Airdrop (cryptocurrency)

An airdrop is a distribution of a cryptocurrency token or coin, usually for free, to numerous wallet addresses. Airdrops are primarily implemented as a way of gaining attention and new followers, resulting in a larger user-base and a wider disbursement of coins.

Overview

Airdrops aim to take advantage of network effect by engaging existing holders of a particular blockchain-based currency, such as Bitcoin or Ethereum in their currency or project.[1][2]

There are two ways creators distribute their tokens: by selecting recipients at random, or by publishing the event in airdrop-related bulletin boards or newsletters. Often, random Ethereum accounts with value above a certain threshold will receive various unsolicited airdropped tokens. Many websites now exist which promote cryptocurrency Airdrops, and social media is a great place to read about upcoming Airdrops.

Cryptocurrency enthusiasts can gain free cryptocurrency by supporting projects who release coins through an Airdrop. Often, Airdrops will have requirements such as joining a Telegram channel, retweeting a tweet, or inviting new users to the project. Should the participant have to contribute capital towards the project, then this is not considered an airdrop, but an ICO.

Airdrops can be considered a very effective and common marketing strategy among new cryptocurrency projects. Its goal is usually to spread the word about a certain product, coin or exchange in the world of cryptocurrencies. Additionally, the new token-holders are incentivized towards the success of the project due to owning a certain number of coins themselves.

Lately this strategy has become increasingly important to the larger cryptocurrency community due to the effectiveness of the strategy, as well as unwanted/spammy advertising practices. Because of this unsavory reputation, many social networks, most notably Facebook, are now refusing to allow ads promoting various virtual coins.[3][4]

In the United States, the practice has raised questions about tax liabilities and whether they amount to income or capital gains.[5][6]

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References
  1. Bogart, Spencer (2017-10-08). "The Trend That Is Increasing The Urgency Of Owning Bitcoin And Ethereum". Forbes.com.
  2. BJORØY, Trond Vidar (2017-09-06). "The latest crypto PR craze: 'Airdropping' free coins into your wallet". venturebeat.com.
  3. "Facebook is banning all ads promoting cryptocurrencies — including bitcoin and ICOs". Recode. Retrieved 2018-05-03.
  4. Recently, Facebook decided to lift its ban on some cryptocurrency ads and allow them through vetted advertisers. "Facebook lifts its ban on some cryptocurrency ads". Engadget. Retrieved 2018-08-29.
  5. "Bitcoin Is on a Collision Course With the IRS". Fortune. Retrieved 2018-01-17.
  6. "Bitcoin Tax Laws Are A Nightmare So People Ignore Them". International Business Times. 2017-11-16. Retrieved 2018-01-17.

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