What is an airdrop and how to spot fake airdrops ?

It is often witnessed in modern societies that people are easily pushed toward a trend or path due to its scale of publicity and social influence. Since the dawn of Cryptocurrencies, different approaches have been taken to make people more involved and grab their attention.

The thing was, introducing a new concept could have been a bit daunting at first, nonetheless, airdrops were one of the most dominant and common ones.

Airdrops were not taken much seriously at the beginning, I myself never thought of them as an important component of the financial crypto market since they didn’t seem to be worth much and could have been easily received as bonuses everywhere or they could appear their own in large sums in your wallet. 

They hadn’t become much of a trend at that time and in general, the whole concept of cryptocurrencies was like a question mark in the mind of the public, consisting of many ambiguous parts. I believe airdrops can be considered a win-win situation, meaning that not only it aids the publicity of the whole program on the blockchain leading to attracting more investors in addition to more participants but also it could be beneficial for people as well since the airdrops themselves will become worthy and be listed in reliable exchanges.

A word of caution, there have been several projects similar to the real ones that do not have value in the market or the required documents such as the white paper. However, by using some marketing techniques they become widespread and surf on the waves of FOMO, which is their creation in society, and make a lot of profit or even take people’s money for good and they tend to mostly target the inexperienced people who have no clue how things work in such environments and just do not want to fall behind about the talk of the town and learn competence and experience through the hard way.

Airdrops are mostly put into three categories:

1– Standard or raffle airdrops 

Standard airdrops, sometimes also referred to as raffle airdrops, are the most common variant of crypto airdrops. They work much the same as a giveaway would in order to promote a new project or cryptocurrency. Following is how they actually work:

Eligibility:

Generally, you shall be required to finish a really simple task—something on the order of signing up for a platform or just registering your crypto wallet address.
Sometimes, no requirement at all is circulated.:

Distribution:

There is usually a fixed amount of tokens to be given away. Some projects, however, may have a limit on the quantity that each user can receive. If there is a high demand, then some projects may use a raffle system where winners are randomly selected from eligible users.

Purpose:

A standard airdrop is a form of marketing for cryptocurrency projects, hence helping to spread awareness of the crypto project and attract new users for balancing community building.

Below are some main pointers on standard airdrops:

• They generally are the most easy way to obtain “free” crypto.
• Be careful not to turn into a scam account; never give out your private keys for an airdrop.
• Do your research about the project prior to participating.

2- Bounty Airdrops 

Bounty airdrops are when you get tokens for doing certain things that help out the project. It’s literally a win-win: free promotion for the project, and free crypto for you.

Now, here’s how it all works with bounty airdrops:

Tasks:

Projects will lay out specific tasks you have to do to qualify for the airdrop. They can include:

• Social media engagement: Like, share, or retweet the posts of a project on Twitter, Telegram, etc.
• Content creation: Blogging, writing articles, making videos about a token’s project.
• Community engagement: Registering at their online forums or using them. Sometimes the technical ones involve testing their platform or reporting issues found on it.

Rewards:

The amount of tokens you get typically depends on the complexity of the task you complete.
More elaborate activities, such as creating content, will generally reward you with more tokens.
Benefits for Projects:

Bounty airdrops are events that gain traction and spread awareness among potential users and investors.
They can also build a strong community around the project. Here are a couple of things to consider about bounty airdrops:

Time commitment:
While the tasks themselves are not usually complex in nature, they do require some time investments if you would like to get a larger amount of tokens.
Research the project:
Do make sure the validity of any project before you ever invest your time. There can be scams out there, so do be careful.

Don’t give away private information:
Private keys should never be required to participate in a bounty airdrop.
If you’re interested in finding bounty airdrops to participate in, guess what? There are actually websites that track and then list them. But do make sure you do your own research before joining any airdrop.

