Imagine waking up to find a surprise gift waiting for you, something you never expected but gladly accept. It’s rare, but sometimes it does happen!
In the world of digital assets, an unexpected present might come with financial benefits. And in the world of cryptocurrency, today could be your lucky day.
A crypto airdrop, or cryptocurrency airdrop, is a marketing scheme from emerging crypto developers that sends small amounts of virtual coins or tokens to targeted crypto wallets.
The goal is to amp up awareness about the circulation of a new coin within the blockchain and cryptocurrency community. The gift is in exchange for user promotion, like a repost on social media about the currency.
Named after traditional airdrops that use planes to deliver resources from the sky, crypto airdrops effectively develop virtual currency and promote its launch. Once the currency fully debuts, developers anticipate that the initial recipients of the free tokens will talk about it enough to spread the word and encourage higher trading levels as part of an initial coin offering (ICO).
To potentially receive this new currency, wallet holders need to already own a minimum amount in cryptocurrency wallets. If specific tasks are required in exchange for the free tokens, the recipients also need to have a certain number of social media followers or exchange something like promotion through a blog post.
While this is a legitimate tactic used by crypto developers, crypto airdrop has been used by cybercriminals in attempts to access private information.
It may seem strange to think that a currency needs some kind of marketing strategy. After all, no one randomly sends out US dollars to bank accounts nationwide to promote using dollars instead of pounds or euros!
However, traditional currencies have been used for many years, whereas cryptocurrencies only recently entered the scene, and significantly fewer people use them worldwide. When more people use cryptocurrency, the stronger the overall networks become. Right now, developers want to grow their currencies as quickly as possible and gain more investors, so they choose these kinds of strategies to encourage additional interest.
people use cryptocurrency as of June 2024, an increase from 5 million in 2016.
Source: Statista
There are several different types of crypto airdrops and each has its own set of requirements for recipients.
To receive their currency, recipients simply need to express an interest in the blockchain project and provide their crypto wallet information to developers. Most standard airdrops only need users to register or sign up to become eligible.
Since there’s a fixed amount of tokens available in a standard airdrop, if developers encounter overwhelming demand, they may switch to a raffle-based system once registration closes to decide which wallets will receive money.
Users who already have a large amount of cryptocurrency may be able to receive this new token or coin as part of a holder airdrop. Since crypto wallets are publicly disclosed, developers can look at who already has a certain amount and determine which users will draw the most attention through their promotion of new blockchain projects.
Bounty airdrops require users to perform specific tasks in exchange for cryptocurrency. In most cases, developers ask for some level of promotional activity from these users, like sharing the project on their social media channels or referring X number of friends to invest. Those who refer others may also benefit from a finder’s fee or referral bonus on top of their free coins.
Developers with a wide network to choose from may hand-select individuals for exclusive access to the new coins. To decide, they typically use criteria outside of crypto wallet balances, like high levels of engagement in crypto forums or investment in previous cryptocurrency projects.
Like any form of raffle, these airdrops are completely random. Entrance into the raffle is based on past behavior, such as registering interest in the project or being part of an exclusive list. These airdrops usually happen randomly because there are more interested parties than coins to be distributed so developers shorten their list of recipients.
Two main steps happen in crypto airdrops once developers have communicated details of their upcoming project: the snapshot and the distribution.
The short answer – yes. In the United States, crypto airdrops are taxable events when you receive them, as they’re considered to be a source of ordinary income.
When it comes time to file your taxes, you need to report this income on IRS Form 1040 Schedule 1 “Additional Income and Adjustments to Income.” The money is taxed at your standard income tax rate. The amount that you received as cryptocurrency is taxed at the fair market value rate for the time that you received the airdrop.
If you choose to sell your currency from the airdrop, you may also be subject to capital gains taxes like other types of investments you hold. This would be reported on an IRS Form 1040 Schedule D “Capital Gains and Losses.”
Even if you did nothing in exchange for the airdrop, the act of receiving this free money still means that it’s income and subject to taxes. If you received a non-fungible token (NFT) as part of the airdrop, this is also taxable as income and priced at the fair market value of when you received it.
It’s always best to work with an accountant if you’re investing in cryptocurrency or receiving any type of crypto airdrop because they can advise you on your specific financial situation. But remember to keep meticulous records of any crypto airdrops you accept to make the process much easier come tax time.
The perks of crypto airdrops for users is quite obvious. For little to no effort, free cryptocurrency is all yours, But for currency developers, there are also a number of key benefits.
