Hello blockchain friends! This time I have decided to focus on answering the question of airdrops. The reason I am doing this is because, lately I got involved in a random airdrop of 1000 CNX tokens that landed in my wallet. I have managed to trade the CNX tokens for a very good deal which got me into exploring this concept further.
I will cover what airdrops are and why they exist in the first place, also how they work and how to stay on the safe side without compromising your wallet security.
What are airdrops?
In a non-crypto context, airdrops are used to deliver food and supplies in boxes to people that cannot be reached in other ways. They are normally dropped from airplanes with parachutes attached so that they reach people on the ground safely.
In the crypto context, airdrops are used to distribute crypto assets, such as coins and tokens, to as many people as possible. These assets can become valuable and therefore many people are becoming interested in receiving these airdrops and trading them . It might sound like a crazy idea, that people are getting valuable coins for free. As crazy as it sounds it's true. Partially.
There is an old proverb saying that
"If you and not paying for the product, you are the product itself"
What this normally means is that you end up giving your contact details or more to the people distributing the airdrops. That might be something that you are or not comfortable with.
However, not all projects are legitimate and crypto space is still a digital wild wild west. This means you should protect yourself and use different email addresses and passwords for crypto related accounts you set up. If available, you should also secure your accounts with 2-factor authentication. And lastly, keep your private keys safely and never share them with anyone. If anyone asks you for your PK, never trust them.
Who distributes them?
When the whitepaper for a ICO project comes out, their token distribution usually includes a percentage of the tokens that go to the community as rewards. Some of these rewards will be distributed in an airdrop during, or right after the ICO has finished.
In the crypto space, whoever distributes an airdrop gets to decide who can take part in the airdrop. Earlier distributions were based on who already had some crypto assets, such as ETH of BTC, in their wallet.
However, there are other methods used for airdrops, where the user is requested to provide contact details such as email addresses, Bitcoin talk profile details, Twitter handles, Telegram usernames and so on.
To maximize the number of airdrops you can participate in, you should also set up social media accounts, remembering the security tips above. The most common method now is to reward airdrop applicants by using their telegram account to validate the application through a unique referral code they are given. This method can easily be exploited by using multiple sessions with different wallets and referral codes.
If you want me to cover this in another post, let me know in the comments below.
Airdrop applicants can also earn reward by retweeting posts with the relevant hashtags or making posts on facebook. This means that participants earn the airdrop by performing promotional work. This is great, especially if you take part in an airdrop for a project that you support and want to succeed, as it provides you a reward for promoting something you like.
Where to store them?
In order to benefit from the tokens distributed during airdrops, you will need an ERC20 address to receive the tokens. I personally use MEW (myetherwallet) which I access through my Ledger nano cold-storage.
The tokens are available to use as soon as you have them in your wallet but sometimes you will find it takes a while until they get adopted by exchanges in order to be traded.
It is also possible to hold as many wallet addressed you want and benefit from one airdrop many times.
Some airdrops use a proprietary approach and have their own web wallets. Normally such projects intend to build dedicated wallets which can be accessed offline too. Before that they simply store the tokens on their website so you can see your balance as you log into your account.
Another place where you might get an airdrop are exchanges. This however can be slightly different as they only happen during a fork. I do not recommend you use any exchange wallet address for ICO airdrops.
What to do with the airdrops?
After you received the well deserved tokens, you might wonder what to do with them. Should you hold onto them for the long term or should you sell them immediately. In order to make a healthy decision, you should do your own research to understand what the long term potential is. If you decide to sell them make sure they are traded on the exchange you intend to use.
Unfortunately there is no easy answer to what to do with your new assets, I am not qualified to give investment advice so you might want to consider getting professional advice for that.
I hope you enjoy this article and find it useful.