Airdrops

An airdrop is the free distribution of a digital asset by a crypto project to the public by virtue of holding a certain coin/token or having an active wallet on a specific blockchain. Airdrops are a way for crypto projects to reward early adopters by assigning them an ownership stake in the project. Imagine if Uber decided to reward the first 1,000 drivers with Uber stocks; this is what a token airdrop does. 

Airdrops are distributed for free, and the receivers are not required to purchase them. Airdrops can be coins, tokens, or NFTs. 

There are different reasons why a crypto project would distribute free tokens. In most cases, it is a symbiotic relationship that benefits the project developers and the receivers of the token or coin.

Prelaunch Airdrop

Some projects will distribute airdrops before launching their project to attract new investors. Investors are attracted to the project to receive “free money” while the project gains attention and public awareness. Not many projects that distribute airdrops before launching their project survive in the long term.

Post-launch Airdrop

A great example is the Uniswap $UNI token airdrop in 2020. The project developers allocated 15% of the total supply as an airdrop to its early users based on a snapshot taken before 1st September 2020. In essence, everyone who used Uniswap received 400 UNI tokens that they could claim for free. At the time, the price ranged between $2 and $4, and many sold their tokens for a nice “free” profit. Those who held on, however, were handsomely rewarded. At its all-time high of $44, the airdrop was valued at $17,600, and at the time of writing (6th January 2022), each $UNI token is valued at $16. 

Hard fork Airdrop

An airdrop may also happen because of a hard fork which is basically a split in the blockchain. The new chain will release a new cryptocurrency; thus, holders of the old coin will have their holdings split in equal value between the two cryptocurrencies and receive an airdrop of the new coin. In August 2017, the Bitcoin hard fork created the Bitcoin Cash ($BCH) blockchain. Those that held Bitcoin before the hard fork received an equal amount of $BCH coins airdrop according to their $BTC holdings. During the hard fork, $BCH was valued at around $300, and it reached an all-time high of about $4290. At the time of writing(6th January 2022), $BCH is valued at around $390.