Everything you need to know about the crypto gifts

Crypto enthusiasts could earn up to $50,000 in one fell swoop airdropping Optimism, Uniswap, dYdX, Aptos, and other cryptocurrencies. Sounds absurd, but it is one of the biggest temptations in the crypto sector: tokens and coins for free. However, experienced investors know: “there ain’t no such thing as a free lunch” and so airdrops also have their price. They are associated with their very own security risks, raise questions about decentralization in some projects and can, under certain circumstances, turn out to be a tax trap.

This is how airdrops work

First and foremost, airdrops are a marketing strategy for crypto and web3 companies. They lure users to the project in the hope of tying up activity and liquidity on the respective platform in the long term.

However, airdrops are not only used for marketing purposes, they also have a technical background. Very few cryptocurrencies work on the distribution principle today. The entire range of new tokens is therefore mostly mined right at the beginning. Only through rewards or unlocks do they then reach the users. In order to get the tokens into circulation as quickly as possible, many projects use nationwide airdrops.

However, problems arise for the project if most recipients sell their tokens directly. This leads to a strong concentration of the token supply, as the few buyers can quickly become whales.

One of the most famous examples is the Uniswap airdrop. On September 17, 2020, 250,000 different wallets each received 400 UNI from the popular decentralized exchange. At that time, a single interaction with one’s own wallet was required. The tokens were already worth several thousand US dollars at this point and rose even further during the course of the bull market. an extensive one Evaluation of the airdrop by Dune Analytics then suggested the obvious: most recipients sold their tokens immediately.

This poses problems for projects. On the one hand, comprehensive airdrops do not seem sustainable enough for their own optimization purposes. On the other hand, fair and distributed launches like Bitcoin’s are also unattractive from a marketing perspective.

Gifts come at a price

The latter is of no interest to speculators anyway. In the meantime, a veritable culture of “airdrop farming” has developed. Because the crypto gifts can be anticipated, also because projects are still playing with the hints of an airdrop. Best example: Arbitrum.

Unlike its cousin Optimism (OP), the Layer 2 platform Ethereum does not yet have a token. But that there will be one is almost certain in the crypto community. As Optimism has shown, one could qualify for this just by using the blockchain. Many projects already follow this principle – even before they actually start.

As a thank you or motivation for participating in the test networks, developers often give cryptos to their users. Airdrop hunters are trying to exploit this by jumping on the test network train of various new blockchains in an increasingly speculative manner. Beginners are often overwhelmed here and then complain about the complexity of the networks – in some cases they even demand compensation.

Fraud can also quickly occur here. Legitimate-looking airdrop announcements often end up in Twitter or email inboxes. Anyone who clicks on the links and connects their wallet will quickly lose their cryptos. Airdrop hunters should therefore be aware that they alone are responsible for the security of their own portfolio. Basically, you should always keep an eye out on the official channels of the project for corresponding announcements.

These projects could launch an airdrop

Despite everything, airdrops are still in demand. If you want to take the risks, you will find a few (first) approaches here.

For passive airdrop farmers, the first step might be to register with Earni.fi worth. The application promises to use the wallet addresses entered to determine which airdrops you may have already qualified for. The platform also provides updates on new airdrops. However, this service is chargeable.

The following projects are also possible but by no means guaranteed Candidates for a future airdrop:

1.zkSync

What it is: Ethereum Layer 2 blockchain based on zero-knowledge proofs

Official page: zksync.io | introduction

Strategy: Use of the test network before the start of the mainnet

2. Sui

What it is: Layer 1 blockchain with novel programming

Official page: sui.io | introduction

Strategy: Use of the test network before the start of the mainnet

3. Strongnet

What it is: Ethereum Layer 2 blockchain based on zero-knowledge proofs

Official page: starkware.co | introduction

Strategy: Use of the network and the applications on it

4.Aztec Network

What it is: Private Ethereum Layer 2 blockchain based on zero-knowledge proofs

Official page: aztec.network | introduction

Strategy: Use of the network and the applications on it

Other notable candidates are: Scroll, LayerZero, Celestia, Be, Shardeum

Attention taxes!

If you are actually the lucky recipient of an airdrop, you have to consider the tax aspects. In Germany, this is indicated by a letter from the Federal Ministry of Finance, in which Individual questions on income tax treatment be clarified by cryptos.

Accordingly, the receipt of the tokens should in most cases be counted as income and not as a gift. However, this often remains a case-by-case decision. If you receive a larger airdrop or are unsure about crypto taxes, a tax advisor should be consulted before selling the tokens.