What is an Airdrop?

What is the definition of an airdrop?

An airdrop is the act of distributing tokens (fungible or non-fungible) to numerous wallet addresses. Airdrops or “drops” are often used as a marketing tool for cryptocurrency start-ups.

What are examples of fungible and non-fungible token airdrops?

There are some subtle differences between the typical drop of actual cryptocurrency (fungible tokens) and non-fungible tokens. In the case of a cryptocurrency airdrop, a project may announce that it is offering free tokens at a specific time to the first 500 users to sign up for the drop. The sign-up process can happen through a website or a service like Discord (or other means) and typically requires the user to provide the address of a personal wallet that supports the cryptocurrency that’s being dropped. One idea behind giving away a cryptocurrency is to promote the ecosystem to which its connected and to draw more users to sample that ecosystem’s value or utility.

Non-fungible token (NFT) airdrops are slightly different. For example, Anheuser-Busch (AB InBev) has created a marketing initiative whereby beer enthusiasts for specific AB InBev brands (Stella Artois, Budweiser, etc.) can set their cryptocurrency wallets up to receive promotional NFT drops from those brands. Such a drop could be a promotional coupon for a discount on the customer’s next purchase of that brand or a ticket to a special event. At the more forward-thinking enterprises, Web3 strategists view NFTs and airdrops as a way for creating and maintaining brand community, loyalty and ongoing engagement.

What is the relevance of airdrops to enterprises and businesses?

Blockchain-based start-ups use airdrops to promote products and/or raise awareness of their cryptocurrency project. Airdrops allow a company to reward loyal patrons of specific blockchain networks. In addition, sending airdrops to all wallet or existing token holders distributes tokens in a manner that may not happen in an open market. Rewarding early adopters is an effective way to help a company stand out from their competition in the start-up realm.

Some start-ups will employ a clever fundraising strategy whereby users are promised future airdrops of free crypto or NFTs in exchange for participation in a limited NFT sale. The limitation might be based on the number of NFTs that can be purchased in exchange for the future benefit. Or, there might be a limited period of time during which these special-purpose NFTs can be purchased.

What are the risks of participating in an airdrop?

Users should approach these offers with caution and do whatever it takes to ensure that the start-up will legitimately follow through on its promise. There have been many NFT sales that involve the promise of future benefits, where the sellers have taken the money with no intention of delivering on any of the promised benefits.