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SFM Labs - Airdrop

A quick disclaimer upfront: All information given in this presentation is researched and intended to be educational and illustrative to the specific topic, as always. Any companies, products, people, or other items mentioned do not constitute an endorsement, recommendation, or relationship. Every owner has to do their due diligence, as the decisions and responsibility about any investment lie with the owner. This information is not financial advice.

What is an airdrop in crypto?

An airdrop in crypto is the possibility to distribute cryptocurrencies or NFTs. These can be sent free of charge and directly to specific wallets or to entire wallet collections.

Depending on the application, certain quantities of a token or an NFT are sent specifically to addresses that have an actual value (such as the actual token or the actual NFT collection from which it was sent).

Why do airdrops exist and what can airdrops be utilized for?

Airdrops offer - as mentioned before - the possibility to send currencies or NFTs to others free of charge and without any worries. There can be several reasons why an airdrop takes place:

1. Marketing in the form of promotion

Airdrops can be used as a marketing tool. Tokens are sent out to promote new and upcoming projects. Thus, for example, the receipt of an unknown token can lead to research on the website of the respective token and to look into it more. There is also the possibility to advertise new means of payment, as El Salvador has done, for example. At the launch of Bitcoin as the new currency for El Salvador, everyone who installed the government wallet received 30 dollars worth of Bitcoin.

Fun fact: The first coin ever distributed via airdrop was AuroraCoin in 2014, which at the time was considered a possible cryptocurrency for Iceland, airdropped to citizens upon official registration.

2. Dust-Attacks

Airdrops - like any other technology - can be used for bad purposes. The most common and well-known case here is sending worthless or low-value tokens to obtain data from a holder or access to a wallet.

We are talking about dust tokens, which have no other purpose than to get the wallet holder's savings. Therefore, dust tokens should always be ignored and should not be traded, sold or sent out.

3. Reevaluation / Relaunch of a token

Airdrops can also help renew a project or currency, or help out with a restart. For example, for some currencies, the possibility of an airdrop is used when a new version of the contract is due. This means that the old tokens are issued in the new token form and provided to the respective holder in the appropriate conversion.

4. Rewards / prizes from raffles

Those who participate in sweepstakes that are automated or even randomly select the winner from a system can also benefit from airdrops. Participation in sweepstakes where NFTs are given away, for example, can be designed using this method. For example, one holds a special number or variant of an NFT and can thereby receive another, less frequently distributed NFT variant, which then appears by chance in one of the wallets of all holders. There are also special events that provide a sum of a token and then distribute it to the respective winner based on a distribution (measured by the activity of the participants).

5. Payments for holding other currencies

Airdrops are also used in automated cryptocurrencies as a means of payment or payment for shares. Thus, for example, when holding tokens that distribute a part of the fees as the same or other token, you get currencies. These then end up in the wallet in which the main currency - which legitimizes you for the allocation of the free tokens - is located.

How can airdrops be triggered?

Airdrops can take place either manually (similar to sending currency to others, only by activating a mechanism) or through automation. In the case of automation, this is regulated by a contract which, based on the ground rules and the agreed conditions, distributes the tokens fully automatically and without human intervention under certain circumstances.

What is important - regardless of whether manual or automated - is that the determination of the threshold values, when a distribution takes place and how much is distributed, is determined in advance. This is the only way to ensure that the distribution neither affects the monetary value of the project nor renders the airdrop worthless.

Future outlook for airdrops and potential growth

Airdrops make it possible to easily and quickly distribute certain predefined amounts of tokens to holders. The purpose of any action can be positive in the form of a distribution of profits, shares or even advertising, but it can also be negative in the form of dust attacks.

It is important that the meaning of each action is well predefined. In the future, entire systems could be set up in which rewards are given out by holding a currency for a longer period of time or by participating in decisions or events. The possibilities for merging traditional processes and expanding opportunities to engage in a cause or take a greater interest in a venture will be significantly strengthened and expanded. Security will be a major feature here, because the increasing allocation of goods also increases the fear of losing them again through other functions or security gaps in systems.

But here, too, it is true that every process grows with the future, and this one, too, will evolve - it's just a question of time.



Gandalf - SafeMoon Educator

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