Steemit Crypto Academy Contest / S12W01 - Understanding Cryptocurrency Airdrop

One of the good sides of crypto currency is the ability of the developers to give out certain quantity of the coin for free to individuals by crediting their wallet addresses. This is known today as crypto airdrop. Infact many have made millions of dollars just from crypto airdrops.

What is this crypto airdrop, how do we get to find the real ones to avoid getting scammed?

This weeks crypto academy engagement contest deals with this. The topic is Understanding Cryptocurrency Airdrops. I will be using the contest tips to explain more on this topic.

Define what is crypto airdrop?

Crypto airdrop can be defined as the act of sending crypto assets to already selected wallets that have met the criteria for the airdrop as is stipulated by the owners of the token.

It is a form of marketing and promotional method employed by the crypto startup company to create awareness for its token. It is also an avenue of letting as many as possible become wallet owners of this token which speaks good for the token.

These airdrops my be free or given in exchange for a little payment by the company. Others may be in the form of mining, holding a particular coin or in their wallet, performing certain tasks on social media platform and so many other ways.

Give the different types of crypto airdrops.

There are different types of airdrops and we are going to explain them as follows:

Task airdrops.

This type of airdrop is the one that require users to perform certain tasks. The task they are asked to perform would create more awareness to the public. This awareness could be in the form of liking and retweeting a promotional post, to make it trending in Twitter, Facebook, Instagram, and the likes. They may also offer extra airdrop token for each new user referred using your referral link.

For example, gleam.io is used by many startups to conduct their airdrop. Each task you perform gives you a reward point, at the end, the points are calculated and paid out to you as the tokens.

*Standardized Airdrop. *

This is the type of airdrops in which participants indicate their interest to participate by dropping their valid wallet address for the airdrop. Most at times nothing more is required.

This kind of airdrop usually have limited time to participate and the amount of token received by all will be the same quantity.

Holders Airdrop

This is the kind of airdrop in which existing holders of the token are given airdrops based on the amount they are holding. It may be required that the holders have a particular quantity of token and above before being eligible for the airdrop.

Exclusive Airdrop

In this type of airdrops, some selected persons are chosen for the airdrop. This criteria may be based on some other factors apart from quantity of token held by the individual.

Developer airdrop.

This is the type of airdrop for the developers of the projects and others who have supported the project so far.

Hardfork airdrop

This is the type of airdrop that occurs when Hardfork occurs on the blockchain which leads to a creation of another token to either replace the former or as a gift to holders of the former token.

For instance, the airdrop of lunc token for existing Luna holders. Usually, a screenshot of the different wallet holders are taken at a specific time to know the quantity they will be airdropped with.

Have STEEM token ever been claim as a crypto airdrop?

From the inception of my journey in steemit up till now, I have not witnessed any steem airdrop whether on the steemit platform or in any other exchange.

The only time I heard of steem airdrop was in May 2020 during the Hardfork on the steem Blockchain. During that time, holders were airdropped with the new steem token to account for the old one.

How to identify if a crypto airdrop is legit or scam. How can we also fine free crypto airdrops

° Any legit crypto airdrop will not require or seek that its participants invest money to ratify their participation. Remember it is just for promotional purposes.

° Any airdrop that involves sending some BTC or other tokens to individuals wallet without being aware of such is a crypto scam. This type is known as dust scam.

° Any crypto airdrop that involves connecting your wallet through phishing links and completing the connection by providing your secret phrase or keys in order to claim the airdrops are not legit airdrops.

° Any airdrop that wants investors to invest and own a particular NFT in order to be airdropped a particular token is a scam. They are indirectly creating liquidity for themselves to sell off their own NFT and there after the NFT becomes useless in the hands of the holders.

° Do further research on the project.
It is always advisable that each person do his own research before participating in any airdrop. This will help to easily identify scam airdrop project.

