What Are Crypto Airdrops : Full Guide

The term “airdrop” is commonly used in the crypto space. There is a chance that you may have come across it once or more in your crypto journey.

But how much do you know about airdrops, how do they work, and what should you be wary about? In this guide, you’ll find all the important details you should know about airdrops, including airdrop taxes.

What Is A Crypto Airdrop?

Crypto airdrops refer to the distribution of cryptocurrencies by blockchain-based startups to different wallets for favorable motives.

Usually, these motives include marketing or promotions for a utility token or coin or to create awareness for a brand. Whatever the motives are, they are always good unless the parties intend to defraud crypto holders of their assets, as we’ll discuss in subsequent sections.

How Do Crypto Airdrops Work?

Airdrops work just like regular giveaways on social media—this time, from a crypto brand. Airdrops may be sent directly to your wallet if you hold a particular asset. A recent example is airdropping of the ApeCoin token for Bored Ape NFT holders. 

Other times, you may have to claim airdrops by engaging in one or more tasks based on the brand’s instructions. Examples of tasks to do may include:

  • Inviting friends to register with the brand, 
  • Sharing the brand’s content on social media, 
  • Or simply being active in the brand’s Telegram or Discord community.

Many brands announce their rules via social media. Also, holding a certain token such as ETH or BTC and using a wallet that supports the brand’s token qualifies you to claim a crypto airdrop.

Many airdrops come from blockchain or DeFi startups looking to create value for their tokens. These startups do it in preparation for token presales, often hosted privately instead of the public sales or initial coin offering (ICO), which may come afterward.

Are Crypto Airdrops Safe?

Airdrops are free money—who doesn’t love free money? However, you should be wary of fraudulent organizations. Many brands posing as promising projects are the opposite. 

Moreso, scammers, may disguise themselves as startups to organize airdrops. You should never give anyone your private keys or seed phrases to earn an airdrop. Due to FOMO on the project, people make this mistake, leading to the loss of crypto assets.

Secondly, you should create a separate wallet (with a different seed phrase or private key) for the airdrop. This will make it hard for a fraudulent party to access your assets through a “dusting attack.

A dusting attack is a method used by scammers to access your wallet and steal your assets. They do this by sending free tokens (called dust) as airdrops. These tokens are bound to malicious smart contracts that can grant them unsolicited access to your wallet.

Is It Possible to Make Money From Crypto Airdrops?

Is It Possible to Make Money From Crypto Airdrops?

You could make money from crypto airdrops, but not the kind of money that will buy you a car or help you start a business. At least, not at the onset of the airdrop.

Since the airdrop organizers plan to capitalize on the economic phenomenon common with digital brands—the network effect—their token can only get value when more people purchase or hold it.

You may only see value in the token after an initial coin offering (ICO) or private token sales. Depending on the project’s potency surrounding the token, the airdrop could turn out huge. 

Otherwise, certain factors, such as the following, may cause the token to earn little or no value after an airdrop:

  • Massive token sale from holders after little pump
  • Skepticism in the project and the token
  • Negative market influence, among others.

Is Crypto Airdrop Taxable?

The Inland Revenue Service (IRS) sees cryptocurrency earnings as income, hence taxable. However, airdrops may be treated slightly differently because of their nature.

The IRS did mention crypto airdrop in one of its recent official tax guides—the Revenue Ruling 2019-2024. However, it used the term in reference to earnings gotten from crypto hard forks, specifically from miners or validators. It did not categorically highlight the unsolicited airdrop we mean in this context.

This doesn’t mean that airdrops may not be taxable. A fair market value applies to airdrops, and you must report airdrop taxes per capital gains and losses as they relate to the value of the airdrop at the time you claimed it or the value at which you received them.

Taxes due to cost basis also apply when you sell off your airdrop holdings. Cost basis refers to the airdrop plus additional fees such as gas or exchange fees. This implies that you may consider the fees to determine a fair market value when reporting an airdrop tax.

Biggest Crypto Airdrops: Are Airdrops Worth It?

Biggest Crypto Airdrops: Was It Worth It?

Airdrops such as Ethereum Name Service ($ENS) and LooksRare ($LOOKS)—a popular NFT marketplace—have given huge returns to recipients. Although an average airdrop could be worth $30 or more, you may earn more by participating in more airdrop-related tasks.

Best Crypto Airdrops 2020

1. Trust Wallet Token ($TWT)

Trust Wallet is a Binance-run multi-asset wallet, and it featured one of the biggest crypto airdrops of 2020. Its airdrop required users to download and set up the wallet, refer family and friends, and claim up to 100 TWT tokens.

2. Atomic Wallet Coin ($AWC)

Atomic Wallet was another multi-coin wallet whose airdrop required users to sign up and verify their email addresses and earn about 15 AWC tokens.

3. Basic Attention Token ($BAT)

Basic Attention Token ($BAT) is Brave Browser’s utility token. Its airdrop demanded users to refer their friends and family to earn $10 plus an additional 40 $BAT. Although not as big as $TWT, $BAT was definitely one of the biggest crypto airdrops of 2020.

Best Crypto Airdrops 2021

1. Biswap ($BSW)

Biswap dedicated about 40,000 $BSW for its airdrop campaign. Participation requirements included following the brand on Twitter, referring friends and family, retweeting posts, and providing a BEP20 wallet address.

2. The Sandbox ($SAND)

$SAND is a coin powering the metaverse platform The Sandbox and was one of the biggest crypto airdrops of 2021. The Sandbox’s airdrop required participants to create a metaverse account and follow the brand’s social media handles and communities, including Discord and Telegram. 

3. Sologenic ($SOLO)

Sologenic targeted 1000 lucky winners in its airdrop campaign, dedicating 40,000 $SOLO tokens. Participants were to follow the platform’s official social media handles and contribute to their community on Telegram to qualify.

How To Find Crypto Airdrops?

How To Find Crypto Airdrops?

There are many ways to spot top potential crypto airdrops, and social media platforms like Discord, Twitter, and Telegram are potential hubs to spot them. There are chances you may find fraudulent projects on social media too.

You may also spot top potential crypto airdrops through verified websites like CoinMarketcap, Coindesk, Airdrop.io, Airdropking.io, etc. Some of these platforms are verified and offer exclusive crypto updates through their Telegram channels or websites.

Airdrops And Swapzone

Receiving an airdrop is one thing; getting value on them is another. Swapzone helps you to swap or convert tokens received through airdrop fast and easily while providing you with exchanges with the best rates.

Swapzone has a reputation for updating its platform with new tokens early. Hence, you can swap your airdropped tokens at the lowest fees with more than 700 cryptocurrencies at the best rate on the market. 

On Swapzone, you can easily swap through a wide range of instant cryptocurrency exchange providers, review the providers, their offers, speed, and exchange rates. You can do this through the following steps:

  1. Select your airdropped token in the Send section.
  2. Enter the amount you wish to swap.
  3. Choose the crypto you’d like to get in the Get Up To section.
  4. Select an exchange offer to proceed with.
  5. Enter your wallet address to receive your exchanged crypto.
  6. Send your airdropped token deposit to a generated address.
  7. Receive your crypto!