An airdrop[1] is an unsolicited distribution of a cryptocurrency token or coin, usually for free, to numerous wallet addresses. Airdrops[2][3] are often associated with the launch of a new cryptocurrency or a DeFi protocol, primarily as a way of gaining attention and new followers, resulting in a larger user base and a wider disbursement of coins.[4] Airdrops have been a more important part of ICOs since crypto entrepreneurs have started doing private sales instead of public offerings to raise initial capital.[citation needed]

Airdrops are also often used by companies, brands and entrepreneurs to reward their current holders, investors and collectors, which may receive tokens, coins or assets for free, based on how much they invested or contributed to a certain project.[5]

Airdrops aim to take advantage of the network effect by engaging existing holders of a particular blockchain-based currency, such as Bitcoin or Ethereum in their currency or project.[6]

In the United States, the practice has raised policy issues about tax liability and whether they amount to income or capital gains.[7]

A dusting attack is one important risk of crypto airdrops to take into consideration.[citation needed]

References

  1. ^ "OKAirdrops". Telegram. Retrieved 2022-05-20.
  2. ^ Coin, Crocodile. "Claim Airdrop $80 Now". Retrieved 2022-05-20.
  3. ^ "Claim Airdrop Floki Inu Gold". flokiinu.tech. Retrieved 2022-05-20.
  4. ^ Van Boom, Daniel. "Crypto airdrop season: Why people are making thousands for 'free'". CNet. Retrieved 8 March 2022.
  5. ^ "Crypto Airdrop Explained". boardroom.tv.
  6. ^ BJORØY, Trond Vidar (2017-09-06). "The latest crypto PR craze: 'Airdropping' free coins into your wallet". venturebeat.com.
  7. ^ "Bitcoin Is on a Collision Course With the IRS". Fortune. Retrieved 2018-01-17.