If you’re an iPhone or Mac user, you may already be familiar with airdropping, a proprietary service in Apple operating systems, introduced in 2011, which can transfer files among supported Apple devices by means of close-range wireless communication. In the age of completely digital financial transactions, it only makes sense that this practice would eventually reach its way to the world of crypto.
What is a crypto airdrop?
As it relates to cryptocurrency, airdrops are largely used as a marketing tool. A FinTech company will send coins or tokens to digital wallets of users in their community to promote their cryptocurrency and to encourage interest and/or further acquisition of said currency. This is perhaps most common when a startup is launching a new coin and wants to drum up a new customer base. In this scenario, the company would send the new token(s) to the wallets of active members of their blockchain community for free, or in the case of a “bounty airdrop” tokens would be sent in exchange for something like retweeting a post sent by the company issuing the currency. The practice is not dissimilar to a company sending out promotional discounts before the launch of their online or brick-and-mortar store, the significant difference being that tokens sent through airdrops can be cashed out in hard currency, perhaps by using a bitcoin ATM, if the user so chooses.
Airdrops can be received by early adopters of blockchain projects or those with existing holdings in other tokens. It can be a great way for a new FinTech startup to set themselves apart and generate interest. In fact, Michael J. Casey, Chair of CoinDesk's advisory board and an advisor at MIT's blockchain research initiative, argued that such marketing is essential if a cryptocurrency is to succeed, saying: "A currency is nothing if it is not widely used. And that can't be achieved unless people make some cost-incurring effort to encourage widespread usage.” If executed properly and successfully, an airdrop of new token(s) is a win-win for both the startup and the customer.
What do prospective airdrop recipients need to know?
As we have written about before on the blog, it is important for all crypto customers to look out for scams, and the same rules apply to staying vigilant against such scams in airdrops. With bounty airdrops in particular, scams have been known to happen under the veil of social media giveaways. Other airdrop scams may include fake airdrops or fake key scams, where nefarious third parties try to get a hold of a customer’s money or private key under the pretense of airdropping a token in return. It is vital that customers never give out private key information or connect their digital wallet to an untrusted party, so be sure to do your research on a particular project to make sure it is legitimate. Always take the temperature of how other investors and leaders in the FinTech space are responding to a potential venture before proceeding further.
You may be saying to yourself: an airdrop sounds great, but how will I know when the next one will happen? Luckily, a simple cursory search in your favorite online search engine should lead you to some websites and newsletters that have aggregated upcoming airdrops, as far as they are known. Even websites like Yahoo! will publish these forecasts. Keeping your financial safety and online security always in mind, airdrops can be a fabulous way to get in on the ground floor of a new currency, and may definitely be worth exploring.