DEFINITION
An airdrop refers to the provision of token rewards as an incentive for participating in various activities during the initial stages of a project.
I) REASONS FOR PROJECTS OFFERING FREE TOKENS
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Projects opt for airdrops or alternative methods of rewarding users instead of token sales to mitigate potential SEC violations, particularly if tokens are considered securities.
Airdrops generate excitement and a fear of missing out (FOMO), thereby attracting attention to the project. -
Projects allocate a portion of their tokenomics for giveaways as a means of expressing gratitude to early adopters and establishing a positive reputation. Failing to value early adopters can lead to fear, uncertainty, and doubt (FUD), which may result in decreased interest in the project.
II) HOW TO DISCOVER AND EVALUATE PROJECTS OFFERING AIRDROPS:
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When assessing a project, it is important to consider the amount of investment it has received. Check notable funds that have invested by referring to a table like Airtable - Messari Fundraising Data. Such a table can also help identify promising early-stage projects.
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Identify specific actions that increase the likelihood of obtaining the maximum airdrop reward. Learn from examples like Paraswap, where only 20,000 wallets out of 1,300,000 eligible ones received the airdrop. Details can be found at What’s an “active user”? Clarifying PSP token distribution filtering logic | by TokenBrice | ParaSwap | Medium.
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Explore activities performed by individuals for the project by visiting https://dune.com/browse/dashboards. Focus on activities that are undertaken by no more than 40% of users to enhance the chances of receiving the airdrop.
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For a comprehensive guide and insights, search for project-related guides and interesting news from the project and its founder on Twitter using the advanced search feature. However, keep in mind that you should not blindly follow the guide, as it may simply reflect the author’s assumptions. Strive to outperform those who strictly adhere to the guide.
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Observe how the project’s founders and team engage with the community. While it’s worth noting that not all projects offer airdrops, such statements are commonly made to deter scammers.
II) TIPS FOR ENGAGING AIRDROP FARMING:
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Avoid expecting guaranteed profits from projects, as potential gains are uncertain. If you solely focus on hitting the jackpot, you may end up disappointed.
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Refrain from spreading yourself too thin by creating multiple accounts across numerous projects. Even if one project yields substantial returns, the others may not, leading to financial losses due to fees. It is better to create multiple accounts within a single promising project that you genuinely believe in and are confident will deliver returns.
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Avoid investing your last remaining funds solely for the purpose of participating in an airdrop. Recognize that this is not a quick game, and it may take a considerable period, such as a year or even 2-3 years, to realize any returns from a project. Consequently, refrain from investing funds that you cannot afford to lock in for an extended duration.
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Evaluate the risks associated with investments and only utilize funds that you can comfortably invest without compromising your financial stability.
