Everyone loves to get something for free. Therefore, free cryptocurrency giveaways or airdrops, also called crypto airdrops, are a common target of cryptocurrency scammers.
In many scams, scammers use tricks to get their victims to divulge their data, give them money, or even give them the keys to their cryptocurrency wallets. This article will explore the most common scams associated with cryptocurrency, as well as how to claim tokens safely.
Nevertheless, we are all aware of cryptocurrencies, as the term has existed for a long time. As their use continues to debate, more and more people are becoming involved in the crypto world. Airdrops are one of the essential tools for traction. What are airdrops? Airdrops are simply promotional giveaways in online games that keep players engaged.
In crypto airdrops, tokens or coins related to the service are free. Participants are often asked to promote their services on different social media platforms for a discount. Numerous airdrops have already taken place, with several scheduled for the next few weeks. Most cryptocurrency investors have likely encountered an airdrop from one platform or another. Let’s dive into it to explore more about crypto drops!
How Does an Airdrop Work in Crypto?
Cryptocurrency airdrops are very common in the crypto world. The giveaway consists of tokens or coins given away to the crypto community as a token of appreciation. The goal is to gain initial awareness, gather followers, and establish a user base by using this marketing strategy. Airdrops are a legitimate way for the crypto community to get new coins for free or for small tasks such as social media followers and referrals. The initial coin offering (ICO) aims to gain resources and value for ICO projects and start-ups.
How do crypto airdrops differ?
Many cryptocurrency projects give away free crypto in various circumstances, although they are primarily motivated by user incentives.
Following are the types of airdrops you will typically see:
Holder Crypto Airdrop
The crypto industry often takes a snapshot of crypto assets on a specific date, then gives airdrops based on the cryptocurrency assets. As an example, Stellar was founded in 2014.
As a nod to the Bitcoin network, the Lumen team announced in 2016 that it was planning on airdropping lumen (XLM), the cryptocurrency it is building, for $19 billion to bitcoin (BTC) holders. As a condition of receiving the XLM reward, you had to verify your Bitcoin holdings.
An airdrop is provided to holders of another cryptocurrency who hold a small amount in their wallet.
People can claim an airdrop based on their holdings on a particular date, and the airdrop is usually coordinated based on the assets they have on that date. In 2014, Stellar was launched as a cryptocurrency. Stellar’s leaders announced a plan to pay tribute to the Bitcoin network. It plans to give existing bitcoin (BTC) holders 19 billion XLMs, its native cryptocurrency, as compensation for their holdings. Stellar airdrop participants had to verify their Bitcoin holdings to receive their reward of XLM.
Standard Crypto Airdrop
Airdrops that transfer native coins to wallets are a standard marketing strategy for cryptocurrencies. A brand is usually advertised to promote adoption and encourage more people to participate in and out. You simply need to create a new account and provide your wallet during the distribution event address.
Exclusive Crypto Airdrop
Crypto coins are distributed exclusively through airdrop aggregators to followers of the aggregator. Those websites post news about upcoming airdrop events. Designated wallets can only receive crypto from exclusive airdrops received by selected wallets. As part of the Uniswap decentralized exchange’s airdrop, 400 UNI will be distributed to every wallet interacting with their protocol until a specific date. Holders of the governance token have the right to vote on the development of the project, as well as make decisions about how they want to spend their funds.
Bounty Crypto Airdrop
In addition to bounty airdrops, digital assets must be acquired through promotional activities for recipients to receive them.
Among these activities are:
Participating in a Twitter or other social media posting about the blockchain project. Subscribe to the project’s mailing list.
Engaging in a discussion forum to participate in the project
Bounty airdrops usually require more work than a standard airdrop. However, the activities are generally not problematic.
Find out about crypto airdrops the best way you can
There is a way to win some free coins if you find the upcoming airdrops. In some cases, cryptocurrency projects will announce upcoming airdrops on their websites or social media, especially if the project has a community. You can find information about forthcoming cryptocurrency airdrops on websites that constantly publish airdrop announcements for those looking for new gems. Additionally, mega players offer crypto-airdrops on their websites. Finding airdrops on crypto-focused social media channels and forum groups is also a good option, but be aware that more scam projects may airdrop, so the risk is higher.
