Steemit Crypto Academy Contest / S12W01 - Understanding Cryptocurrency Airdrops
Crypto air drops are basically cool giveaways in crypto world. When any project decide to distribute free tokens to their community then Crypto air drop happens. You can say that it's like a surprise gift receiving in digital currency form.
If we talk about main purpose of crypto airdrop then it is to give awareness about token and project and when free tokens are given away then definitely project have a most strong hope to attract people and in return to build a strong community by engagement of people in the platform.
Airdrops can also play a great role in giving rewards to their loyal supporters because projects often like to choose those people for the distribution of tokens who remain involved actively for the support of project in any way so it can be a hug and thanks to those who always remain active for project support.
Air drops can be used as a marketing strategy for the incentivization of people to use a particular platform. As an instance you can say that there is a decentralised exchange that offer air drops for the encouragement of users for trading purpose at their platform. When users receive free tokens then they get motivated and in return they also becomes more active users so it's a quite clever way to gain attention of people in Crypto space which is very competitive.
Crypto air drops is just like finding treasure in the digital world because once you complete the requirements of a particular project you will receive free tokens by project automatically into your wallet and requirements could be in the form of joining any of their social media group it could be to follow them at their social media channels or could be the filling of their forms so requirements only depend on the choice of projects.
All airdrops would be equal in their creation there is no guarantee of it because there are some projects that have a distribution of token that have real value and there are some also projects could be seen that may also limit their value and these could also be turn out to be scams so there should be are completed research when participating in air drops so that you may stay away from any scam and enjoy Crypto air drops exploring also.
There are some of the common and different types of Crypto air drops I am describing below:
1. Standard Airdrops:
Scandal Air Jobs are one of the most common type of airdrops. You have to meet the project requirements such as joining their social media groups or any other requirement which the project have and after that you become able to receive gift in the form of digital currency in your wallet.
2. Holder Airdrops:
Holder airdrops are those that rewards existing token holders and it could be the token holders of any particular cryptocurrency. If there is a token holder that have already placed token in his wallet then project would decide to distribute some additional token to that token holder to say thanks to him in the form of some digital tokens for his support to the project. In this way the more token a person holds in his wallet the more he would have chances to get or to receive additional tokens.
3. Fork Airdrops:
When a blockchain network undergoes a hard fork then fork air drops happens that results in the creation of new cryptocurrencies so if there is a token holder who is holding original cryptocurrency at the time of fork then there are too much chances for that token holder to automatically receive equal amount of new cryptocurrency. We can relate it to the statement **buy one and get one free.Hahaha **
4. Snapshot Airdrops:
When snapshot is taken by a project of a blockchain Network at a specific block height then snapshot air drops occurs. If a token holder have particular amount of cryptocurrency in his wallet when there is a time of snapshot then that token holder would be eligible to receive free tokens from new project or by this air drop compaign.
5. Bounty Airdrops:
There is a slight difference between standard air drops and bounty air drops and slight difference is about the contribution that in bounty air drops you have to complete certain requirements or you can give your contribution to the project in anyway for earning of your free tokens and the contribution that you can give to a project is about writing articles, by the creation of different informative videos etc so it is like to put some of your hard work and to get result or reward in return.
6. Exclusive Airdrops:
Exclusive air drops have some limitation that they are limited to early investors, influencers or participants of a particular event and they are airdrops which some people can only enjoy so exclusive drops are not for everyone.
STEEM tokens have been distributed through a Crypto air drop and their was an exciting event in this Crypto world if we go back in 2016 when STEEM BLOCKCHAIN decide to rewards early adopters and supporters by conducting air drop of STEEM tokens.
During the air drop STEEM tokens are given to those individuals who already created their accounts at steemit so it was a kind of appreciation and thank you to all those individuals who support the platform at that time. If we talk about amount of tokens that are distributed among these individuals then it depends upon various factors like;
- The type of activities they have at steemit.
- Engagement levels of individuals.
- Regularity of individuals.
It was a kind of appreciation for those individuals and encouragement for those individuals for their contribution at steemit. With the distribution of these free tokens steemit try to encourage users as well as two attract more and more users to make the blockchain more engaged and stronger.
If we talk about steem tokens that different individuals received in the form of AIR drops than it could be used at the blockchain for various purposes like it all depends upon the choice of user that what they want to do with these free tokens like they want to give rewards to content creators ,they want to utilise these free tokens in curation of posts or they want to give more power to their accounts by the process of power up.
