Airdrops became all the rage in the early 2010s as would-be trolls explored the possibilities of sending unsolicited photos to unwitting passersby. Now, in the world of fintech, a similar strategy is used to stir up excitement around freshly launched cryptocurrency projects and build platform awareness — a marketing tactic commonly referred to as crypto airdrops.
“In an airdrop, you would open your crypto wallet and the airdropped item would magically be there,” said Gregory Keogh, SVP of customer success at Curios, a white-label NFT marketplace. “It is very similar to having a surprise birthday present mailed to your house.”
What Is a Crypto Airdrop?
What Is a Crypto Airdrop?
A crypto airdrop is a marketing strategy used by blockchain-based projects that involves divvying out free tokens en masse as part of a broader promotional initiative. This is done as a direct deposit into a user’s crypto wallet.
At the intersection of blockchain and guerilla marketing, these public campaigns are designed to increase awareness about a startup company’s platform or product and encourage widespread adoption of its native token.
“This is often an exciting way to launch a network,” said Winston Robson, co-founder and CEO of metaverse marketplace WeMeta, adding that airdrops can be used strategically to target likely early adopters.
“It is very similar to having a surprise birthday present mailed to your house.”
For example, NFT marketplace LooksRare airdropped its token to users who had completed transactions via OpenSea, the leading platform in this sector.
This stunt generated a lot of chatter in the community, Robson said, but did not pose LooksRare as a long-term sustainable competitor to OpenSea. While many were excited by the large prize amount, and some — Robson included — used the opportunity to cash out, there was a change of tune when the founding developers had the same idea. (According to Cointelegraph, the core team withdrew an estimated $30 million at the time.) Even though the developers denied accusations of a rug pull, this spooked investors, tanking the native token’s value by 15 percent in the aftermath.
Although crypto airdrops are commonly employed to promote new projects, some existing projects use airdrops to reward longtime community members, Robson said. The 2021 Ethereum Name Service airdrop, for example, awarded tokens to existing ENS domain holders based on a formula determined in part by how long their domains had existed.
How Do Crypto Airdrops Work?
Once a startup decides that an airdrop is the way to go, the first step toward making it happen is to launch a public campaign. Most commonly, widespread outreach is achieved across forums and social media platforms such as Discord and Twitter. Ideally, the news energizes commotion around a platform’s debut or a newly launched feature — as well as the size of the prize.
As the campaign picks up traction, companies compile a list of potential token recipients. This can be done in different ways, such as collecting the wallet addresses of interested parties or snapping a screenshot at a set point in time to qualify a users’ eligibility by specified, metric-based criteria. If an airdrop is specified to users of a platform prior to September, for example, then the screenshot would include the wallet addresses of active users from that designated timeframe.
Sometimes companies gather additional information, like an email address, at this stage — especially if the company hosting the airdrop is seeking to expand its contact list.
After determining a batch of recipients, companies typically facilitate the airdrop through a smart contract, or a self-executing program that automates transactions. This program transfers tokens from the company’s treasury wallet and distributes it to select participants, with no action required on the recipient’s end. At this stage, companies typically publish their transaction block results to further promote the project and prove that the airdrop actually happened.
Safety First: The Risks of Crypto Airdrops
What Is the Point of a Crypto Airdrop?
As a crypto marketing agency founder, Tim Haldorson helps businesses launch airdrops from scratch. Ultimately, the goal is to grow a platform’s user base in a way that doesn’t encourage a big sell-off by token recipients.
“Crypto airdrops are a great way we help new projects stand out and increase awareness rapidly,” Haldorson, who is CEO of Lunar Strategy said, noting that there’s a trick to curbing users from flipping coins.
Since airdrops can target early supporters, existing members or highly engaged users of a project, developers need to figure out which route will attract the audience that can contribute most to the project at its unique stage and how to best incentivize the public to want to learn more.
“The goal with an airdrop is to give long-term value to the people who receive the airdrop,” Haldorson said, noting that a common strategy within the DeFi space is to airdrop tokens to users holding crypto from competing platforms doing similar things. They are often the ideal audience and are more likely to contribute to the project after learning about it via the airdrop, he explained.
“However, [a substantial growth in users] only follows projects with a strong team behind it and a clear vision forward.”
Types of Crypto Airdrops
Crypto projects vary in their preferred choice of airdrop, depending on their end game. Some may be implementing this promotional tool to bring together a community following a hard fork in a network, while others would rather focus on making first-time users feel taken care of. It could also simply be a response to highly competitive market conditions. Luckily, there’s a variety of techniques to parachute guaranteed goods into a user’s virtual estate.
In a standard airdrop, no tasks are required aside from signing up for an account. The key here is to get in quick, as there may only be a certain supply of tokens tied to the release of a new project, doled out on a first-come-first-serve basis. The decentralized exchange RabbitX has used standard airdrops to reward new users who sign up for its platform.
These service-oriented airdrops are sustained by small favors and voluntary legwork done by recipients. Typically, companies require some low-lift promotional work, with rewards handed out to those willing to sign up for a newsletter, follow specified social media channels across platforms, interact with a project’s recent post or simply log on to a live forum. Foodie NFT platform One Rare listed a nine-step to-do list for eligibility in a $75,000 giveaway, which included following the company’s accounts across social media, tagging friends and adding accounts on a watchlist.
This type of airdrop rewards users who are ‘holding,’ or have accumulated, a certain amount of tokens at the time of the promotion. This is determined by a community-wide snapshot taken at a certain point in time of user wallets, which can occur on a specific date or during a set time span. Whatever the reward, it’s gifted to those who have met or exceeded a threshold amount. NFT-to-token swap platform Sudoswap has yet to launch its own governance token, to be named SUDO. When it does, those holding NFTs of its sister application, Oxmon, or OXMON tokens will be on the receiving end of the first batch.
Hard Fork Airdrop
When a protocol branches off or hard forks from its original code, splitting into two separate platforms, developers airdrop the new coins as a crumb trail to convert native users. An example of a hard fork airdrop would be ETHPoW, a proof-of-work chain going separate ways with Ethereum since it transitioned to a proof-of-stake system in an event known as The Merge. Like holder airdrops, these simply require users to hold the original token.
Wallet size isn’t everything. Exclusive airdrops often reward a user’s time logged on a project, money spent on non-token activity or level of engagement within a forum. Exclusive airdrops reach those with empty wallets and deeper extra-curricular investment in a project. A famous example includes Uniswap’s generous airdrop of 400 UNI tokens to each of its long-standing users, regardless of holding status.
If a startup announces a fixed number of rewards but receives an overwhelming response, it may choose to implement a lottery mechanism to deliberate the winners selected at random, dubbed a raffle airdrop. This option can also be utilized as an add-on to any of the previous airdrop methods. Gaming platforms Revv, Wolf Game and Phantom Galaxies all recently gave out $500 worth of their native coins to 100 lucky winners