Cryptocurrency Airdrops: Complete Guide from Basic Knowledge to Practical Usage

What is the “Airdrop” You Often Hear About in Cryptocurrency

The “Airdrop” that is a hot topic in the blockchain industry refers to an event where users can receive free cryptocurrencies or NFTs by meeting certain conditions set by companies or projects.

It functions as a marketing method to increase awareness of new currencies and projects, while also serving as a way to reward users. Especially between 2024 and 2025, large-scale distributions by layer 2 (L2) and AI-related projects are occurring successively, and it is analyzed that the overall market has created new value amounting to billions of dollars.

The reason why airdrops are attracting attention is that they are increasingly seen not just as advertising, but as “rewards for community-contributing users.” Recent examples include mechanisms where long-term users and loyalty program participants receive continuous token distributions.

Reasons for Conducting Airdrops and the Operators’ Goals

Projects and companies have multiple strategic objectives for implementing airdrops.

Building Market Infrastructure: Newly issued cryptocurrencies initially face challenges such as limited holders and low liquidity. Distributing widely ensures that many users hold the currency, creating an environment where trading is active.

Increasing Recognition and User Base: For projects with low awareness, airdrops are an effective promotional tool. They can reach potential users through free distributions.

Ecosystem Activation: Gathering many participants in the early stages accelerates overall project growth. When a new currency is born through a hard fork, it is sometimes conducted as a fair initial distribution.

Long-term Monetization: After attracting users through free distributions, some strategies aim to generate profits via transaction fees or service usage fees, viewing it as an “investment campaign.”

Types of Airdrop Methods and Differences in Participation Conditions

Airdrops come in various forms, each requiring different preparations. Understanding these differences beforehand is crucial.

Snapshot Method

This involves recording the wallet balances on the blockchain at a specific date and time as a “snapshot,” then distributing tokens or NFTs to users who held the targeted assets at that moment. An example is the distribution of Flare(FLR) to XRP holders.

In this method, trading activity tends to increase before and after the snapshot date. Since many users sell after the snapshot, there can be temporary price fluctuations, so caution is needed.

Social Media-Linked

Participation is conditioned on actions such as following official accounts, retweeting, or using specific hashtags on social media. It is easy for beginners to participate, making it accessible.

Service Usage-Based

This requires using a specific platform or DEX (Decentralized Exchange) for a certain period. Typical cases include protocols like Uniswap. It rewards actual user activity.

Hard Fork-Derived

Users holding the original currency automatically receive the newly forked currency. A famous example is the distribution of Bitcoin Cash when it split from Bitcoin.

Multi-Condition

This combines multiple conditions such as holding specific assets, social media activity, and transaction history. By setting diverse participation requirements, it filters for highly committed users.

The Significance of Receiving Cryptocurrencies for Free

The biggest advantage of airdrops is that you can acquire cryptocurrencies or NFTs without investing funds. For beginners, it offers a valuable opportunity to experience the blockchain industry without actual investment risk.

If the received assets are valued on the market, they can become holdings, and you can profit from their appreciation. There are cases where tokens from unknown projects were listed on major exchanges or partnered with large companies, leading to significant value increases.

However, participating just because it’s “free” can sometimes lead to poor decisions. If you buy certain assets to meet participation conditions, the purchase costs and transaction fees (gas fees) may outweigh the value of the tokens received, resulting in a net loss. It is important to calmly estimate the “actual cost-effectiveness” before participating.

Impact of Price Fluctuations of Held Assets

When the condition “holding a specific currency” is included, an increase in users purchasing that currency can change supply and demand, causing the price to rise. For existing holders, this means an increase in the value of their assets.

However, once the snapshot is confirmed, users who bought to meet the condition often sell all at once, typically causing a rapid price decline. It is crucial to distinguish between short-term profit strategies and the project’s long-term growth prospects.

How Airdrops Contribute to Overall Market Liquidity

Newly issued currencies or tokens initially have few holders and low trading activity. Wide distribution through airdrops creates a situation where many users hold small amounts, improving overall market liquidity.

Higher liquidity allows users to buy and sell smoothly, reducing slippage (the difference between expected and actual transaction prices). This benefits all market participants.

Risks of Fraud During Airdrop Participation and Countermeasures

Scams pretending to be airdrops are common. Malicious third parties may create fake websites that look identical to legitimate ones, attempting to steal wallet private keys or personal information.

Most Dangerous Sign: Requests for entering wallet passwords or private keys. Legitimate airdrops do not require any wallet information from the recipient. If such requests appear, it is almost certainly a scam.

Phishing Warning: Fake sites that closely resemble official websites may prompt users to connect their wallets. Often, the URL differs by just one character. Always verify with official sources.

