What is airdrop coin? A must-know for beginners exploring airdrops!

Airdrop is a familiar term for many people working in the field of making money online. It is a way to earn high profits, but it also comes with significant risks. In fact, many individuals have lost a considerable amount of money through airdrop coins.

In this article, IPFighter will provide a detailed explanation of airdrop coins, how they work, their common forms, and important tips to help you maximize your opportunities to earn from airdrops.

What is airdrop coin?

Airdrop coin is a method of distributing tokens (digital currency) for free to a group of users with the goal of promoting a specific cryptocurrency project in the cryptocurrency market.

Lucky participants may receive coins, tokens, or NFTs. If the project succeeds in attracting a large number of participants and major investors (“big sharks”), the value of the token can increase significantly, yielding substantial profits for the owner. These tokens can then be sold on exchanges in exchange for fiat money (government-recognized legal currency).

Why do projects have to do airdrops?

The primary goal of a crypto project is to get their coin listed on an exchange—in other words, to make their coin valuable and liquid.

Similar to a money-printing factory, for a currency to have value, it must be widely recognized and used in transactions such as making payments, investing, purchasing goods, paying salaries, or being exchanged for other valuable coins or fiat money.

Airdrops are one way to introduce a new coin to the community. As the community grows, the project can attract more investment capital, increase liquidity, and help the currency gain value, creating the promise of a potential asset before being listed on an exchange.

Of course, there are many strategies to increase a currency’s value, but there’s no denying that airdrops are one of the most effective marketing methods for cryptocurrency projects, yielding significant results.

Popular forms of airdrop

There are various forms of airdrops that users may encounter, but they are typically classified into three main groups: DeFi, NFT games, and testnets.

1. DeFi (DEX, lending/borrowing,…)

In the DeFi sector, airdrops are often used to incentivize users to engage with decentralized protocols.

• Encourage liquidity: Many DeFi projects organize airdrops for liquidity providers. This means that if you add capital to a liquidity pool, you may receive free tokens as a reward.
• Staking and Farming: Some projects also offer airdrops to participants involved in staking or yield farming. By depositing tokens into the platform to earn profits, users can receive additional project tokens as rewards.

2. NFT game airdrops

NFT games are a prominent trend in the cryptocurrency industry, with many game projects using airdrops to attract new players.

• Early game adoption: Early adopters of the game often receive airdrop tokens as an incentive. This encourages users to experience the product during its initial stages.
• Community engagement: Some game projects require participants to complete specific tasks within the game to earn tokens. This fosters interesting interactions between players and developers.

3. Testnet participation and product testing

Another form of airdrop involves inviting users to participate in product testing before the official launch.

• Product feedback: Testnet participants not only receive free tokens but also have the opportunity to provide valuable feedback to improve the product. This input helps the project refine its features.
• Rewards for contributions: Many projects reward testnet participants with free tokens, creating an additional incentive for users to contribute.

Examples of airdrops

There are numerous examples of successful airdrops in cryptocurrency history. These examples not only highlight the effectiveness of airdrops but also provide valuable lessons for users to learn from past experiences.

1. Uniswap

Uniswap is one of the most well-known DeFi projects that conducted a memorable airdrop in 2020. Users who had interacted with the platform before the airdrop received free UNI tokens. This initiative not only created immense excitement within the community but also significantly boosted the platform’s usage.

2. 1inch

The 1inch project is another notable example, offering airdrops to users who had utilized their services. The 1INCH token has since become an essential part of many investors’ portfolios in the cryptocurrency market.

3. Shiba Inu

Shiba Inu serves as an intriguing example in the meme coin category. The project distributed millions of tokens to airdrop participants, effectively increasing brand awareness and capturing significant community interest.

Why is airdrop coin risky?

As you can see, there are many forms of airdrops, requiring strong knowledge and the ability to quickly grasp market information. Without these, you may end up as a small fish surrounded by risks and traps.

1. Opportunity cost

One significant risk is the opportunity cost. You might spend a lot of time researching a project, reading information day and night, and joining communities discussing it. Then, you invest money to participate, building accounts to increase your chances of receiving coin/token rewards. However, when it’s time for the rewards to be distributed, you may not be lucky enough to get chosen.

Even if you do receive rewards, not all airdrop tokens are valuable. Many tokens quickly lose their value after being distributed.
In the end, the time, effort, and money you invested are the biggest costs.

