Airdrops involve the distribution of crypto tokens to early adopters and supporters of protocols or platforms. It’s a great way to sucker in newcomers who feel risk averse and would like to get some skin in the game without deploying too much capital or are willing to give up some labour in exchange for token allocations.
Airdrops were a popular marketing tool back in the 2017 ICO era, and for good reason: it’s the promise of free money and who doesn’t like receiving a handout? When the goal is to rally support and enthusiasm for whatever you profess to change in the market, buying up some support is a good place to start.
If it works for the government, surely it will work for the next revolutionary ponzi, I mean project in the crypto space. As is the case with many tokens, the airdrop allocations didn’t work out for most holders, with tokens heading to zero over a short period in the spotlight.
Now, before you dismiss me as some close-minded maxi, I will let you know that I am speaking from experience; I was one of those early airdrop hunters, and my success rate is damn near zero.
In fact, the only airdrop I did qualify for that ended up worth something was UniSwap, and that was purely by accident, having performed a trade on the DEX during its first few weeks of launch. Of course, I promptly dumped those tokens the moment I received them and never looked back.
As for any airdrop I actively signed up for, they all went to zero before I could access a penny.
Airdrops are back with a vengeance
After 2017, Airdrops went into hibernation, and the idea was traded for the DEFI token, which was used to pay users for providing liquidity to different protocols.
In 2021, yield farming was all the rage, but like many concepts in crypto, they eventually make a return when enough people forgot about it, and enough new blood has entered the arena, and airdrops look to be the beneficiary.
To get people excited and attract the uninitiated, the idea that airdrops can yield thousands of dollars — if not more has begun to circulate. A narrative that airdrops from projects like Layer 2 networks like Optimism and Arbitrum to thank for embedding it in people’s brains.
With the promise of potentially big payoffs, some users unsurprisingly try to grab as much of the airdrop supply for themselves and actively follow airdrop releases. These so-called “airdrop farmers” or “airdrop hunters” try to speculate which projects might conduct airdrops and make themselves eligible for as many tokens as possible.
Don’t Fall for the Hype; Airdrop Hunting is a Waste of Your Time
The allure of free cryptocurrency can be tempting, especially in the fast-paced world of blockchain technology. Airdrops, where projects distribute tokens for free to raise awareness and attract users, seem like an easy way to score some quick crypto gains.
However, the harsh reality is that airdrop hunting is often a complete waste of time and can even be detrimental to your likely desire to build wealth.
Low Success Rate
Most airdrops offer minuscule amounts of tokens, often worth only pennies or even fractions of a penny. Even if you participate in dozens of airdrops, the total value you accumulate is likely insignificant compared to the time and effort invested.
Even if the tokens in question develop a market with liquidity, you have a few more hurdles to navigate.
The first would be to get out the door before all the other airdrop holders so you can access as many of the available buy orders as possible and realise a return.
The second would be to purchase the native token of the chain you’re using so that you can pay the gas fees to transfer or trade those tokens, which will eat into your profits or even render your airdrop too costly to move.
The third pitfall for airdrop holders is you’re being watched on-chain. As a humble click trader, you’re at the mercy of trading bots and trading desks looking to net a profit if there is a lot of activity on-chain for a specific trading pair, which will happen with airdrops, MEV bots will step in to scalp some of those trades.
Scams and Time Sinks
Unfortunately, the airdrop scene is rife with scams. Fake projects lure participants with inflated promises, hoping to steal their personal information or wallet details.
Many legitimate airdrops also require extensive tasks like joining multiple social media channels, writing articles, or completing lengthy surveys, consuming much of your valuable time without guaranteeing any reward.
Survivorship bias
Only the success stories will hit the headlines, and they only tell half the story and rely on individuals to FOMO into the airdrop space, thinking they will be one of the lucky ones. The truth is that 99 to 100% of the airdrops you’re participating in are farming will go to zero before you can realise any profits.
Opportunity Cost
While you’re busy chasing insignificant airdrops, you could focus on more impactful activities like developing a talent, learning new skills, or investing in Bitcoin, which will likely outperform any of those airdrop tokens.
Chasing airdrops distracts you from valuable learning and potentially lucrative opportunities.
If you still need to be convinced by arguments and want to spend your time airdrop hunting, consider tracking the time you spend on these endeavours and what you eventually pocket at the end of the day.
Why are you wasting your time if your money is less than the minimum wage per hour in your country?
What’s in it for the airdropper?
- Marketing and network effect: Free tokens can be seen as a form of viral marketing, where recipients tell their friends and family about the project. This can create a network effect, where the more users join, the more valuable the project becomes for everyone.
- Liquidity and price discovery: Airdrops can increase the number of wallets holding the token, improving its liquidity and leading to a more accurate price discovery. These allocations can also be used as marketing metrics to promote the token, with claims of wide distribution and wallet activity.
- Test and distribute tokens: Airdrops can be used to test the functionality of a new token, chain or platform it will be used on. Projects are happy to hand out a few tokens to pay for some user testing and user data, work out some kinks and crowdsource some cheap labour.
- Access capital: Projects have already factored in how these distributions will affect them and feel they are happy with the amount of selling pressure it could provide. While many airdrop holders are there to dump at first sight, some might think that this is worth increasing their allocation since the free allocation only lowers their cost base. Hence, the risk of losing money is lower by buying more, or so the holders are led to believe.
Airdrops are for airheads
If something seems too good to be true, it probably is. Don’t let the illusion of free crypto distract you from making smart investment decisions based on thorough research and a solid understanding of the market.
There are numerous ways to learn and grow in Bitcoin without wasting time on airdrop hunting.
Invest your time and energy wisely, look for ways to be constructive, upskill yourself and provide value that the market will reward instead of spending your time seeking out another round of digital welfare cheques that likely won’t pay off.