3- Holder / forked airdrops 

Holder/forked airdrops, often also referred to as holder airdrops or forked coin airdrops, are a sort of airdrop tied to already existing crypto holdings. To further clarify, let us consider the following explanation of what it is and how it works:

Eligibility:

You will have to be holding some specific cryptocurrency in your wallet at the time of a “snapshot” so that you can be eligible for this kind of airdrop.
This means that the snapshot is almost like a record of every blockchain address holding the qualifying crypto at a certain height of a block.
Distribution:

The new tokens from the airdrop are then distributed based on how much qualifying crypto a person has.
On some occasions, it might be proportionate. The bigger you have, the more airdrop tokens you will get.
There can also be a flat distribution where everyone holding the qualifying crypto gets the same sum of airdrop tokens, regardless of the amount they hold.
Fork Connection:

Not all holder airdrops are related to forks; some are.
A fork is when there is a split in a blockchain and a new cryptocurrency is created along with the original one.
This would imply, in such scenarios, that the airdrop is giving away tokens from the new forked coin to holders of the original coin.
Among the key things to remember about holder / forked airdrops include:

They reward existing holders for holding a particular cryptocurrency and might increase its potential value.
Do your research: Not every forked coin is legit; it is important to know the project behind the airdrop before claiming any tokens.
Wallet Requirements: Mostly, you are required to have or hold the qualifying crypto in a non-custodial wallet, meaning you are the one in charge of the private keys, so you become eligible for the airdrop. It might not be supported by exchanges.
You can read more on holder airdrops and forks from, 
“https://twitter.com/its_airdrop?lang=en” pen_spark.

DeFi Projects:

A common source of airdrops, however, are DeFi projects, which use them also for many purposes. The following is how DeFi and airdrops connect:

Marketing and Building the Community:

Most new DeFi projects utilize airdrops in getting attention to their platform and bringing in new users.
With free tokens, they may get people to take initiative to learn more about the project and become active users.

Reward to Early Adopters:

DeFi projects often make use of airdrops for the purpose of rewarding their early users over the platform or by providing liquidity.
This may further give a boost to the project’s whole ecosystem and encourage the continuity of participation.

Distribution of Governance Tokens:

Some DeFi projects distribute their governance tokens via an airdrop.
These governance tokens would provide holders the right to vote on crucial decisions concerning the future direction of a project.
Here are some things to consider while looking for DeFi projects offering airdrops:

Project Legitimacy:

Do some research on the DeFi project behind the airdrop. Of course, watch out for scams promising outrageous return rewards with very minimum effort.
Quite obviously, projects with well-defined purposes and strong development teams, backed by a well-defined roadmap, are heaps better.
Airdrop Requirements:
Some DeFi project airdrops might be in need of certain prerequisites to be met, such as using their platform or following them on social media.
Be sure that such requirements are within your risk tolerance.

Token Value:

The value of such tokens may differ. There are no promises that they will someday immediately derive some value.
Realize the possible potential of the project and know the risks before diving in.
Here are a few resources that can help you in finding DeFi project airdrops:

Airdrop Tracking Websites: Some websites track and list upcoming airdrops, focusing on DeFi projects. Make sure to research the project before participating in any airdrop listed.
DeFi Project Social Media: Most DeFi projects announce airdrops on their social media handles like Twitter and Telegram. The concept here is to follow promising projects so that one is updated in case such a potential airdrop opportunity arises.
There you go—airdrops may be a way to some free crypto, but always stay safe and don’t fall victim.

Minimizing the Potential Risks:

In order to protect your capital and finances it is much better to remain on the safe side and not make hasty decisions by rushing into it just because others are doing so. Hence, some measures have to be taken to make the risks as low as possible. 

1. Learn About the Team: It is a much wiser decision if one looks at the team members and the founder of the project. By looking into their professional background, their experience and also reputation, a much wiser and better decision could be made. 
2. Check for Security Audits: Look for proven security audits with track records These audits can identify vulnerabilities in the project’s code and security measures.
3. See What People Are Saying: Reviews and discussions in trustworthy forums and discussions could make a great difference in one’s perspective and act as a valuable source.
4. Look for Transparency: Projects such as the ones with airdrops have to come clear and vividly show
5. Stay Legit: Make sure that the project follows the rules and regulations of the place you live in and is legally permitted to do so 

By following these steps and conducting thorough research, you can increase your confidence in a project’s safety and legitimacy before investing or participating.

Shall we chip in? Is it reliable?

