Hard forks and airdrops are forms of passive income strategies, which are essentially free giveaways of particular tokens to users
The idea of receiving passive income from one’s assets becomes even more appealing for long-term investors when cryptocurrencies like Bitcoin (BTC) go through bear phases like the one we presently find ourselves in.
Different strategies, including staking, lending, cloud mining, and yield farming, have gained popularity in recent years and reward investors with cash or tokens in exchange for their crypto token investments.
However, people that are involved in the crypto ecosystem can search for tokens or projects that give away extra tokens in proportion to their vested holdings as a reward through hard forks or airdrops for a variety of reasons.
Hard forks and airdrops operate differently and are created through entirely distinct procedures since both are meant to increase the project’s popularity or as part of a marketing strategy.
Let’s examine what sets crypto airdrops apart from hard forks and how investing in
How does a cryptocurrency airdrop operate and what is it?
Crypto airdrops are regarded as manna from heaven for cryptocurrency enthusiasts ready to test out various projects because they need little technical expertise and may carry fewer dangers.
A crypto airdrop, often referred to as token giveaways informally, is the free distribution of a cryptocurrency coin or token to existing token holders. An airdrop’s purpose is to increase user traction in a market that is oversaturated with thousands of cryptocurrency tokens and coins, and is typically related with the debut of a new project or cryptocurrency.
Users have no control over the timing of airdrops, which are promotional in nature and typically carried out by developers or cryptocurrency business owners to give away extra tokens or coins to existing token holders.
Similar to how traditional firms give away freebies to promote new product offerings, the number of tokens awarded depends on the amount invested in or efforts made toward a project.
There are two different kinds of crypto airdrops: retroactive airdrops and takeover airdrops. The two are distinguished primarily by the stage in which they are offered and their intended use.
A retroactive airdrop is generally announced when an existing blockchain protocol is planning to unveil its native crypto token and rewards early users or those who have contributed to the project prior to a particular date.
It is a very popular tool for creating hype around the soon-to-be-launched token. Meanwhile, it also serves as a liquidity creation mechanism and helps with audience engagement by awarding tokens in exchange for retweets, feedback or even increasing followers on social media.
Takeover airdrops are employed when decentralized finance (DeFi) protocols want to snatch users away from the competition or increase their chances of retaining them by offering greater rewards
While it is a comparatively more aggressive form of an airdrop, takeover airdrops are targeted at liquidity providers and users who have displayed higher engagement in activities such as staking so as to attract them away from a competing DeFi protocol.