Airdrops in Cryptocurrencies: Everything A Beginner Should KnowSince the very beginning of the crypto world, cryptocurrencies have proven to be a source of wealth for investors brave enough to take a risk. There have been lots of ways of earning money from cryptocurrencies. But, like every type of investment, there have also been scams that have left some investors with their fingers burned.
Despite the existence of scams and frauds, one real way of earning money via cryptocurrencies is airdrops. Cryptocurrency airdrops may sound a strange concept to the beginner. So, to answer any questions that you may have, here is an explanation what an airdrop is in the world of cryptocurrencies.
What Is Airdrop in The World of Cryptocurrencies?Initial coin offerings, tokens, and blockchain technology are the foundations of cryptocurrencies. The term “initial coin offering” (ICO) refers to the way that businesses and companies source funds to launch a cryptocurrency project.
In an ICO, funds are obtained by releasing coins or tokens from the project to members of the public. ICO transactions are carried out using blockchain technology. Blockchain technology eliminates the need for validation by a central authority. Instead, transactions are validated by a network of computers that decipher complex cryptographic puzzles.
Once you understand the basics, you can begin to understand airdrops. Airdrops are a procedure where new coins or tokens are issued to current holders of other coins, such as Ethereum or Bitcoin. In other words, if you have previously purchased an existing blockchain currency and you have those coins in a wallet, an airdrop will entitle you to claim the new coins. You may be able to claim the new coins at no cost at all. Or, you may have to carry out a simple task to be able to claim your coins.
How Are Airdrops Created?Airdrops are created via several methods. One of the most popular ways of creating them is through a hard fork. When existing cryptocurrencies or ICOS are hard forked, free coins of the new cryptocurrency are offered to holders of the parent coin.
If well-known cryptocurrencies such as Monero, Litecoin, bitcoin, and Ethereum are forked, new coins and tokens will emerge as a result. These new coins will be distributed to holders of the existing cryptocurrency or ICO.
Motivations Behind Free Crypto AirdropsThere are several reasons why free crypto airdrops occur. One of these reasons is that a free coin issue generates excitement and hype around the new cryptocurrency. Here’s a further explanation of the reasons that free crypto airdrops are made.
1) Rewarding Faithful and Long Time Investors:
Sometimes an airdrop is made to reward existing investors. It is used as a means of rewarding early adopters and long-term holders of a cryptocurrency.
2) To Raise Awareness:
Freebies have always been a good way to pull in new customers or investors to any venture. Cryptocurrencies are no different in this respect. Airdrops are sometimes offered to create awareness of a new coin. The best way to promote a new coin to current holders of cryptocurrencies is to give them some free coins.
The idea behind this is to strike a chord with these holders and get them intrigued enough to research the new cryptocurrency further. It will encourage investors to find out what the new coin has to offer and find out why the coins have released.
3) To Evenly Distribute Token Supply
Another reason for airdrops is to ensure that the initial supply of coins is evenly distributed through the crypto community. This ensures that coins are not centralized in the possession of one holder.
How to Stay Updated on Cryptocurrency AirdropsYou can stay abreast of the latest cryptocurrency airdrops by looking for announcements on any bitcoin forum page. You will also find announcements on the Twitter page of a cryptocurrency project. You can also stay up to date by subscribing to or joining an active cryptocurrency community that specializes in this area. However, you do need exercise a bit of caution when searching out a community to join. Some of these communities can be fraudulent.
Tips on Accessing Your Airdropped CoinsThe way that you get hold of your free cryptocurrency airdropped coins varies from project to project. Sometimes all that is required is that you retweet, sign up, join telegram, refer a friend or complete a social media task. However, when it comes to hard forked coins, you will need to know how to log into your public address using your private key. Or, you will need to know how to direct or determine the use of your private key. Your cryptocurrencies should be kept secure in tried and trusted cryptocurrency wallets. Some example of these are Exodus (desktop wallet), Ledger Nano S (hardware wallet) and My Ether wallet (web wallet).
On a final note, cryptocurrencies are gaining new grounds and increasing in popularity with each passing day. As cryptocurrencies grow, new fraudulent schemes will also appear.
The existence of fraudulent schemes creates the need for investors to be vigilant. You need to do your research on all cryptocurrency projects that you come across, including airdrops. Despite the existence of scams, cryptocurrencies and airdrops can be kept safe if you use private keys that are known only to you. Any airdrop project that requires you to disclose your private key is one to be very wary of.