Trusting your money with airdrops depends on various factors. Here are some key points to consider before claiming:

Reputation of the Project: It is essential to find out if the project has a good reputation. Check the background of the team and history of earlier projects, and feedback within the community.

Viability of the Project: It may be predicted that there might be potential within the project. Look for a clear whitepaper indicating objectives, a roadmap, and a well-defined use case of the token that has been airdropped. A clear inception of the overall plan undertaken by the project enables one to estimate its long-term growth potential.

Token Value: Consider what the ultimate value of the airdropped tokens could be. Some airdrops offer tokens with future utility, while others have very limited utility. Assess the purpose of the token in question and its possible demand in the cryptocurrency market to decide whether it aligns well with your investment goals.

Risk Management: Be warned, for there are risks associated with airdrops. Scams and fraudulent projects may try to obtain personal data or lead users to reveal sensitive information; so, set your path with the established and verified projects to avoid such risks.

Portfolio diversification: It may turn out to be a means of diversifying your cryptocurrency holdings with no initial investment. By being a part of the legitimate airdrop, you get to hold different tokens from various projects; hence, increasing your chances of being part of some successful ventures.

With these factors Truly researching them will help you in making a decision to participate in airdrops and thereby reduce potential risks.

What to do after getting the AirDrops?

Here are the steps to manage your investment and maximize the potential of your tokens after getting airdrops:

Secure Your Tokens: For safety, you can transfer your airdropped tokens into a safe wallet. You may opt for some trusted hardware wallets or some reputable software wallets with which you have complete control over the private keys. Ideally, keep them off exchanges unless you intend to trade them actively soon.

Stay up to date regarding the project. Keep an eye on official sources such as social media, newsletters, and community forums for the latest news about announcements, partnerships, product updates, and any potential future milestones that may impact the token’s value.

Use Token Features: Know how to use the airdropped token within the project ecosystem. Some tokens may give access to features, discounts, or even voting rights. If any of the above are of core interest to you, use them.

Trading vs. Holding: Depending on the market performance of the token, you can either trade or hold it. If it happens to be a token with good market value, then you may want to trade it on cryptocurrency exchanges. On the contrary, if you have a belief in the long-term prospects resulting from the project, then it will be wiser to hold the tokens and wait for an uptrend to take place in the market.

Continuously watch the market trends for this token: check its price movements and trading volumes, and monitor the market sentiments in relation to it. Use those as part of your decision-making, know-how, and when to buy more, sell, or hold onto your airdropped tokens.

Remember, just as with most investments in cryptocurrency, an airdrop comes with certain risks. Set aside time to investigate, diversify your portfolio, and seek advice from financial professionals if needed or appropriate.

Tax Implications of Airdrops

Airdrops are considered income upon receipt and must be reported to tax authorities at the fair market value of the tokens on that date. These tokens are then included in your overall taxable income.

Selling airdropped tokens can result in capital gains or losses, calculated based on the difference between the initial fair market value (when received) and the selling price.

Consulting a Tax Professional

For specific tax advice regarding airdrops and your individual circumstances, it’s highly recommended to consult with a tax professional. They can analyze your transactions and provide tailored guidance on reporting and potential tax liabilities.

Telling the difference between Fake and Real Airdrops 

• Do not follow every project of Airdrops popping up from different websites, only true official channels authentic airdrops are announced.
• Focus on user action: “These features often require users to take an extra step, such as signing up for a newsletter, like a page, or some other proactive action that involves the network. By the way, fake airdrops can do this too.”
• Deceptive tactics highlighted: “These features are apparently useful, but they sometimes lead users to do some duties like joining a newsletter or even liking a page. Fake airdrops are not far from it, too.”
• Generalize the concept: “These features aren’t always free. They often come with the expectation of user participation, like subscribing to or engaging with the platform. Fake airdrops can be equally manipulative.”
• When there is an offer that seems too good to be true, think twice
• Colorful promises such as free money, hundreds of dollars for just 10 minutes of your time, etc. could all be a trap and that title is the bait that you bite and might cause identity or finance theft.
• You must also be requested to transfer a small amount of cryptocurrency as validation or initiation of the project which could be a red flag in the first place.
• Airdrops are expected not to ask for your private keys, security seed phrases, or any sensitive information at all.