airdropped more than 15 million additional 1INCH tokens to users, worth approximately $83 million at the time.
Ethereum Name Service (ENS)
Ethereum Name Service (ENS) offers decentralized human-readable wallet names such as “myname.eth” to replace the long string of random characters (e.g., 0x9ejf8…). Launched in 2017, ENS sells a variety of domain names as non-fungible tokens (NFTs) that users can truly own as digital assets. In 2020, following continuous growth in adoption and popularity, the company decided to incorporate aspects of decentralization into its infrastructure. Accordingly, the project launched a decentralized autonomous organization (DAO) alongside a native ERC-20 governance token, ENS. Then, the project airdropped a significant portion of ENS tokens to early-bird buyers of ENS domain names.
With a maximum total supply of 100 million tokens, Ethereum Name Service (ENS) designated 25% of its token supply to the airdrop distribution. A maximum of 789 tokens could be received with each ENS domain purchase. Further, the number varied depending upon the length of the registration time of each domain. However, 137,000 addresses were eligible, with many seeing a four or five-figure value crypto airdrop of free tokens.
Pros and Cons of a Crypto Airdrop
Now we understand the different types of crypto airdrop models and some of the most popular. Thus, we’ll explore the pros and cons of a crypto airdrop.
- If it is strategically coordinated, a crypto airdrop can be a relatively low-cost marketing campaign for businesses and blockchain projects.
- A well-timed crypto airdrop has proven to be a successful fundraising method and brand-awareness tool.
- Tasks for users to receive a free crypto airdrop are often incredibly arbitrary, requiring minimal effort (e.g., clicking “share” or “retweet”).
- For airdrop recipients, everyone enjoys receiving free crypto!
- Airdrops on some centralized exchanges and certain decentralized platforms are subject to KYC documentation requirements.
- Users may have to pay a gas fee to access their airdropped assets on very few occasions.
- Projects must strategically plan for a crypto airdrop launch to avoid an immediate sell-off of airdropped tokens. Moreover, businesses need to find the delicate balance of the number of tokens to give away. Too little may not make enough of an impact, while too many may entirely dilute the asset’s value. Historically, a company has actually miscalculated to the point of running out of tokens! Decentralized content storage provider, U Network, was subsequently forced to buy back some of its tokens from airdrop participants.
- As with many different aspects of the cryptocurrency industry, due diligence and research are integral. Some crypto airdrops are potential scams designed to gain users’ private keys and personal details. Although this happens few and far between, it is always worth doing your own research around the project of a token. Plus, make sure to verify the token contract address on a block explorer for the relevant blockchain.
What is a Crypto Airdrop – Summary
So, what is a crypto airdrop? Anytime someone asks you that, you now have a wealth of material to offer a confident answer. Overall, crypto airdrops are a form of marketing and distribution model to send crypto assets to specified wallet addresses for free. However, the crypto airdrop model comes in different forms, accommodating relevant needs for businesses and projects.
Crypto airdrops are just one of the many ways blockchain can introduce practical novelties to businesses. For more information on the value and utility of blockchain across industries, see our “Proof of Ownership Explained” and “Importance of Web3.js” articles next. To learn more on a deeper level how to incorporate blockchain into existing business IT systems, check out the Blockchain Business Masterclass course. At Moralis Academy, students can become blockchain certified and confident leaders of a team of developers. Alternatively, to educate yourself further on standard industry phrases, our “Crypto Terminology” article is an excellent beginners’ guide!