Air drops allowed early adopters to get benefit from their involvement or engagement and to give them a sense of ownership if a platform is getting success or to give them a feel that in the success of platform they have a great role.
At steem blockchain that initial air drop place a great role for evolving of platform and tokens have also gained a good value in crypto market within a very little time and now steemit is a most vibrant community where users can interact with each other in the form of creating content and in the form of giving votes to each other. So it was a very exciting event of history which is a proof that how air drops can play a role in building community and in their growth and how they can reward their early supporters.
There are different ways that can be used for the identification of a scam or legit if it is present in any Crypto air drop.
1. Research the Project:
To give a proper time to research the project is very important that is behind giving the air drop so you have to simply look for all the information about the team, their experiences and what goals they want to achieve. You have to check that the project have a white paper or not or is the project have their active social media platform or not so that you may clear yourself and enter yourself in our transparent and well established the project and if you would clear all these confusions then it would be obvious that air drop which is not a scam.
2. Verify Official Channels:
You have to verify official channels means that you have to check that is air drop announcement is through their official channel or through their active social media platform because scammers often try to impersonate the project so it would be very crucial to very fine information from most of the reliable sources which are trustworthy.
3. Avoid Sharing Sensitive Information:
Never ever share your personal information in any case because if there is a legitimate air drop then mostly they would like to ask about your minimal information which would include your email or it could also be wallet address but you should take precautions if an air drop is asking for your personal information like your personal keys so avoid to share any of your excessive personal information.
4. Unrealistic Promises:
If there are air drops that are promising unrealistically about many high returns that are strange for you then take precautions about them because if there is a legitimate air drop then it would you really offer you some of the specific and reasonable amount that would not be strange for you and it would same to you that it is for promotion of their project.
5. Token Distribution Method:
You should also keep in mind about the token distribution method that if air drop is not a scam and if there is a legitimate then it is most probably that they would like to distribute tokens to you directly to your wallet address so you should take precautions about that air drops that have requirement to send funds to them or to make any purchase for receiving of your tokens because if a drop is not a scam then they would not ask for money.
6. Seek Community Feedback:
When you have to participate in any air drop then it is important to see overview or feedback of other users about their experiences of the project or of the air drops and for checking feedback and experience of people you can use reputable Crypto website that can provide you deep insights about people reviews.
If we talk about free crypto air drops then they can be find out by different ways I am describing below:
1. Crypto Airdrop Websites:
There are Crypto air drops websites available that track authentic air drops and these websites and platform are for the purpose of providing information about ongoing and upcoming air drops that are not scams and are authentic and also give instructions to participate.Airdrop Alert, Airdrop Bob, and Airdrop King are the some important website.
2. Social Media Channels:
There are many projects that likes to announce about their air drops through their official social media channels or platform like it can be in the form of Twitter can be in the form of discord can be in the form of telegram can be in the form of other social media app so its only depends upon the choice of project and by following these projects and joining them you can update about latest air drop opportunities.
3. Crypto Forums and Communities:
To discover air drops it is very important and interesting to participate in different Crypto forums and communities .Bitcoin talks have there sections where users have opportunities to share information with each other about outgoing the air drops so engagement with these communities can help everyone to stay informed about air drops.
4. Project Websites and Whitepapers:
Reading white paper of a particular project that you have in your mind or visiting their official website can help you a lot in providing information about any air drop if it is upcoming because many projects have their details about their air drop programs in their white papers or in their official channels.
On Crypto air drops Taxes may be very complex so its much better to take an advice with text professionalist for personalized benefits so that test treatment of Crypto air drops depends upon several factors here some I am describing below.
1. Taxable Income:
Receiving Crypto through an air drop is considered taxable income in many of the jurisdictions. On the date of receipt value of tokens that a person receive include in his taxable income at fair market value. So there is a need to report that income on your text return and then you have to pay tax according to that.
2. Ordinary Income vs. Capital Gains:
Tax mein differ and it may depends upon the air drop classification that whether it is ordinary income or capital gains and if air drop token are able to sell immediately then it means that there are more chances to treat them as ordinary income and if someone is holding a token and not selling them then any games or losses may be subject to Capital gains tax.
3. Valuation:
If air drop tokens are not listed on exchanges then determining the fair market value of these tokens could be challenging and there are some jurisdictions that can provide guidelines that how to value such tokens for text purposes so it is very important to keep record and details of all those air drops including date of their receipt.
4. Holding Period:
If there are air drop tokens and someone is holding them as Capital asset than length of the time in which the person is holding them may also affect tax so there are some jurisdictions that says that if you are holding the token for a certain period then you are eligible for tax rates on any subsequent gains.