Practical Security Measures:

• Double or triple-check official website domains
• Never input or share your private keys externally
• Refer only to trusted sources (official Twitter, Discord, emails)
• Prepare a separate wallet dedicated to airdrops
• If security is uncertain, it’s better to refrain from participating

The Possibility That Distributed Tokens May Have No Value

Tokens obtained via airdrops may not be sufficiently valued in the market. For example, even if you receive 1,000 tokens, if each is worth about 0.1 yen, the total is only around 100 yen.

If you pay high gas fees (network transaction fees) to meet participation conditions, those costs may exceed the token’s value, resulting in a negative net profit.

Before participating, it’s effective to compare expected fees or purchase costs with the current value of the tokens, and perform a simple calculation to see if the expected return is positive.

Tax Treatment and Points to Note in Japan

It is easy to overlook, but cryptocurrencies obtained through airdrops are subject to taxation. Being free does not mean they are tax-exempt.

Basic Tax Rule: The market value of the received assets (at the time of receipt) is considered “miscellaneous income” and is subject to income tax. In Japan, the maximum tax rate can be around 55%.

Unlisted Tokens: Valuation at the time of receipt can be difficult, so they may not be taxed immediately. However, when sold, the entire amount may be taxed as profit.

Procedures Depending on Domestic Exchange Handling: Many airdropped tokens are not listed on Japanese exchanges. In such cases, using overseas exchanges is necessary, which involves transferring assets between multiple exchanges. For tax filing, consolidating transaction histories from each exchange and performing complex calculations is required. Using tax software or consulting professionals is advisable.

Current Tax Reform Trends: Discussions by the Financial Services Agency and industry groups include proposals to unify cryptocurrency taxation with stock-like separate declaration taxation (around 20%) and to introduce loss carryforward systems (up to 3 years).

If annual miscellaneous income is below 200,000 yen, filing is not required; exceeding that amount makes filing mandatory.

Necessity and Options for Wallet Preparation

Participating in airdrops generally requires a cryptocurrency wallet. For snapshot-based airdrops, holding the targeted assets in the wallet at the specified time is a prerequisite.

Hot Wallets (e.g., MetaMask): Connected to the internet, easy to set up and operate. Suitable for small-scale airdrop participation.

Hardware Wallets (e.g., Ledger): Offline storage with high security, but require connection when participating. Suitable for holding large assets.

Before participating, confirm the specific conditions of the airdrop and prepare the appropriate wallet type to ensure smooth procedures.

Beginner-Friendly Participation Steps and Cautions

Even with limited basic knowledge of cryptocurrencies, participation in airdrops is entirely possible. Social media-linked types, which only require retweets or follows, are especially beginner-friendly.

Common pitfalls for beginners:

• Paying high fees to buy assets for snapshot participation
• Falling for scam sites with security concerns
• Entering sensitive information like private keys

Recommended approaches:

• Acquire basic security knowledge before participating
• Start with trusted projects
• Begin with small amounts and gain experience gradually
• Cross-reference official information and community feedback

Strategies for Gathering Airdrop Information

To efficiently obtain airdrop information, utilizing multiple sources is effective.

Reliable sources:

• Official project websites and social media (Twitter, Discord)
• Cryptocurrency news sites and media
• Community forums sharing user experiences
• Reddit and other market discussion platforms

Cautions When Using Information Sources:

• Do not rely on a single source
• Be wary of unsubstantiated high praise or recommendations
• Regularly check for the latest updates

The Present and Future of Airdrops

Airdrops have become a characteristic aspect of blockchain culture. Their effectiveness as a marketing tool is proven, and their role in providing value to users is strengthening.

In 2024, distributions worth billions of dollars are flowing into the market from new projects. This trend is expected to continue for the foreseeable future.

However, the risk of scams is also increasing, requiring participants to have high literacy and vigilance.

Summary: Key Points for Safe and Effective Participation

Airdrops are a valuable opportunity for both beginners and experienced users to acquire assets. While offering the benefit of free asset acquisition, there are risks such as scams and tax considerations.

Key points from this article:

• An airdrop is an event where users receive free cryptocurrencies or NFTs by meeting certain conditions
• Various formats exist, such as snapshot-based and social media-linked, each requiring different preparations
• Benefits include free asset acquisition, potential project value increase, and contribution to market liquidity
• Risks include scams, token value uncertainty, taxation, and handling on domestic exchanges

To participate safely, verify official information, protect private keys strictly, and select trustworthy projects. Always gather information from multiple sources and make careful decisions before participating.

The cryptocurrency market is constantly evolving, and airdrop mechanisms are diversifying. Building on this foundational knowledge and staying updated will enable you to utilize airdrops effectively and expand your cryptocurrency investment opportunities.