A cryptocurrency wallet is required since the airdrop involves a cryptocurrency transfer. If you possess any cryptocurrency, such as Bitcoin, Ethereum, or any other you may already have, these are the same wallets where you store them. It is usually required that you supply your wallet address when you register for the airdrop on the platform. Because of the preceding, when the airdrop’s due date arrives, the company will transfer the amount promised to your wallet address — if you are among the end-users to win the airdrop.
Depending on the platform you decide to use, you may be required to use a wallet based on the platform’s blockchain system. A lot of blockchain projects use the Ethereum platform to develop their tokens. It is essential to ensure that you have a wallet supplying the corresponding token that you intend to acquire free of charge.
Why do crypto airdrops exist?
A crypto airdrop is primarily organized to promote a blockchain startup, project, or service by distributing a few tokens. The team can bootstrap its project by issuing tickets to its users, thereby ensuring that tickets are distributed fairly amongst the team’s community from day one. Furthermore, once the tokens begin trading on an exchange, users are incentivized to promote the project and help the project reach a greater audience due to receiving these tokens whenever there is more interest surrounding the token, the greater the chances that its value will increase.
Many of the projects involved in airdrops gain attention by promoting the launch on their website, forums, and social media channels. As a consumer, receiving a HelloFresh voucher in your email with a discount code is no different from receiving a discount code in a marketing campaign designed to attract more people to the platform by offering a financial incentive.
Users will never have to invest in legitimate crypto airdrops. A smart contract isn’t a method to stand out among competitors that seek external funding before issuing a token; instead, it is a way to stand out against them.
The Crypto Airdrop Claim Process
Airdrop registration: Join the project’s page by creating an account or filling out a unique form. In most cases, registration requires that you register by providing your name or social media account, e-mail address, and cryptocurrency wallet address.
Follow the instructions to claim free tokens. Whenever you participate in an airdrop, the issuers provide you with a list of tasks you are expected to complete. There are usually requests to follow their social media accounts and retweet and share their posts within a short amount of time.
Link your crypto wallet address: As tokens can only be earned by doing this, it is necessary. It is essential to remember that giveaway coins use various blockchain technologies, so you should make sure that your wallet supports the same token standard.
Just wait: It is worth keeping in mind that crypto airdrops are somewhat like a lottery. There is no way to guarantee you will receive credit for completing these tasks – they are distributed randomly.
What Are the Dangers of Crypto Airdrops?
There is nothing wrong with using cryptocurrency airdrops as a legit way to raise awareness about a project. Although it is an effective and legitimate tool, it is also widely abused by scammers who wish to make money by exploiting it. Airdrops are often simply a scam intended to steal your private data or cryptocurrency, and there is no secret to this. Whenever crypto airdrops come, you need to be cautious and take everything at face value. Scammers can differentiate the goals of their scams based on the types of crypto airdrops they provide. Following are examples of crypto airdrop scams that fall into the following categories:
- Data gathering
A fake crypto airdrop is an attempt to entice users into visiting a phony website by imitating legitimate projects. Your personal information can be collected here, such as your name, email, passwords, or wallet address. These data types are later sold to scammers or used for social engineering attacks.
- Private key gathering
There is another less common type of airdrop scam, but it is no less dangerous. You can only join an airdrop after you download an app that requires you to import your private key, which fraudsters demand as part of the registration process. However, even if they claim they do not store private keys on their apps, asking for one should raise concerns. You shouldn’t ever share your private keys with anyone.
- The purpose of pumping and dumping
The pump and dump scam is also a common scam, which involves creating hype around a coin before it is listed in an exchange. The moment coins are listed on a cryptocurrency exchange, and the price starts to spike, token vendors sell their assets without any intention of continuing to develop the project.
- Referral credits
In some cases, scammers collect your sign-up information and use it somewhere else on the internet, where they gain credit for connecting you with other websites. Nevertheless, it still wastes your time and effort for nothing, even though it is less harmful than other scams.