When developers have worked hard to create a new cryptocurrency, they need to make sure people know about it in order to succeed. With so many other currencies to choose from, it can be hard to stand out in this market. A crypto airdrop is a powerful marketing tool to gain attention and direct users to an incoming currency.
Broad usage is essential for a cryptocurrency’s success, which means you have to establish credentials as early as possible. Digital scamming looms as a threat in the crypto world, and an airdrop can help users feel reassured that the new currency is safe and legitimate.
For passionate members of the crypto world, airdrops can reignite their interest or give them something fun and exciting to talk about within the community. As interest grows thanks to loyal fans, developers can see greater success when the currency is released to the public.
In order to receive a crypto airdrop, you need to have a cryptocurrency wallet to store your digital assets. These are available through numerous blockchain platforms that allow you to send and receive cryptocurrency; they also monitor your balances.
To be included in the cryptocurrency wallet category, platforms must:
* Below are the top five leading cryptocurrency wallet software solutions from G2’s Summer 2024 Grid Report. Some reviews may be edited for clarity.
OKX, one of the world’s largest crypto exchanges, lets over 50 million users buy, sell, and trade tokens in over 100 currencies. You can securely and efficiently manage NFTs, cryptos, and other digital assets in the OKX wallet.
“Low trading fees, integration with TradingView, solid and smooth user interface in both web and mobile apps, high volume and liquidity, and a helpful support team.”
- OKX Review, Tael H.
“It would be nice if they also support the BNB Smart Chain (BEP20) address for some types of cryptocurrencies. I could have used it to make a more cheap deposit.”
- OKX Review, Tahir D.
With over 1 million users, Zengo Wallet stands out as one of the world’s leading crypto wallets. Zengo has industry-leading security features, along with self-custody tools that make it easier than ever to manage your cryptocurrencies and digital assets.
“What I like best about Zengo is the simplicity of the recovery process if you need it on a new device. It makes a face map of you when you originally start a wallet and when it needs to be recovered it just scans your face and can recover your wallet from there. Also, it is super easy to send and receive any of the many cryptocurrencies they support!”
- Zengo Wallet Review, Jordan M.
“I wish it supported more cryptos. Some top tier crypto projects are missing. I also wish it supported the Lightning network for bitcoin.”
- Zengo Wallet Review, Jean-Philippe M.
Fireblocks is a digital asset custody, transfer, and settlement platform that gives users 24-hour access to their cryptocurrency wallets. The tool has best-in-industry security features, with an intuitive interface to expedite workflows and crypto management.
“Fireblocks are exceptional at digital assets security. The feedback we get internally and from our integration partners are exceptional, as is the support.”
- Fireblocks Review, Ruari H.
“Sometimes there are outrages. Would be beneficial to have backup ‘generators’ and redundancy software in place.”
- Fireblocks Review, Mostafa A.
Use Coinbase’s top-notch crypto platform to buy and sell Bitcoin, Ethereum, and Litecoin assets. It helps you buy and sell cryptocurrency securely, while also providing guidance on market movements.
“Super intuitive and easy for beginners that want the ease of a managed web wallet but the flexibility to add a stand alone wallet for using DeFi apps and other advanced options.”
- Coinbase Review, Scott F.
“Difficulty to deposit by credit cards in some countries. Also high fees for some currencies for exchange to the blockchain, I hope this is reduced in the future.”
- Coinbase Review, Hamada E.
Metamask is a crypto wallet and gateway for blockchain apps, specifically Ethereum assets. It’s a user-friendly and convenient way to access decentralized applications from both browsers and mobile devices.
‘’One of the most significant advantages of using Metamask is its ability to facilitate fast and efficient transactions on the Ethereum network. When sending funds or interacting with dApps, transaction speed is crucial to ensure a seamless user experience.
Metamask utilizes optimal gas settings and offers customizable transaction fees, allowing users to prioritize speed or cost-effectiveness based on their preferences. This flexibility ensures that transactions are processed swiftly, even during periods of high network congestion. Metamask's commitment to delivering fast transactions greatly enhances the overall efficiency and convenience of using the platform.”
- Metamask Review, Areg B.
“Metamask relies on the security of the user's computer or mobile device. If the device is compromised by malware or if the user falls victim to phishing attacks, their private keys and funds could be at risk. It's essential for users to exercise caution and ensure they have appropriate security measures in place.”
- Metamask Review, Nabil A.
Crypto airdrops have emerged as a great way for developers to raise awareness about a new coin or token before releasing the currency to the public. They also increase the liquidity of their asset by distributing it across thousands of digital crypto wallets. Crypto airdrops are a unique way for crypto users to gain assets with little effort…and who says no to free money?
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