How Do Crypto Airdrops Work and How Can Your Business Launch Them?

Crypto airdrops

Everyone likes freebies, and when these freebies are crypto tokens, it’s doubly nice. Airdrops offer just that, but the process of launching and receiving them is not as simple as it sounds.

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Crypto airdrops are free tokens that are issued as part of a marketing strategy. They are often used by startups. To become eligible for earning tokens, users are given several conditions. For example, they need to repost news about the platform’s launch or subscribe to its channel.

Even if those projects turn out not to be very successful and their tokens never increase in value, it is not too painful for early adopters, because they received the crypto for free and did not lose any personal funds.

Crypto airdrops have a lot more benefits than that, but they also have some serious pitfalls, and it’s vital to know how they work and what to expect when preparing to release them. Read on to find out all the details.

How do crypto airdrops work?

Companies distribute their tokens as airdrops in order to increase engagement with their new project and gain in popularity. However, not every random person can receive these freshly-minted tokens. Users need to meet two conditions:

  1. Complete specific tasks set by the project
  2. Do them within a certain period of time

The requirements for becoming eligible to receive airdrops are determined by the company that launches the tokens. For example, users may need to share a company post on social media, join a community on Twitter, Telegram, or Discord, test a beta version of the platform, subscribe to a newsletter, or simply like and repost some promotional material.

Some companies choose a slightly different marketing strategy: they do not announce specific requirements, but instead only hint about a possible airdrop. When this happens, users are keen to follow project channels and interact actively with the protocol in order to benefit.

However, this method is best for the more hyped platforms. If you are at the very beginning of your journey, simpler conditions for receiving a crypto airdrop will work better.

It’s also worth noting that airdrops, just like any crypto projects, are not possible without blockchain technology: tokens first need to be minted with the help of their newly-created blockchain platforms. Then, startups will be able to send those airdrops to users’ crypto wallets where users can claim them.

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Examples of crypto airdrops

The first airdrop in history happened in March 2014 when Iceland launched its Auroracoin as an experiment that would potentially replace the Icelandic króna and Bitcoin. Each citizen first received 31.8 AUR, then 318 coins. In the third stage, the amount doubled to 636 coins. All the coins were airdropped for free.

Although Auroracoin’s value crashed and the attempt failed, the airdrop phenomenon itself only gained popularity over time. Let’s check several examples of more recent crypto airdrops.

Uniswap (UNI)

Uniswap, a large Ethereum-based cryptocurrency exchange, launched its airdrop campaign in 2020. Despite Uniswap’s popularity and success, this decentralized exchange didn’t have its own token until that year.

When Uniswap airdropped UNI, those who had used the platform before a certain date could receive 400 tokens for free. At that time, one token was worth $2-4. A year later, in 2021, its price peaked at $43.21.

However, as of November 25, 2022, UNI’s price is back down to $5.48. Someone probably managed to make a fortune back in 2021, when the price reached its maximum.

Ethereum Name Service (ENS)

Ethereum Name Service airdropped its ENS tokens in 2021 and created one of the most successful crypto airdrops of that year. Those users who registered a .ETH address on the service’s platform had a chance to receive and claim around 200 tokens per address, while some could get up to 1,000 ENS.

As of November 28, 2022, ENS has a market cap of $260 million and a single token price of $12.86. The price peaked at $76.09 on November 29, 2021.

Doodles NFT

Doodles NFT is a collection of 10,000 bright and creative profile pic (PFP) NFTs for Web 3.0. It launched on October 17, 2021 and quickly became successful. Crypto airdrop campaigns contributed to its success as well.

One of the projects within Doodles that airdropped their tokens was called Pukenza. For this airdrop, 8,010 Pukenza NFTs were produced, consisting of artworks using Doodle NFT’s main colors. Users who received and claimed their free Pukenzas could add them to their Doodles to modify accessories, clothes, hair, and background color.

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Should your business launch airdrops? Pros and Cons

Competition between crypto companies and startups is no joke, and without proper marketing it is extremely difficult to get your ideas heard. Before you consider turning to crypto airdrops as a way of promoting your project, you should be aware of the following advantages and disadvantages.

Pros

There are four reasons why crypto companies use airdrops:

  • Raise brand awareness

Airdrops are often released even before a project is launched because they can give a company significant brand exposure. When the release finally happens, the project will already be popular enough to get attention from both users and the media.

  • Grow a community around the project

The crypto community literally lives on social media and watches what’s happening in the crypto world on a daily basis. Advertising your project and airdrops there will help you grow a solid community of project supporters who, later on, will not only promote your platform but also make it function.