The Best Way to Claim Airdrops
- Websites to be verified
You would not believe how many scammers impersonate legit crypto projects and create fake social media profiles and websites similar to the original projects. You should always do your due diligence and check whether the URL you have received as an airdrop matches the official one. Of course, don’t stop there, and you should look into the entire project to make a sound judgment. The fact that the team is anonymous, that there are incomplete details about the project, the fact there is no guidance provided on how to get airdropped, that the website looks unfinished, that it looks slightly different from the original brand, or has a lot of broken links are some of the red flags.
- Third-party registration should be avoided.
To facilitate registration, you may be required to fill out a survey administration program, such as Google Forms.
It is important to note that legit crypto projects that wish to establish themselves on the market invest in their digital presence and generally do not use low-cost solutions since it may detract from their reputation.
- Never share your private keys.
There are no reputable crypto players who request sensitive information such as private keys to access your wallet and send your crypto coins. This is not to be confused with a public key, which serves as an address for your wallet. If you find any airdrop asking you for your private keys to receive free tokens, then there is no legitimate reason for that.
- A high reward should never be promised.
Generally, airdrops consist of small amounts of cryptocurrency given away in massive quantities. The project you are thinking about working on is likely a scam that wants to trick you into thinking it is a legitimate venture. It’s not uncommon for scammers to make huge promises, but then when they cannot deliver on their promises, they demand amendments or request a higher deposit in exchange for tokens that should have been free.
- A donation-based airdrop should be avoided.
People who claim tokens from airdrops are regularly scammed into depositing funds. These companies generally ask for a small amount of crypto to compensate for the high network fees necessary to transfer tokens to your wallet. In contrast, the purpose of a crypto airdrop is not to ask for money in exchange for participating but to give away free coins in exchange for your participation. The expenses associated with legit airdrops will include transfer fees.
- Never download unknown wallets.
No crypto projects worth your attention ask you to download apps to obtain free tokens. You must be aware that if an airdrop of a petite young crypto startup asks you to do this, it is a sign that it is unreliable. An unknown wallet may simply be malicious software that targets your private keys, allowing it to steal your cryptocurrency funds.
- Create separate wallets for airdrops
Keeping your main wallet separate from those participating in airdrops is a strict requirement, even if you are aware of potential risks but still decide to participate in airdrops regardless.
Follow your intuition and common sense.
Listen to your gut and stop whenever something seems wrong or too good to be true.
Airdrops are offered as a marketing tool for promoting new platforms and services within the crypto community. The more people flock to the service as word of mouth spreads throughout the crypto ecosystem, the higher the chances of success. It’s similar to digital marketing for a regular company. However, the real reason is that the virtual currency must remain true to its value and grow with time.
- · Be Careful of airdrop scams.
Because many people are interested in airdrops to make easy money, scammers have discovered it to be a great way to deceive people. At the end of last year, Metamask noticed an airdrop scam where malicious tokens were sent by threat actors to random cryptocurrency wallet holders. Due to the curious nature of the account holders, they would often search online for the receipt to find out more about what it is. Searching on the internet ultimately leads unsuspecting users to the malicious website of the threat actor, where they are phished of crucial information related to their online activities.
Hence, it is advised that users be vigilant and only participate in airdrops of open platforms, which may already be listed on reputable websites. Detection of such scams is also possible if the scammers ask the users to send cryptocurrency as part of the airdrop enrollment process.
An airdrop may fail if the amount promised is too high. It is best to avoid potentially malicious activities or thoroughly investigate what the project involves.
How Does A Crypto Airdrop Affect Taxes?
Generally, you need to pay taxes on the proceeds of airdropping crypto into your wallet if the platform airdrops it to you. Airdrops are usually taxable as ordinary income since their fair market value is greater than zero. When you decide to sell your airdropped asset, you may be required to pay capital gains on the appreciation of the purchase.
As a result of crypto airdrops, crypto projects have an easier time standing out and gaining traction. It can also be an excellent way for crypto enthusiasts to expand their portfolios by investing in up-and-coming tokens. Be careful and do your research before participating, as there are likely more scam airdrops around than legitimate ones.