Airdrop (cryptocurrency)

An airdrop is an unsolicited distribution of a cryptocurrency token or coin, usually for free, to numerous wallet addresses. Airdrops 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. 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. One example of this is the company Omise, which gave away five percent of its OmiseGO cryptocurrency to Ethereum holders in September 2017.

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.

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

Risks and challenges

While airdrops can be an effective marketing tool, there are risks and challenges involved:

• Scams and Phishing: Some malicious actors may offer fake airdrops, attempting to steal users’ private keys or other sensitive information. It is important for users to carefully verify the legitimacy of any airdrop before participating.

• Token Value Volatility: In some cases, the value of the tokens distributed in an airdrop may decrease significantly over time. This can be due to market conditions, lack of demand, or the project failing to deliver on its promises.

• Regulatory Uncertainty: As mentioned, the tax and legal status of airdrops remains uncertain in many jurisdictions, which may result in tax complications or even regulatory penalties for participants and developers.

See also

• Helicopter money