Airdrops are one of the most popular features in crypto. In exchange for minor social media engagement, airdrops allow users to receive free cryptocurrencies in their wallets.
In return, new blockchain projects receive public attention and liquidity as their roadmaps are finalized. Likewise, large corporations like Coca-Cola can use NFT airdrops to popularize their brands within the upcoming Web3 metaverse.
Blockchain and crypto startups copied this marketing methodology. Instead of products, they gave away their project’s tokens, and instead of email addresses, the users had to provide their wallet addresses.
Thanks to streamlined web browser wallets like MetaMask, it is now easier than ever to participate in airdrops. It is no secret that blockchain startups don’t really have marketing budgets. Crypto airdrops filled the gap by becoming marketing events.
In the second half of 2022, this trend started to shift as venture capital (VC) firms ramped up their investments to the tune of $30.3 billion.
However, there are still hundreds of projects that fall through the VC crack. In turn, this benefits both crypto enthusiasts and developers.
After all, investors are eager to pocket digital assets that might surge in value. Developers count on that to attract hungry investors. They announce a new crypto coin drop, and users get free tokens that might skyrocket if the team follows through on their roadmap.
Here are notable crypto airdrops:
- March 2014: AuroraCoin (AUR) executes the first airdrop, 31.8 AUR to every citizen of Iceland.
- Jan. 2016: Minereum (MNE) airdropped $448,000 worth of 32,000 MNE tokens.
- June 2017: Stellar (XLM) airdropped $124 million worth of XLM tokens. Specifically, 1,000 XLM for every 1 BTC the user holds.
- Nov. 2017: Oyster (PRL) airdropped $9.7 million worth of 2,227 PRL tokens.
- April 2018 – Decred (DCR) airdropped $36 million worth of 258,000 DCR tokens.
Thousands of airdrops have taken place since those early days. But they have diminished in value. Moreover, some have been “weaponized.”
Uniswap (UNI) pioneered the concept of decentralized exchanges (DEXs) with its deployment of automated market makers (AMMs). This was quite revolutionary because investors used to have to visit centralized crypto exchange to swap tokens. As the first DeFi platform to offer that service, Uniswap became quite popular.
Uniswap (UNI) holds over $6 billion in total value locked across Ethereum, Polygon, Arbitrum, Optimism, and even Celo. So, what happens when a competitive team copy-pastes Uniswap’s open-source and hard-forks it into a new DEX called SushiSwap?
In the second half of 2020, Sam Bankman-Fried, the CEO of crypto exchange FTX, transferred $1B worth of Uniswap funds to SushiSwap. This was one of the biggest “vampire mining” attacks, in which funds from one DeFi protocol were migrated to another.
In response, Uniswap launched its UNI governance and utility token. The team then airdropped 400 UNI tokens to all wallets that were recorded having used the DEX.
This was a very clever strategy as Uniswap enforced loyalty to the “brand,” pioneered a retroactive reward, and secured its market position.
In the end, Uniswap prevailed and SushiSwap was marginalized with $823.08 million in TVL, over six times less than Uniswap.
Airdrops are essentially free money in exchange for a tiny social media engagement. No surprise, this venture has attracted bad actors. There are several ways scammers can use fake drops to drain crypto wallets:
Bait and Switch
When an investor signs up for an airdrop, they could also be tricked into sign-up for partner airdrops. These may be fake partnerships designed to generate referral credit, with the original airdrop signee gaining nothing from it.
Pump and Dump
Pump and dump schemes can be tied to airdrops as well. Anyone can set up a bogus airdrop with a fake whitepaper and website.
These “developers” airdrop some tokens to create market liquidity and social media buzz.
The token then gets listed on an exchange, its price skyrockets, and the “developers” sell all of them at the highest price they will ever get. The token holders who didn’t sell are then left with worthless tokens.
Private Key Pilfering
The ultimate goal for any crypto scammer is to get someone to reveal their wallet’s private key. And the main vector is through phishing — revealing private data by pretending to be a legitimate source.
Case in point, a fake Twitter account, posing as a legit blockchain project, could ask you to “connect wallet” at a fake website for an airdrop. At that point, the scammer would gain access to your wallet’s funds. For example, such a scammer attempted to pose as Moonbirds, for their NFT airdrops.
How to Access Airdrops?
Provided you already have installed a MetaMask browser wallet, it is very easy to get into the airdrop action.
MetaMask is the most popular wallet because of its flexibility to connect with other blockchains than just Ethereum Mainnet. Each network has its official page on how to add it to MetaMask. For example, you would need to follow these steps to add Avalanche (AVAX).
You will need this flexibility in order to access the widest range of airdrops. Most of them mentioned here come from registering on aggregator airdrop portals. One of the most prolific ones is AirDropAlert.com. You can hone down on a category or focus on the “new airdrops.”
By clicking on each airdrop card, it is easy to see what the blockchain project is all about, its total value, eligibility conditions, and sign-up instructions.
As you browse through project descriptions, you will inadvertently learn much about blockchain technology, decentralized finance, and network oracles, as if you are going through a college course.
You may notice that many airdrops do not guarantee free tokens. Instead, they provide an opportunity to receive coins after completing all the stated requirements.
For this reason, it is best to stick with projects that sound genuinely interesting, useful, and viable. Other notable airdrop aggregators are the following:
Although most aggregator sites have expanded their criteria for project listings, in order to avoid fake airdrops, there is still some curation variety left. For instance, if a legit airdrop doesn’t pass on one portal, it may pass on another. Therefore, it’s a good idea to visit them so you don’t miss a legit airdrop.
Always keep in mind that airdrops are supposed to be free. Beware when someone asks you to directly send funds to receive an airdrop. In such instances, you are dealing with a scammer.
Likewise, never click on links you are not 100% sure about, and never connect your wallet to websites you haven’t double-checked are legitimate.
This series article is intended for general guidance and information purposes only for beginners participating in cryptocurrencies and DeFi. The contents of this article are not to be construed as legal, business, investment, or tax advice. You should consult with your advisors for all legal, business, investment, and tax implications and advice. The Defiant is not responsible for any lost funds. Please use your best judgment and practice due diligence before interacting with smart contracts.