Crypto airdrops: A complete guide

• Crypto projects sometimes reward active users by sending them tokens – this incentive method is called an “airdrop.”

• “Airdrop farming” is a strategy DeFi users employ to try to qualify for upcoming token airdrops.

• Phishing scams disguised as airdrops are commonplace on social media – it’s essential to know how to spot them and exercise caution.

A crypto airdrop is a method used by cryptocurrency projects to distribute native tokens to their active protocol users.

Crypto projects may use airdrops as an incentive mechanism to spur early adoption, democratize the protocol’s management or secure liquidity by rewarding early users with tokens.

Typically, users must complete certain tasks in order to qualify for an airdrop, such as staking tokens, trading or borrowing against collateral. 

Users who complete these tasks during a certain time period may be rewarded with a one-time distribution of tokens.

The airdrop incentive model is similar to credit card points – a card holder may receive a one-time distribution or bonus points if they spend a certain amount of money in the first 3 months. 

The size of an airdrop and the number of tokens distributed to each eligible person varies from project to project.

Types of airdrops

While all airdrops reward users for taking certain actions, they can come in several different forms based on the project’s token distribution strategy — known as tokenomics:

• “Free” airdrops – tokens are automatically sent to qualified addresses. Recipients aren’t charged any fees to accept these tokens.

• Claimable airdrops – eligible wallet holders manually claim their airdrop from the app. This process typically involves users paying gas fees to receive the airdrop.

• Vested/locked airdrops – eligible wallet holders can claim tokens after a certain time period has elapsed.

Sometimes, early claims are available but these typically involve a penalty (e.g., early claims result in a 50% reduction of airdropped tokens)

Projects may use this option to disincentivize recipients from immediately selling their airdropped tokens on the secondary market and dumping prices.

How to qualify for an airdrop

Qualifying for any airdrop generally involves an element of speculation, as many projects are intentionally vague about what their users need to do to become eligible until an airdrop is officially announced.

In some cases, users may try to complete as many actions as they can on a chosen platform in the hopes of qualifying early for any potential future airdrop that may arise. From a project standpoint, this preemptive activity can help to drive early engagement and new users.

The decentralized finance (DeFi) sector offers a wide range of projects, each with its own functionality and desired user activity. Receiving airdrops from these different projects can involve completing entirely different tasks.

Here are some examples of different kinds of platforms and actions that have historically qualified people for airdrops:

Decentralized exchanges (DEXs) (like Uniswap)

• Trading and providing liquidity.

• Uniswap and dYdX rewarded traders and liquidity providers (LPs) with 2 of the 3 largest airdrops in history.

Blockchains/Rollups (like Arbitrum)

• Transferring funds to a blockchain and interacting with popular apps (trading on DEXs, borrowing on CDPs, etc.)

• Internet Computer and Arbitrum both rewarded early users of their blockchains with over $1 billion in airdrops.

Liquid staking platforms (like Lido)

• Staking eligible tokens on their platform.

• Users who staked Solana’s SOL token on Jito earned a collective $225 million via airdrop.

Bridges (like Wormhole)

• Using the bridge to transfer tokens between chains.

• Using a new bridge to transfer funds to a new chain could qualify for both airdrops.

Money market platforms (like Aave)

• Lending assets and taking out a loan against your collateral.

Ecosystem expansion

• Staking a network token with an expanding ecosystem could qualify for airdrops of future projects.

• ATOM (the native token of Cosmos Hub) stakers have received many airdrops of tokens launched by new Cosmos-based projects.

Notable examples include Osmosis’ OSMO token and Juno’s JUNO token, whose airdrops were worth over $500 million combined at the time of distribution.

While many DeFi users like to speculate about potential airdrops, there’s no defined rulebook for farming them.

Instead, airdrop farmers tend to look for certain clues that a project might be airdropping a token in the near future. 

For example, a project may receive attention from airdrop farmers if it:

1. Does not yet have a token – this is self-explanatory, but a future airdrop is unlikely if a project already has a token. Although, some projects (like Optimism) will commit to multiple airdrops.
    
2. Has an upcoming testnet launch (or is live on testnet) – before a project is available on a “mainnet” blockchain like Ethereum, Solana, Avalanche, etc., they typically launch on “testnet.” As the name suggests, testnets are a testing ground for developers to understand how their app will look and feel, giving them time to sort out bugs and cosmetic issues before it’s fully ready to launch.  Testnets are often the earliest instance that users get to interact with an app’s interface, giving participants the most time possible to qualify for any potential future airdrops. Additionally, testnets use “paper” versions of cryptocurrencies like ETH, so no user funds are at risk when testing out the app.
    
3. Offers a “points'' system – many newer projects reward early adopters with “points” to encourage consistent usage. For example, a new DEX that doesn’t have a token could reward points to users based on how frequently they trade, how much money they trade, etc. A current example of this would be Hyperliquid, which offers leveraged synthetic perpetual futures trading on Arbitrum. Hyperliquid began their 6-month points program on November 9, 2023, and has since seen a significant increase in deposited funds, from $15.56 million to $127.02 million (as of January 26, 2024).
    
4. Is generating a lot of excitement on social media – larger airdrops tend to be a common topic of conversation on X and Reddit. This can be due to several factors, such as prevalent funders, large TVL, a unique product, etc. An example of this would be Arbitrum’s ARB airdrop, which was distributed in March 2023 and currently stands as the 4th biggest airdrop in history in terms of USD value. Before the ARB token was launched, Arbitrum had already gained popularity as a scaling solution for Ethereum, attracting billions of dollars in TVL. By using Arbitrum, users can interact with popular apps such as GMX, Radiant Capital, and Aave while benefiting from lower costs, faster transactions, and Ethereum’s powerful security.