  • Decentralize coin distribution

To avoid token hoarding by wealthy investors and thereby prevent centralization, you can choose to release a certain portion of your token’s total supply as airdrops. It will help you balance out token distribution and ensure that your system remains decentralized.

  • Reward early adopters

Reward loyal adopters, to be exact. It is important for startups to attract those who are really interested in the platform and who will hold certain amounts of tokens for a longer period of time.

In a perfect scenario, such users will interact with the system to keep it up and running once it’s launched. Providing such loyal supporters with crypto airdrop rewards is a win-win solution in this case.

Cons

However, there are several disadvantages to the crypto airdrop concept:

  • Safety issues and scams

Your users may fall victim to crypto scams by connecting their wallet to suspicious websites or clicking on bad links. While this won’t be your fault, it could damage your reputation and there is a chance these users won’t come back to your project after that.

That’s why it’s highly recommended to remind your potential users of simple cyber security measures and highlight which social networks and websites are official and trustworthy. If you notice some suspicious activity on your official channel, be sure to inform your users immediately so that no one loses their funds and they will continue to trust in your project.

How do you avoid scams in the NFT space and beyond? Find the answer here
  • Taxability (in some countries)

Some countries, such as the US, Australia, and the UK, consider crypto airdrops to be a bonus, which means a form of income, so these tokens are taxed. This may prevent users from getting them.

If you provide proper guidance on whether your airdrops will be subject to income tax in certain countries, it will be easier for users to understand what to do if they receive your free tokens.

  • Uncertainty about the token’s future

There are many factors that contribute to the success of a crypto project, and the success of an airdrop campaign is just one of them. Others include how well the platform is developed, how secure it is, how it functions, how its tokenomics work, how many supporters it has gained, and so on.

Instead of increasing in value, there is a possibility that the token may crash shortly after release. You need to put in a lot of effort to prevent this.

How to launch a crypto airdrop campaign in 5 steps?

Here are the five steps you will need to take to create an airdrop campaign and successfully launch it.

Step 1. Develop a detailed marketing plan

Define your target audience and analyze what social networks they use most often. These days, Telegram, Twitter, and Discord are especially popular among the crypto community.

In addition to this, think about the most effective ways of attracting your audience’s attention and encouraging them to take the specific actions that will benefit your project.

Step 2. Choose the platform where you will hold your airdrop campaign

It could be a landing page of your website or even a page in some social network. Use it to post all the information about your project and the upcoming crypto airdrop, share the links to social network pages, and publish announcements so that your users are up to date with the news about your project’s development.

Step 3. Select a service to enable the airdrop functionality

To enable the airdrop functionality on your website or a social network page, you will need to integrate your platform with a special service, such as Gleam or SweetWidget.

If you choose to launch an airdrop campaign on your landing page, then there will be a special window listing all the conditions for receiving and claiming an airdrop. If you’re campaigning through your social media page, you will need to create a post with a link that will redirect users to the airdrop window.

Step 4. Determine the conditions for receiving airdrops and decide on a schedule

You will need to define the conditions for receiving a crypto airdrop, and also determine the total supply of your token and what percentage of it will be distributed as airdrops.

You can create as many conditions as you want for receiving a token, but remember that they must be doable. If your project hasn’t gotten a lot of attention yet, perhaps the entry requirements should be on the simple side.

You will also need to determine the timing of the airdrop campaign and when users will be able to claim their tokens.

Step 5. Launch the airdrop

If everything is ready — your marketing has worked well, you have gained a large number of followers, and the community is anticipating your project — launch the airdrop on the predetermined date.

After a certain period of time, according to your schedule, users will be able to claim their crypto airdrops on your platform. In this way, you will be sure that there are already users who are constantly interacting with your protocol and keeping it running.

Moreover, they are interested in the success of your project and token because there is a chance that they will reap their own benefits from it in the future.

Closing thoughts

A crypto airdrop is a trendy and effective way to promote your project, and can help it stand out from the huge crowd of other crypto startups.

Launching an airdrop requires a lot of effort from different teams, from blockchain consulting and research to design and development. We at PixelPlex can help you through all the stages of an airdrop, as well as the creation of your own blockchain platform.

Reach out to our blockchain consultants for all the details about how to design tokenomics, prepare an airdrop campaign, and implement blockchain in your project. Having built over 80 blockchain projects to date, we know the technology inside out and will find a way to translate your ideas into a real-world solution.

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