Airdrop crypto: What it means, how it works and how to qualify

In crypto, an airdrop refers to the one-time distribution of tokens to users, often as a reward for interacting with a project early on. This might include actions like staking, trading or borrowing against collateral during a specific period.

Projects may use airdrops to encourage adoption, broaden community participation or help seed liquidity. Think of it like a credit card bonus — the more you use your card, the more rewards you get in return for being a loyal client. 

Airdrops follow a similar logic, but with tokens. The size of an airdrop and the number of tokens distributed to each eligible person can vary from project to project based on the amount the person used the protocol.

While every crypto airdrop has its own rules, the process usually follows a general pattern. A blockchain project defines who’s eligible, what actions qualify and when the airdrop will happen. 

Here’s how a crypto airdrop typically works:

1. Eligibility snapshot: The project captures user activity on a specific date, tracking who has interacted with the protocol and how.
2. Task-based or wallet-based qualification: Some airdrops are retroactive, meaning they reward users who already performed certain actions before the snapshot. Others are task-based, asking users to take specific steps, like staking tokens, trading or borrowing against collateral.
3. Token distribution: Once the project confirms eligibility, it sends tokens directly to users' crypto wallets. This might happen all at once or in stages, depending on the project.
4. Claim window (optional): Some airdrops require users to manually claim their tokens within a set timeframe. Miss the window, and the program may reallocate those tokens.

It’s worth noting that not all airdrops are valuable — or compltely secure. Some may offer little long-term utility, while others could be airdrop scams designed to trick users into connecting their wallets to malicious sites. There’s also no guarantee of payment, even if you complete the required steps. 

When in doubt, always verify details through the project’s official channels before taking action.

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

1. Retroactive airdrops: These reward crypto users who interacted with a protocol before a specific date, often without requiring any further action. Traders may receive tokens simply for using the platform during the eligibility period. Protocols commonly use retroactive airdrops to recognize early adopters.
2. Task-based airdrops: As we mentioned above, users must complete certain actions to qualify for this type of airdrop. Also known as “bounty” airdrops, platforms often use these as a growth tactic to increase platform engagement or visibility.
3. Holder airdrops: Protocols distribute tokens to wallets holding a specific cryptocurrency. For example, a project might airdrop tokens to all Ethereum (ETH) holders or holders of its own earlier token version. This can help reward loyalty or incentivize migration to a new token standard.
4. Exclusive airdrops: These target a specific group, such as DAO members, NFT holders or active forum contributors. The goal here is often to reward participation in governance or community-building efforts.
5. Raffle airdrops: Instead of guaranteed rewards, some projects randomly select eligible wallets to receive tokens. While still based on on-chain activity, these offer limited odds, and protocols generally use them for promotional purposes.
6. Claimable airdrops: Claimable airdrops require eligible wallet holders to manually claim their tokens, typically through a specific application or platform associated with the project distributing the airdrop. This process could involve users paying gas fees to receive the airdrop.

Each airdrop type serves a slightly different purpose, from encouraging adoption to rewarding commitment. Understanding the mechanics behind them can help users evaluate opportunities more thoughtfully.

The first step in receiving an airdrop is to have a web3 crypto wallet like Kraken Wallet that supports that particular token. 

In some cases, you may need to download a different wallet to claim the airdrop, so it’s important to make sure that your chosen crypto wallet is compatible with it. 

To check if your wallet can receive a specific project’s airdrop, you can go to their app and click “connect wallet,” which is typically at the top right corner of the screen. If your wallet is listed, it’s compatible with the 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’s official announcement.

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

Airdrop farming can generate a lot of excitement throughout the crypto community. This widespread attention often attracts more bad actors looking to capitalize on people’s eagerness to earn tokens.

Common crypto airdrop scams include phishing attacks and fraud. Phishing attacks are most likely to occur on social media, where 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.

While there’s no guaranteed way to predict an airdrop, some crypto users keep an eye out for these signs that one might be coming: 

• No existing token: Projects without a token are more likely to launch one in the future.
• Live on testnet (or planning a launch): Testnets are a testing ground for developers to understand how their app will look and feel. They give developers time to sort out bugs and cosmetic issues before it’s fully ready to launch. Interacting early with apps on a testnet can position users ahead of a potential launch.
• Points systems: Some projects track early user activity with points, which may influence future airdrop eligibility
• Social buzz: Growing excitement on platforms like X or Reddit can indicate community interest ahead of an airdrop. 
• Well-known backers: Strong funding or growing adoption may signal that a token launch is on the horizon. 

Airdrop farming can generate a lot of excitement throughout the crypto community. This widespread attention often attracts more bad actors looking to capitalize on people’s eagerness to earn tokens.

Common crypto airdrop scams include phishing attacks and fraud. Phishing attacks are most likely to occur on social media, where 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.

Kraken provides a secure and convenient platform for managing crypto assets obtained through airdrops. Users can use the platform to acquire coins for covering airdrop farming fees or easily convert received tokens into cash.

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

When searching for potential airdrops, it’s also important to understand tax implications. In the United States, the IRS treats tokens received from airdrops as ordinary income, which is subject to income tax. Your income tax bracket will determine the tax you owe.

For more information, check out the airdrop section of our complete Crypto Tax Guide.

The first crypto airdrop happened in 2014 when Auroracoin quietly sent AUR tokens to Iceland’s roughly 330,000 citizens as an experiment in decentralized money. 

While the creator of Auroracoin remains anonymous, many believe that they were a citizen of Iceland and wanted to provide an alternative form of currency to its registered population.

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

According to research conducted by Coingecko, the following cryptocurrencies were the largest airdrops to have taken place when valued at the token's all-time high price:

• Uniswap 
• ApeCoin 
• dYdX 
• Arbitrum 
• Ethereum Name Service
• Bonk 
• Celestia