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Crypto airdrops: risks and opportunities

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by 1inch Network

• 2 min read

Airdrops is a way of receiving tokens without any effort or investment. Still, knowing the risks related to airdrops will help you to avoid security threats.

Airdrop tokens are assets sent to wallet addresses as part of crypto projects’ promo campaigns. Coins are distributed for free or in return for some activity that doesn’t normally require much from users. As airdropped tokens are, to some extent, similar to manna from heaven, the name for this form of marketing activity was taken from that for delivery of resources whereby required items are basically dropped from the sky.

Airdrops as a strategy

Airdrops are widely used by projects in early stages to gain traction for their tokens and involve users in investment activities. Some projects encourage users to perform various activities, including staking, conducting transactions within the platform or holding its native token for a specific period, to receive an airdrop

Others involve simpler tasks, like subscribing to projects’ newsletters, retweeting a post or doing some other social media promotion.

Some airdrops target specific platform users to move their trading activity to another place by providing generous rewards in the form of free tokens. This method comes in handy for increasing hype on social media, attracting new users and rewarding already existing token holders. This is also helpful for liquidity creation and luring users away from competing projects. Emotional and social engagement of airdrop receivers drives the efficiency of these marketing tactics.

How to benefit from airdrops

If you consider airdrop benefits from the user’s perspective, they are plentiful.

As airdrops appear to be native tokens of the platforms or blockchains performing the distribution, they allow for testing those projects in exchange for earning interest opportunities.

First, there is a passive income option of airdrop token holding. A project’s success is usually followed by a surge in its currency’s price, meaning that a user can profit significantly by just holding on to the airdropped token.

Second, a batch of airdrop tokens can serve as a start for more advanced ways of earning interest, like yield farming and lending. To take advantage of these opportunities, experienced users hunt for airdrops of promising projects and perform all necessary activities to claim airdrops of leading platforms.

Third, airdropped native tokens can have various use cases, depending on the platform. They can allow for receiving different perks or participating in platform DAO voting if an airdrop token is also a governance token. However, just holding a governance token is not enough in most cases for obtaining voting power. Users, for instance, could be required to stake their governance tokens for a certain period of time.

Basically, airdrops turn out to be a zero-investment method of receiving passive income and interacting with platforms in a profitable way.

Risks connected with airdrops

With the increasing popularity of airdrops, hackers are grabbing this opportunity to use major platforms’ names to trick users by sending fake tokens. When clicking on such a token, users can find themselves on a fraudulent website imitating some famous project’s domain name and interface. Such a phishing source usually asks to connect the wallet, enter the seed phrase or even send some funds to receive more tokens. Requests of that kind are always red flags for possible scam. Airdrops never require any payment. And trusted websites can be bookmarked or their URLs could be entered manually to avoid phishing risk.

Plus, creating a special exclusively-for-airdrops wallet could also be an option to fully secure your funds. Then, even in the event of a mistakenly connected fraudulent site, the main part of your assets will remain safe.

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