Crypto airdrops refer to the distribution of cryptocurrencies by blockchain-based startups to different wallets for favorable motives.<\/p>\n\n\n\n
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\u2019ll discuss in subsequent sections.<\/p>\n\n\n\n
How Do Crypto Airdrops Work?<\/strong><\/h3>\n\n\n\nAirdrops work just like regular giveaways on social media\u2014this 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<\/a> for Bored Ape NFT holders. <\/p>\n\n\n\nOther times, you may have to claim airdrops by engaging in one or more tasks based on the brand\u2019s instructions. Examples of tasks to do may include:<\/p>\n\n\n\n
- Inviting friends to register with the brand, <\/li>
- Sharing the brand’s content on social media, <\/li>
- Or simply being active in the brand’s Telegram or Discord community.<\/li><\/ul>\n\n\n\n
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\u2019s token qualifies you to claim a crypto airdrop.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
Are Crypto Airdrops Safe?<\/strong><\/h3>\n\n\n\nAirdrops are free money\u2014who doesn’t love free money? However, you should be wary of fraudulent organizations. Many brands posing as promising projects are the opposite. <\/p>\n\n\n\n
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.<\/p>\n\n\n\n
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>“<\/p>\n\n\n\nA 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.<\/p>\n\n\n\n![\"Is](\"https:\/\/swapzone.io\/blog\/wp-content\/uploads\/2021\/06\/Swapzones-Referral-Program-BTC-e1623912241554-1024x110.png\")
<\/figure>\n\n\n\nIs It Possible to Make Money From Crypto Airdrops?<\/strong><\/h2>\n\n\n\nYou 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.<\/p>\n\n\n\n
Since the airdrop organizers plan to capitalize on the economic phenomenon common with digital brands\u2014the network effect\u2014their token can only get value when more people purchase or hold it.<\/p>\n\n\n\n
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. <\/p>\n\n\n\n
Otherwise, certain factors, such as the following, may cause the token to earn little or no value after an airdrop:<\/p>\n\n\n\n
- Massive token sale from holders after little pump<\/li>
- Skepticism in the project and the token<\/li>
- Negative market influence, among others.<\/li><\/ul>\n\n\n\n
Is Crypto Airdrop Taxable?<\/strong><\/h2>\n\n\n\nThe Inland Revenue Service (IRS) sees cryptocurrency earnings as income, hence taxable. However, airdrops may be treated slightly differently because of their nature.<\/p>\n\n\n\n
The IRS did mention crypto airdrop in one of its recent official tax guides\u2014the Revenue Ruling 2019-2024<\/a>. 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.<\/p>\n\n\n\nThis doesn\u2019t 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.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n![\"Biggest](\"https:\/\/swapzone.io\/blog\/wp-content\/uploads\/2021\/06\/Exchange-BTC-to-XMR-BTC-to-ETH-at-the-best-rate-with-crypto-a-exchange-aggregator-1024x141.png\")
<\/figure>\n\n\n\nBiggest Crypto Airdrops: Was It Worth It?<\/strong><\/h2>\n\n\n\n
Other times, you may have to claim airdrops by engaging in one or more tasks based on the brand\u2019s instructions. Examples of tasks to do may include:<\/p>\n\n\n\n
- Inviting friends to register with the brand, <\/li>
- Sharing the brand’s content on social media, <\/li>
- Or simply being active in the brand’s Telegram or Discord community.<\/li><\/ul>\n\n\n\n
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\u2019s token qualifies you to claim a crypto airdrop.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
Are Crypto Airdrops Safe?<\/strong><\/h3>\n\n\n\n
Airdrops are free money\u2014who doesn’t love free money? However, you should be wary of fraudulent organizations. Many brands posing as promising projects are the opposite. <\/p>\n\n\n\n
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.<\/p>\n\n\n\n
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>“<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
<\/figure>\n\n\n\nIs It Possible to Make Money From Crypto Airdrops?<\/strong><\/h2>\n\n\n\n
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.<\/p>\n\n\n\n
Since the airdrop organizers plan to capitalize on the economic phenomenon common with digital brands\u2014the network effect\u2014their token can only get value when more people purchase or hold it.<\/p>\n\n\n\n
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. <\/p>\n\n\n\n
Otherwise, certain factors, such as the following, may cause the token to earn little or no value after an airdrop:<\/p>\n\n\n\n
- Massive token sale from holders after little pump<\/li>
- Skepticism in the project and the token<\/li>
- Negative market influence, among others.<\/li><\/ul>\n\n\n\n
Is Crypto Airdrop Taxable?<\/strong><\/h2>\n\n\n\n
The Inland Revenue Service (IRS) sees cryptocurrency earnings as income, hence taxable. However, airdrops may be treated slightly differently because of their nature.<\/p>\n\n\n\n
The IRS did mention crypto airdrop in one of its recent official tax guides\u2014the Revenue Ruling 2019-2024<\/a>. 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.<\/p>\n\n\n\n
This doesn\u2019t 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.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
<\/figure>\n\n\n\nBiggest Crypto Airdrops: Was It Worth It?<\/strong><\/h2>\n\n\n\n
![\"How](\"https:\/\/swapzone.io\/blog\/wp-content\/uploads\/2021\/06\/Exchange-BTC-to-XMR-BTC-to-ETH-at-the-best-rate-1024x141.png\")
<\/figure>\n\n\n\n