An airdrop is when a bunch of devs of a crypto platform give out free tokens or coins. The predominant question in your mind right now might be, why would anyone do that? It is essentially a form of advertising and also aids spread both the use and the popularity of the coin. It is sometimes done so that when people see the coin has been added to their wallet for free, hopefully look up their website, try it out and get hooked.
Airdrops are also used to reward early adopters of an application ie a new DEX or even a blockchain. A perfect example is Uniswap. Although theirs took place a couple of years ago, their issuance model and criteria have been adopted and are the most commonly used ones. Uniswap is a dapp(Decentralized application) that allows you to exchange one ERC20 for another.
Uniswap launched in 2018 and allowed users to start swapping their tokens. At the beginning of time, it was very centralized. They had a headquarter and pay-rolled devs. However, being in the crypto space, they wanted a way for their company to be more decentralized. To achieve this, they created the UNI token that was specifically used to vote on certain changes to the platform. This way, the token holders who are consequently its investors, could vote on changes to the protocol instead of having one person make all the decisions. However, how would they sell their tokens, what if people just wanted to swap their ERC20s and didn't really care about their tokens? This is where airdrops came in. They gave every address that had interacted with their dapp 400 UNI tokens at the time worth $1000. Imagine getting a thousand dollars for trying out some application. These tokens are now valued at $8000.
To understand how exactly this works and why some companies would give out such an amount of money, let us first get some technicalities out of the way. First, Uniswap is a dapp run by smart contracts, the protocol is available on GitHub for anyone to look at. To perform the airdrop, they literally made a list of every wallet that had interacted with their smart contract and sent them UNI tokens. They did this on purpose since they wanted to reward the early adopters and testers of the platform not just any random user. This type of airdrop is mostly used for governance tokens and is often referred to as Retroactive airdrops.
Another form of airdrop is very similar to how an email lead magnet works. In the world of marketing, this refers to the simple idea where you give out something for free in exchange for their email address. It could be a paid software trial period or access to Discord channels. In the long term, it might be used to advertise a paid product from the same protocol. Although this is rare, it is not entirely uncommon for a company to send you some crypto in exchange for your email.
Hunting down airdrops manually can be a daunting task. If you want to begin this quest, there are entire websites that are dedicated to helping you find them. An example is airdrops.io, which contains an "airdrop calendar" of specific coins/tokens/protocols that have upcoming airdrops. Another website is CoinMarketCal. This one includes even more advanced functionality. It allows you to sort projects by airdrops. It also contains other vital features like when some projects will go live and even eligibility criteria to be used.
The popularity of airdrops has also brought about an overwhelming number of scams due to the ease of undertaking this activity and the low risks involved. Doing your research before settling on a particular protocol or token is prudent! Airdrops can also be used to boost on-chain activity and are sometimes used to improve token distribution to achieve more decentralisation. Generally, the majority of airdrops tend to have some eligibility criteria: interacting with a dapp, some on-chain activity and sometimes even holding or having traded the token. Airdrop hunting manually can be time-consuming, especially meeting some of the eligibility criteria. In my next article, I will walk you through how to take advantage of the latest trends in crypto. Telegram trading bots automate on-chain activity and even perform the activities required to be eligible all using a telegram bot. Stay tuned!
