The Art of the Airdrop: What to Know When NFT Comes
First introduced during the 2017 ICO frenzy, an airdrop is a way to send new minted tokens, often free, at the same time to a large group of wallet addresses. Often used in the crypto world as a marketing lever for tokens, dApps or NFT projects, airdrops are primarily distributed for three main reasons.
- Rewarding users for early adoption of a project;
- Paying extra for existing community members; And
- To raise awareness and encourage new users to test a project.
Most airdrops are distributed in one of two ways. They can be either automatically sent directly to the holder’s wallet or claimed by attaching a wallet to dApp or airdrop-specific websites.
Tokens, which usually have some kind of value, can then be retained or cashed out by the recipients. In this regard, airdrops are often seen as “Free money.” And while this is true to a degree, it does not mean that airdrops are tax-free. According to the IRS, all coins received through an airdrop are subject to income tax, even if they are not requested.
Before we go any further, it is important to note this when evaluating or interacting Any airdrops, it Very important To do your own research. Although web3 is the only place where “free money” is possible, it also carries a significant amount of risk.
To better understand the different types of airdrops and how they work, let’s look at an example of each.
Etherium name service
In November 2021, Ethereum Name Service (ENS) announced an airdrop as part of the next phase of community governance. Prior to October 31, all ENS owners were eligible to claim a pre-determined amount of ENS tokens based on their wallet address history. Since launch, the price of the ENS has peaked at more than $ 81. Although tokens now sit at around 8, many people still make a lot of money from their ENS tokens. One of the most anticipated and profitable airdrops so far, ENS Airdrop demonstrates the ability to reward users for embracing the early stages of a project.
Mutant App Yacht Club
In August 2021, Yuga Labs airdrop a digital mutant serum to all board app yacht club holders. After releasing their apps in serum through an on-chain transaction, a mutant version of each app was created. Now serving as a major expansion of the Yuga portfolio, Mutant Ape Yacht Club has skyrocketed in both price and demand, once reaching an all-time high of 40 ETH while now sitting at the current floor price of 14 ETH at the time of writing.
Rare to see
To create hype and traction ahead of the LooksRare NFT Marketplace launch, the team encouraged potential users with an airdrop of their native LOOKS tokens. Aimed at a wide audience of NFT enthusiasts, all OpenSea users, including more than 3 ETHs with a volume of transactions between June 16, 2021 and December 16, 2021, had the option to claim LOOKS tokens after listing an NFT for sale in the LooksRare Marketplace. With additional LOOKS earnings and rewards for token holders, this strategy has helped LooksRare quickly gather a core user base.
However, it is worth noting that when using Airdrop to create traction around a new project or product, crowds of money-hungry users can create an artificial product-market fit. Typically, when there is news or speculation about an upcoming airdrop, new users are flooded with the product. Once Airdrop is installed, or the circulation around the news decreases, users disappear as soon as they arrive. After pumping a token at $ 6.70, Lucas finally returns to the world where at the time of writing it now sits at $ 0.17, causing irreparable losses to many investors.
The benefits of airdrop
As shown in the examples above, airdrops are one of the best ways to create similar values for both project founders and community members. Not only do they often reward holders with financial gain, they also serve as a way to build deeper relationships with existing community members.
Stacey Yale, Founder of Visible Women NFT, uses airdrops as a way to connect with her community and provide additional benefits. As a way to express the values of visible women through art, Yale often provides her community with portrait airdrops that focus on women promoting gender equality. Most recently, holders received portraits of Judge Ketanji Brown Jackson and Marilyn Monroe.
“I find AirDrop to be an integral and exciting part of our creative process,” Yale said in an interview with NFT. “Through AirDrop, we encourage our community to perceive NFTs as a valuable resource and to help them collect NFTs.”
Related to the old Web 2 investment model, airdrops democratize the ability to participate in the reverse of investing in private companies, says NFT collector Brandon G.
“On Web2, if you have the opportunity to buy pre-IPO shares of a company, you need to meet certain investment requirements, sign a lot of paperwork, engage lawyers and face lock-up time before selling your shares. . “He said in an interview with NFT now. Participating in a DAO, dAPP, or NFT project and investing your time gives you unparalleled access to this uphill and pays off much faster than other traditional investment methods.”
Danger of airdrop
Unfortunately, by enticing people with the promise of quick cash, airdrops are one of the easiest and most profitable scams to set up. Like an email address, universal wallet keys, good, universal 6 Similarly your email receives spam messages, Anyone Can send Something, With malicious and unwanted tokens in your digital wallet at any time. Whether you want to interact with the token, however, is your choice.
The most common scam is to airdrop an NFT or crypto-token that contains a malicious contract in the wallet. These malicious NFTs are often assigned a high ETH standard to encourage people to interact with the contract. Once users are granted smart contract access, their wallet is cleared.
In other cases, hackers will infiltrate popular discs and tap into the mindsets of FOMO-powered NFT collectors, hinting at false airdrop announcements. To claim these airdrops, users will either have to pay their seed fees or attach their wallet and communicate with a defective contract. If the contract is approved, the wallet is removed. A different method, but the same result.
Finally, airdrops are a fairly common catalyst for pump and dump schemes. Each follows a similar pattern. First, a token maker will introduce a token and pay enough to promote it to a wider community. If the hype increases, the token maker will be able to list the token for a hefty price using the social evidence behind it. Once listed on the Exchange and Volume Pump, manufacturers (who are usually the majority token holders) will sell their tokens, effectively disrupt the market, and hold the bag of innocent investors.
How to make a secure claim and contact Airdrop
Remember, all airdrops are unique and should be heavily investigated and treated with caution. To be safe when testing and claiming airdrops, it is important to keep the following in mind:
- Look for unusually short mint or claim windows. Most legitimate projects will announce Mint or Airdrop in advance.
- Do not bow to FOMO. Always take your time in the verification process and never rush to make a hasty decision.
- Always check three times to make sure the URL of your claim page is correct Also double-check Discord, Twitter and other socials for validity.
- Do not interact with any tokens left randomly in your wallet. This includes selling, returning or hiding / concealing to the original seller. Just let them stay.
- Verify contract address via etherscan.
And remember – Always Do your own research and ask trusted community members if you have any questions. This is just another reason why community space is so important.
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