What Is Airdrop?
Also known as: Token Airdrop, Crypto Airdrop, Free Token Distribution
In short
An airdrop is when a crypto project distributes its tokens for free to wallet addresses that meet certain conditions. It is usually done to gain visibility, reward early users and spread token ownership among a wide audience.
Airdrops are organized in different ways. Some distribute proportionally to everyone holding a coin on a certain date, while others give small amounts in exchange for social media tasks. The type that has drawn the most attention in recent years is the retroactive airdrop, in which wallets that used the protocol before its token launched are rewarded after the fact. Uniswap's distribution of UNI to its past users in 2020 is one of the well-known examples of this model.
With airdrops, projects aim to spread governance power among a broad community and increase usage of the network. However, since users who create many wallets just to collect rewards (Sybil behavior) can undermine the fairness of a distribution, many projects apply filters to weed out such addresses. In some countries, tokens received through an airdrop may be considered taxable income.
Scams carried out under the name of airdrops are common. Free token offers that ask you to connect your wallet to a fake site, sign an unknown transaction, or share a private key or recovery phrase can result in stolen funds. Real airdrops never ask for a private key; project information should be verified through official channels.
Last updated: · This content is for information purposes only and is not investment advice.