5. Deductions and Losses:
If a person incur expenses related to participation in a Crypto air drop in the form of transaction fees then he may be able to the deduct those expenses. So in the same way if a person is experiencing any loss by selling of air drop tokens then you maybe able to offset those losses against other capital gains.
Very honestly I want to say that I have not yet in my life personally claim a Crypto air drop before but I can explain a brief procedure for claiming an air drop .
1. Research:
You should look for project website social media channel or dedicated air drop platform for staying updated about air drop announcements which are outgoing or upcoming and you should also have clear instructions and guidelines about air drop tokens.
2. Wallet Requirements:
You have to make sure that you should have a proper volatility that support air drop tokens because there are many air drops that require compatible for transferring tokens so there are many popular options present here in the form of Metamask ,trust wallet , MyEtherwallet or hardware wallets like Trezor.
3. Eligibility and Requirements:
Holding a specific amount of specific token or accomplishing some particular tasks are some of the eligibility criterias of some air drops. So there is a need to read carefully requirements and eligibility criterias of a particular air drop token before claiming it and make sure that you meet all the criterias.
4. Registration and KYC:
KYC stands for know your customer so it is just like registration somewhere so there are some air drops who have requirement of this option also so you have to follow all the provided guidelines for completing the registration process that may include your information including your mail, your wallet address but not very personal information from you.
5. Follow Instructions:
For claiming tokens there are specific instructions that air drops often have and these instruction may include for joining their social media groups to subscribe their news letters or social media channels or it could be complement of any other task so you should precisely follow all the instruction so that you may be eligible for claiming air drop.
6. Wait for Distribution:
You have to wait for distribution of air drop tokens when you have completed other necessary steps and distribution timeline can vary from project to project so you should stay updated through official channels of project for updating any of announcements.
7. Check Wallet:
After waiting for Air drop distribution you have to immediately go to wallet to check that you have received tokens or not because there are some drops that require manual token edition to your wallet and there are many more like that which transfer automatically your tokens in to your wallet.
It's important to remember that all necessary steps that I have shared was general overview that how you can claim air drop tokens but specific process could also very for each air drop so you should always research on your own before claiming any air drop and you should stay updated about all instructions.
Advantages 🌟
- Opportunity for Free Tokens: Without any purchase or without any investment If you have an opportunity for getting free tokens then it is a great benefit of crypto airdrop.
- Token Exposure: Air drop is a best opportunity for increasing awareness and exposure about some new projects by the process of distributing tokens in a wider audience.
- Community Building: Airdrops increase fostering community building by giving invitation to different people to engage with each other.
- User Acquisition: Air drop could be one of the best way to attract new users towards a specific project because people are incentivised to join for the purpose of learning about a new token in this way.
- Potential for Value Appreciation: For example if air drop token is gaining value with the passage of time then it could be much beneficial for the participants to gain potential benefit by price appreciation of a particular token.
Disadvantages👎
- Scam Risks: There could be some fraud through air drop by the collection of some personal information or private keys of different people so there should be awareness about source of news about air drop.
- Token Dumping: Token value can also go towards a sharp decline because there could be many participants who have a mind to sell air drop tokens immediately after getting them.
- Eligibility and Requirements: There could be some air drops that have too much lengthy eligibility criterias for participating to get air drop tokens so to fill such a complex eligibility criteria may decrease attraction of others.
- Privacy Concerns: There could be some air drops that may required personal information from people so it may raise privacy concerns for those who want to remain anonymous.
All these were my general observations about advantages and disadvantages of air drop and just like the method of claiming air drop advantages and disadvantages may also very depending upon the project so self research is very important again I am repeating it.
Sin duda que resultó muy atractivo obtener tokens gratuitamente, fue una muy buena estrategia para llamar la atención de muchas personas e impulsar la inversión de muchos otros cuando conocieron el proyecto.
Aunque el proceso de obtención suele ser sencillo, se debe buscar las fuentes oficiales del airdrop y conocer o investigar el proyecto (DYOR) para estar seguro de su inversión.
Saludos y mucha suerte.
CONGRATULATION...
This post has been upvoted through steemcurator08
Team 5: Curation Guidelines & Basics for September
Curated by - @chant
Thank you @chant
You've provided a comprehen You covered various aspects of cryptocurrency airdrops, including their types, legitimacy, taxation, claiming process, and advantages/disadvantages. Great job on sharing valuable insights!
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