Crypto 101: What’s an Airdrop?

An airdrop is when digital assets/tokens are given away for free.

If you only remember one thing about airdrops, be quite sure that it is this: airdrops will never require your private key. Burn that in to your memory.

Airdrops will never require your private key.

…airdrops will never require your private key. Got it? Good.

On occasion, creators of a new digital asset will airdrop some percentage of their new tokens in an attempt to raise awareness about their project. Airdrop recipients can either be chosen: at random via public blockchain addresses, selected according to various conditions, or some combination of the two.

It’s common for airdrops to deliver tokens to public addresses on an existing blockchain if those addresses held a certain quantity of a particular token at a fixed point in time. (i.e. Any addresses owning more than 10 ETH last Thursday would be included in the airdrop.)

Another popular method is to require that interested parties register their public address to be considered for an airdrop. They may also be required to provide social media account names, email addresses, and other public information.

If you are the recipient of an airdrop, the tokens belong to you. You can sell them on an exchange, hodl them, or simply ignore them. They can not affect any other tokens in your wallet and they pose no security risk just sitting there.

Other Airdrop Considerations

  • A fork can be considered a kind of airdrop – one where every address on another blockchain, at a given “snapshot” time, receives an equal amount of new tokens on a new blockchain.
  • Normally, if someone refers to a fork as an airdrop, they are doing so in a condescending manner… as though the new token has no hope of competing with the original token.
  • You are only guaranteed access to your airdropped tokens if you control your private keys. That is to say – they must be airdropped to a hardware or software wallet that you control. If you keep all of your existing tokens on an exchange, then you should not expect an airdrop. (Usually, exchange addresses are excluded from airdrops altogether. Other times, the exchange simply doesn’t put in the effort to redistribute the airdrops it receives on its users’ behalf.)
  • Airdrops are sometimes likened to dividends, but this isn’t very accurate. Dividends redistribute value from a company to its shareholders – airdrops do not redistribute value from the original token you held.
  • Airdrops are not always wanted. Many people become annoyed with valueless tokens which can potentially clutter up some wallet interfaces.
  • If you sell an airdropped token, you may owe taxes on the sale. Your cost basis is probably zero. Talk to your accountant.

 

  • Most importantly: airdrops will never require your private key.

I’m passionate about blockchains. I’m excited about decentralization, autonomous organizations, cryptocurrencies, and uncensorable dApps.

I’m also overwhelmed – with questions about these cutting edge technologies. I want to understand the tech, the politics, and the implications of the blockchain revolution.

Most of all, I want to share what I discover – because broader understanding will lead to greater participation, more rapid adoption, and, subsequently, a better world.