To find out good crypto airdrop project, we should

1. Do further research on the project. Know the project team, find out their history in the crypto space, whether they have worked on a similar project and so on.

2. Any crypto airdrop that requires providing wallet key, seed phrase or other sensitive information is a tell- tale sign of scam and should be avoided.

3. There is need to check the official channels of the project. This includes their Twitter handle and websites to see if they announced the airdrop there.

4. Any offer that seems to be too good to be true is eventually a scam. We cannot pluck money easily just by climbing a tree.

5. Being very mindful of third party websites we use since many are designed to steal our private and personal information

How are crypto airdrop taxed?

Crypto airdrop is taxed but it is majorly dependent on the taxation laws of the land or country which the individual resides.

Some places tax crypto airdrops as ordinary income. This implies that it will be taxed based on its value as at when it was given to you. This mode of taxation are mostly applicable in the US, UK and Australia.

Some other countries do not impose tax on it, while some regard the airdrop as an income, and on selling it too, you will be required to pay capital gains tax on the profit accruing from it.

So like I said earlier, the issue of airdrop taxation is subjective to each country.

Have you ever claim a crypto airdrop before? Which coin was that?. If you haven't claim an airdrop before then explain how one can claim a crypto airdrop

I have claimed several airdrops . But came to understand that most of them are fake and scam. The airdrop was just an opportunity to have access to your wallet.

I have claimed the airdrop of ECC token, VANCATDOG token and NEBULA token. The screenshot below shows the quantity of VANCATDOG and NEBULA received via the airdrop and till date no value has been attached to it.

They are over 2 years now. A phishing site was given through which you connect your decentralized wallet. I have a dedicated wallet for airdrops, so even if they hack it, they will not see anything.

Many paid for the ICO hoping to make profit when listed, instead they removed liquidity from pancake swap and zoomed off.

The project team of ECC token asked us to pay $20 worth of BNB to be able to transfer our asset from their app to a decentralized wallet. Once more, I refused to pay.

So these are just some of the airdrops that I have participated in.

Steps to claiming an airdrop.

1. Most airdrops are done using a decentralized wallet and not a centralized wallet. So the first thing to do is to download trust wallet app or meta mask app via google playstore.

1. Copy the airdrop link from the company's social website and paste on the trust wallet browser.

2. The site now opens, then connect the airdrop wallet.

3. Once the wallet is connected, scroll down, you will see the claim button for the airdrop, click on it.

4. Once you click on it, you will be told that you have claimed the airdrop

Go back to your trust wallet asset page, you will see the airdropped tokens.

Let us remember that this is just one way of claiming an airdrop, other projects might have a different way or distributing it.

Advantages and disadvantages of crypto

Advantages

° it helps the crypto project team to increase their token holder base, increasing the number of wallets having the token. That is one of the things you look out for when researching on a crypto project.

° Through airdrops social communities are created which enhances engagement on the new project.

° it is a way of rewarding major supporters of the project, thus creating a sense of ownership and long term mindset for the project in them.

° It serves as a way of promoting and driving adoption of that crypto token.

° It is free money and increase in networth for the participants and a strong motivator for the holder.

° It provides a cost effective way of marketing the project and it's token.

Disadvantages

° Airdrops can attract the attention of people who are not interested in the project or it's growth but just the free money. This does not help the growth of the project at all.

° Airdrops can also attract fraudsters who create similar social network just to prey on unsuspecting victims or fraudulently receive the airdrop token.

° It can also be very expensive to run airdrop, so the project team needs to be careful too.

° Investors who buy the token later may see a sharp drop in prices because those who got the airdrops are selling it off.

Conclusion

It is great to have engaged in this crypto academy contest. I have learnt a lot more about crypto airdrops and how it works. It has widened my horizon about what is involved in airdrops. I will continue to be more careful when doing so.

I therefore invite @aaliarubab, @hamzayousafzai and @casv to make their entry here

Success to you all!