The ultimate purpose of an airdrop is to encourage early use of a project rather than attracting a large crowd whose only interest is getting the airdrop payment.

Kraken lets you purchase the assets you'll need to start using these platforms and qualify for potential airdrops. Log in or sign up for your Kraken account today.

Airdrops have also gained prominence in the non-fungible token (NFT) sector.

The concept remains largely the same: users who buy a certain NFT become part of the collection’s community.

Some communities reward their members periodically by “airdropping” new NFTs to them. 

A well-known example of an NFT airdrop took place in 2021 when Bored Apes Yacht Club members received a mysterious “mutant serum” NFT in their crypto wallets. The mutant serum could be “applied” to existing Bored Ape NFTs, resulting in the creation of an entirely new Mutant Ape Yacht Club NFT while still retaining ownership of their original Bored Ape.

So far, over 9,487 of the 10,000 Bored Apes have interacted with the serum, which shows that the airdrop was a massive success.

Before the 10,000 vials of serum were distributed, an additional 10,000 Mutant Apes were sold to the public. The entire collection was sold in under an hour for a total of $96 million.

Mutant Apes are still one of the most traded collections selling on Kraken NFT.

While the Mutant Ape airdrop is an interesting demonstration of the versatility of NFTs, many NFT airdrops are distributed similarly to regular crypto token airdrops.

• Holders of certain NFTs and/or tokens

• Community members deemed “loyal” by meeting certain criteria, such as:

  • Holding an NFT for a certain period of time.

  • Contributing to the NFT project in some way (participating in a community channel such as Discord, promoting the project on social media, etc.)

  • Attending an in-person event.

There are many ways to buy NFTs and begin looking for potential airdrop opportunities.

For more information, make sure to read our in-depth guide, How to buy an NFT.

The first airdrop took place in 2014, when Auroracoin issued AUR tokens to the entire population of Iceland.

While the creator of Auroracoin remains anonymous, it’s believed that they were a citizen of Iceland and wanted to provide an alternative form of currency to its registered population of ~330,000 people.

While widespread adoption wasn’t achieved, Auroracoin remains one of the most interesting attempts to introduce a decentralized form of currency to a large group of people. 

Several crypto projects have since followed in their footsteps when introducing their coins to the market as well.

Popular payments network, Stellar (XLM), also decided to launch its own airdrop in 2017— worth a reported $120 million, at the time.

The event saw the team distribute 16 billion XLM tokens to all BTC holders, in a bid to strengthen ties with Bitcoin supporters. The project went on to airdrop a further 2 billion tokens to all Keybase users in 2019, following a new partnership deal.

Perhaps the most influential airdrop in crypto history so far occurred in 2020, when Uniswap (UNI) distributed 400 UNI tokens to the wallet addresses of users who traded on their v1 platform. 

Typically, projects announce airdrops to build up excitement and adoption around their app, but Uniswap gave no advance notice.

This unannounced distribution of $6.43 billion worth of tokens changed the perception of airdrops, and crypto users began seeing any project without a token as a potential source of income via airdrops.

Thus, the concept of “airdrop farming” was born. 

Crypto project builders also realized that creating speculation around potential airdrops was an effective way to drive early adoption of their products.

While not every crypto project will have an airdrop, the proliferation of airdrop farming has incentivized new projects to give generous airdrops in an effort to drive early users toward their platforms.

Airdrop farming is an activity that essentially revolves around looking for “free” tokens and can generate a lot of excitement throughout the community.

This widespread excitement often attracts an increased number of bad actors looking to capitalize off people’s eagerness to earn tokens.

Common airdrop-affiliated scams include phishing attacks and fraud. 

Phishing attacks are most likely to occur on social media. Essentially, scammers pretend to be associated with the project and try to get people to interact with a fake version of the project. The fake project then steals funds from users who interact with it. 

The most relevant crypto-related conversations tend to happen on X, Reddit, Discord and Telegram, making them the most likely places for crypto-related scams. 

For example, bots on X may use the same logo and similar handle as a crypto project’s account and post information about an “upcoming airdrop” with a link to click on that leads to a phishing scam.

The difference between the official X handle and the fake one is often subtle, so attention to detail is important when verifying if information related to airdrops is legitimate. 

It’s also crucial to verify any links you see regarding airdrops. In some instances, scammers post URLs that misspell a project's name or is inconsistent with the official website. These factors are major red flags.

“Fake” websites typically look like the actual project’s website and often prompt visitors to connect their wallet, which is standard for Web3 apps. However, connecting your wallet to a phishing scam frequently results in stolen funds.

It’s essential to exercise caution whenever the topic of airdrops is brought up. Some easy ways to protect your crypto include:

• Verifying that the website is legitimate by checking the project’s social media. accounts before connecting your crypto wallet to a Web3 app.

• Verifying that the account posting about an airdrop is the official account of the crypto project.

• Cross-checking the project’s accounts to verify that the project has posted about the airdrop on Discord, Telegram, etc. 

• Never giving your wallet seed phrase to anyone.

For more general safety tips, you can read our article on, how to keep your crypto safe.

Kraken lets you buy, sell, trade and secure hundreds of the most popular cryptocurrencies associated with airdrops.

Whether you are looking for coins that will help cover the fees you'll incur while airdrop farming or to convert the tokens you recieved from an airdrop into cash, Kraken is a convenient and secure crypto platform.

Make the most of your airdrop efforts and get started with Kraken today.