2. Scam projects

An even greater risk is falling victim to scam projects—fake initiatives created by fraudulent groups. These projects often appear well-organized, with seemingly methodical planning, fake investors (who are actually the scammers themselves creating artificial liquidity), and convincing marketing.

When the project collapses, there are no tokens on exchanges, and the team announces its termination, you’ll realize you were one of many victims of the scam. Stay alert and avoid falling for FOMO-driven projects.

To avoid scams, look for these signs of legitimacy:

• Clear information: A trustworthy project provides transparent details about its goals, development team, and the airdrop process.

• Experienced development team: Check if the team is well-known and has a proven track record in the industry. A reliable team increases the likelihood of project success.

• Strong community: Reputable projects often have large, active, and engaged user communities. You can assess this by examining their social media presence and engagement levels.

• Exposure of personal information: Some airdrops require participants to provide personal information, which can be risky. Be cautious of scams that steal your personal data. Instead of receiving rewards, you might find your information misused for malicious purposes.

As a small fish in the ecosystem, you face two options: find some bait and escape quickly or risk being devoured by larger predators. Luck and perseverance are crucial, but so is preparation. If you’re new to airdrops, make sure you are thoroughly prepared before diving into this opportunity to make money.

What do you need to prepare when participating in the airdrop?

To participate in an airdrop effectively, there are a few key things you need to prepare in advance.

1. Cryptocurrency wallet

You’ll need a cryptocurrency wallet that supports the token type issued by the airdrop project. Common wallet options include MetaMask, Trust Wallet, and Ledger.

• Provide the correct wallet address: Your wallet address is where the tokens will be sent. Ensure the address you provide is accurate.
• Verify wallet address: Double-check your wallet address before submitting it to avoid errors. Even a small mistake can result in losing your tokens permanently.
• Use a secure wallet: Choose a reliable and reputable wallet to store your airdrop tokens. If you’re unsure about the security of a software wallet, consider using a hardware wallet for added safety.

2. Social network accounts

Many projects require participants to engage with them on social media platforms such as Twitter, Telegram, or Facebook to qualify for airdrops. Make sure you’ve created these accounts and are ready to follow, like, or interact as needed.

3. Email

Some projects may ask for an email address to send notifications or updates about the airdrop. Use an email address that you check regularly so you don’t miss any important information.

How to effectively hunt for Airdrop coins?

To hunt for airdrops effectively, you need a well-planned strategy.

1. Stay updated on information

Regularly monitor project websites, Telegram channels, and Twitter accounts to ensure you don’t miss any opportunities. Information in the cryptocurrency world changes quickly, so staying up to date is crucial.

2. Join the community

Participating in communities on platforms like Reddit, Discord, or Telegram allows you to connect with like-minded individuals. These communities often share valuable information about upcoming or potential airdrops.

3. Check the project’s reputation

Before participating in any airdrop, evaluate the project’s credibility. Use review sites, forums, or insights from well-known industry analysts to assess the project’s legitimacy and potential.

What is the appropriate allocation of airdrop capital?

Properly allocating capital for airdrops is crucial to optimizing profits while minimizing risks.

1. Determine budget

Before participating in airdrops, set a clear budget for how much you’re willing to spend on these projects. This helps you stay disciplined and avoid overcommitting to risky opportunities.

2. Only invest what you afford to lose

Avoid allocating excessive capital to airdrop projects, especially those you’re uncertain about. Only invest what you can afford to lose, as there’s no guarantee the token’s value will increase. A cautious approach ensures you protect your overall financial stability.

Information channels about airdrop

Finding reliable sources of information about airdrops is crucial for success.

1. Website specializing in airdrops

Many websites provide detailed and up-to-date information about airdrops, such as Airdrop Alert, CoinMarketCap, and AirdropBob. These platforms are regularly updated with the latest opportunities, making them valuable resources.

2. Social network

Following a project’s official social media accounts is another way to stay informed. These accounts often share updates quickly, helping you act in time. Ensure you only follow verified accounts to avoid scams.

Conclusion

Airdrop coins are an intriguing and promising concept in the cryptocurrency world. This article has provided a deeper understanding of airdrops, including how they work, their popular forms, and the associated benefits and risks. Hopefully, you’ll have a successful and rewarding experience hunting for airdrop coins. Always exercise caution and conduct thorough research before participating!