Launching a new project is always an exciting affair in the crypto community. If a new token is involved, developers can use a few ways to distribute it to as many users as possible. Project owners can employ airdrops and lockdrops to send the native token to interested parties, creating a solid community and user base for the crypto project. These methods can be used for any kind of crypto projects, including play-to-earn crypto games.
Although similar, lockdrops and airdrops are not the same thing, and today we'll learn what they are and how they each work. The main difference between crypto airdrops and lockdrops is that airdrops involve freely distributing tokens to the community, while lockdrops require users to lock up their existing tokens to earn additional tokens as a reward.
Let's dig in, shall we?
Crypto airdrops - distributing free tokens
A crypto airdrop is a promotional method of distributing cryptocurrency coins or tokens to existing token holders of a specific network.
An airdrop helps a project gain more user traction, seeing how the market is filled with thousands of existing tokens and coins.
The business decides when the airdrop occurs and which users receive free tokens. The developers usually distribute tokens only to crypto wallet holders that have other tokens at a predetermined time.
Types of crypto airdrops for token holders
There are several types of crypto airdrops that can be used to attract users to a new network.
Retroactive airdrops - more tokens for free
The retroactive airdrop happens when existing blockchains unveil their original tokens, rewarding early users or any project participants. This type of crypto airdrop is excellent at creating hype around the new tokens, but it can also increase liquidity and create organic interest in the launch, as users receive tokens for retweets, follows on Social Media, etc.
The takeover airdrops are used in decentralized finance protocols to build a strong community by offering purely promotional rewards or to get new users from other projects.
This type of airdrop is targeted at liquidity providers and users that have staked tokens, making sure they choose the project that offers airdropped tokens over any other DeFi protocol.
Tips for participating in airdrops
Before you participate in future airdrops, there are some tips and tricks that all token holders should be aware of:
Don't pay for airdrops
Airdrops are constructed on the fundamental idea of distributing free tokens to the community without any financial commitment from the users. If you originally intended to participate in an airdrop, but the project asks you for money in exchange for your participation, grab your coins and go!
Don't share your private key
It's called private key for a reason! Never, under any circumstance, share your private key with anybody. Keep your cryptocurrency wallet safe from any crypto scams.
Create a new email address just for airdrops
A good idea would be not to share your primary, private email address with all the airdrop projects you want to join. It does not matter what email address you use to receive free tokens, so we advise keeping things separate. You can create a separate email that you use exclusively for airdrops or make a new one for each airdrop.
Have separate passwords
Generally speaking, creating different passwords for different websites is a great rule of thumb. If the airdrops you wish to join, require website registration, don't use the same password everywhere. We know juggling 100 passwords can be a hassle, and that's why you're locked out of some account or other, but you can use one of the password manager applications or an online password generator.
Avoid Know Your Customer Airdrops
Some projects ask you to give your personal information or do some sort of Know Your Customer process in order to send you the airdropped tokens. The choice is ultimately yours, but you should be able to receive tokens without sharing any private details.
Are hard forks similar to airdrops?
There are many passive income strategies in the crypto world. We've discussed about blockchain forks and the differences between soft and hard forks. Since both free airdrops and hard forks can generate extra coins for participants, you might wonder if they are the same or not.
The short answer is yes, a hard fork is similar to an airdrop. In both cases, you're getting free coins. The main difference between them is that hard forks occur during a blockchain split when a radical change is made to the blockchain software protocol. A hard fork creates two separate blockchains and entirely new crypto coins. Token holders of the original tokens might be offered a certain amount of the new token for free as a way to create a strong community around the new network.
What are lockdrops?
Now that we know what airdrops are and how they function, it's time to look closely at lockdrops. A lockdrop is a modified version of an airdrop, where the user has to show some commitment to the project in order to get a certain amount of free tokens.
Lockdrops are created via smart contracts. With every token that is locked in, more tokens are created. Users can claim their original funds plus the new tokens when the network is launched.
To participate in a lockdrop, users lock via staking one token or more tokens for a specific time. Upon release, they receive the locked tokens and additional tokens native to the blockchain project.
Who invented lockdrops?
The first lockdrop was done by a governance-focused startup called Commonwealth Labs. The lockdrop took place on their Edgeware network, a self-upgrading smart contract platform on the Polkadot blockchain.
Edgeware claimed they gave away more than 90% of their EDG token at the time.
Copyright © Edgeware
How lockdrops work - smart contract use
The staking time can vary depending on the token used. Tokens are locked in a smart contract, and the rewards are calculated depending on how long you stake. Token holders that lock their coins the longest receive the most in return.
Crypto enthusiasts believe lockdrops are the future of airdrops. They don't just target anyone that wants free tokens but address the audience that will actually use the new network and its native coin.
You ask, we answer
Can anyone participate in a crypto airdrop or lockdrop, or are there certain requirements to be eligible?
Generally, anyone can participate in a crypto airdrop or lockdrop, but the requirements may vary depending on the specific project. For airdrops, users usually need to have a specific wallet or be a member of a certain community to be eligible. Lockdrops, on the other hand, require users to lock up their existing tokens for a certain period to receive additional tokens as a reward.
Are there any risks associated with participating in a crypto airdrop or lockdrop?
As with any investment in cryptocurrency, there are always risks associated with participating in airdrops or lockdrops. The tokens received may have little to no value, or the project may fail entirely. Additionally, there may be scams or fraudulent projects that claim to be offering airdrops or lockdrops to unsuspecting users. Therefore, it's important to do your own research and only participate in legitimate projects.
What are some examples of successful crypto airdrops or lockdrops in the past, and what can we learn from them?
One successful airdrop was the Uniswap airdrop in 2020, which distributed tokens to users who had previously used the Uniswap decentralized exchange. As for lockdrops, one notable example was the Edgeware lockdrop in 2019, which required users to lock up their existing Ether tokens in order to receive Edgeware tokens as a reward. This helped to build a strong community around the Edgeware project and increase adoption of the token.
Successful airdrops and lockdrops are often those that are well-publicized, have a clear value proposition, and are able to attract a large and engaged community of users.
To sum it up, the difference between lockdrops and airdrops is that the first ones require a level of commitment much higher than the second ones. For example, you could receive airdropped assets based on what other coins you have in your wallet or as a thank you for supporting the protocol, but you are not really required to do anything. Meanwhile, for a lockdrop, you must lock and stake your own funds with a new protocol to get any rewards.
You're probably wondering, " Are lockdrops worth it more than their counterparts?" Only the developers of a cryptocurrency or protocol can answer that, depending on what they're seeking to obtain: a smaller but engaged community or a more expansive but possibly less committed network of people.
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