Complete Guide to Cryptocurrency Airdrops: From How They Work to Important Tips

Introduction

In the world of cryptocurrencies, “Airdrops” are one of the key opportunities that investors pay attention to. This system, where tokens or NFTs are distributed for free simply by meeting certain conditions, is rapidly expanding between 2024 and 2025, especially focusing on Layer 2 projects and AI-related stocks.

This guide comprehensively explains everything from the basics of airdrops, how to receive them, to the risks to be aware of when participating, catering to both beginners and experienced users. To utilize airdrops efficiently, accurate knowledge and proper information gathering are essential.

Table of Contents

• Definition and Basic Concepts of Airdrops
• Purpose and Market Impact
• Classification and Participation Methods
• Benefits for Investors
• Risks to Understand Before Participating
• Frequently Asked Questions and Answers
• Summary

Definition and Basic Concepts of Airdrops

What is an Airdrop

An airdrop is a marketing strategy where, by fulfilling certain conditions set by the project team, participants can receive cryptocurrencies or NFTs free of charge.

Often conducted to increase awareness of new projects and expand the blockchain ecosystem, airdrops serve as an important part of corporate strategy. In addition to traditional “one-time distributions,” more projects are introducing ongoing reward systems such as point programs and loyalty schemes.

These programs are not just promotional; they are mainly designed as a mechanism to reward community contributors.

Background for Implementation

Airdrops are conducted through approaches different from conventional fundraising or marketing, driven by the following backgrounds:

For currencies created via hard forks, they serve as a fair initial distribution to existing holders. For new projects, especially in early stages, airdrops are an effective tool to quickly build recognition and a user base.

Purpose and Market Impact

Main Objectives

The reasons why projects deploy airdrops are diverse.

Increasing Awareness: Making new tokens or projects known in the market
Building a User Base: Growing the number of holders to form a community
Enhancing Liquidity: Ensuring healthy liquidity in trading markets
Activating the Ecosystem: Increasing token circulation and enriching the ecosystem
Forming Early Holders: Building a core community to drive the project

Especially for new projects, these factors greatly influence market success. When a project is a fork of an existing currency, it also involves the fair distribution of the new currency.

Trends After 2024

Large-scale airdrops from Ethereum Layer 2 solutions and re-staking projects like EigenLayer have brought billions of dollars in value to the market. This clearly indicates that airdrops are a crucial part of project growth strategies.

Classification and Participation Methods of Airdrops

Airdrops come in several types, each with different participation conditions and procedures.

Understanding these types helps to increase participation opportunities efficiently.

Benefits for Investors

Free Asset Acquisition

The biggest advantage of airdrops is obtaining tokens or NFTs without risk.

While usually requiring purchase, simply meeting the conditions allows you to acquire assets, significantly lowering the barrier for beginners to enter the crypto world. For operators, increasing user numbers and earning transaction fees can lead to long-term benefits, making this a mutually advantageous system.

Positive Impact on Held Assets

When holding certain currencies is a condition for an airdrop, the number of users purchasing that asset may increase, potentially raising its price. Existing holders can expect an increase in their assets simultaneously with participating in the airdrop.

However, be aware that some users may sell off large amounts immediately after the snapshot, which can cause a temporary price decline.

Early Contact with Promising Projects

You can participate in projects that are not yet recognized in the market for free, gaining opportunities to anticipate future growth.

Subsequently, if the project gets listed or partners with major companies, its recognition can increase, leading to significant returns.

Market Liquidity Improvement

Distributing tokens to many users increases overall market liquidity. This reduces trading costs and slippage, creating a more favorable trading environment for investors.

Risks to Understand Before Participating

Scams and Security Measures

Many scams impersonate airdrops. Be especially cautious of cases requesting your wallet password or private keys.

Official airdrops do not require your private keys. If such requests occur, consider it highly likely to be a scam.

Safety tips:

• Always verify the official website URL
• Never share your private keys
• Avoid connecting your wallet to suspicious websites
• Use a dedicated wallet for airdrops

If unsure, it’s best to refrain from participating.

Uncertain Token Value

Tokens distributed may not be valued in the market. Even if you receive them, if their practical value is not recognized, you end up with assets that are essentially worthless.

For example, receiving 1,000 tokens worth about 0.1 yen each only amounts to roughly 100 yen. If the costs incurred to meet participation conditions (like gas fees) exceed this, you will face a loss.

Estimate the costs involved before participating.

Tax Treatment

Cryptocurrencies obtained via airdrops are generally taxable. Being free does not provide tax advantages.

If the market value is established, the received amount is recorded as “miscellaneous income” based on the price at receipt. In Japan, tax rates can be as high as approximately 55%.

Even for unlisted tokens, the full amount may be taxable upon sale. If annual side income exceeds 200,000 yen, filing a tax return is mandatory. Keeping records across multiple exchanges is important.

If uncertain about tax matters, consult a professional.

Restrictions on Selling in Japan

Many tokens received via airdrops are not available on Japanese crypto exchanges. Converting to Japanese yen requires using overseas exchanges, which presents challenges such as:

• Opening accounts on foreign exchanges
• Managing assets across multiple platforms
• Complex calculations during tax filing

Consider these factors carefully before deciding to participate.

Frequently Asked Questions and Answers

Is an airdrop really safe?

Safety varies greatly depending on the project and the implementing entity.

Reliable companies tend to conduct safer airdrops, but caution is needed with unknown projects. Features of safe airdrops include clear announcements via official channels, no private key requests, and transparent participation conditions.

Avoid suspicious emails or DMs, and excessive personal information requests. Never share your private keys with others.

How is tax calculated?

Tokens obtained via airdrops are taxed as “miscellaneous income” based on their market price at the time of receipt.

For unlisted tokens, the full amount may be taxable upon sale. Tax rates can reach up to 55%, but there are proposals to switch to a stock-like separate declaration system (around 20%).

If annual side income is below 200,000 yen, filing may not be required; otherwise, filing is necessary.

Is a wallet setup necessary?

Generally, yes. For snapshot-based airdrops, holding the target currency in your wallet at the specified time is a condition.

Commonly used wallets include hot wallets like MetaMask and hardware wallets like Ledger. Preparing the appropriate wallet according to the participation conditions ensures smooth entry.

Can beginners participate?

Basically, yes. Especially social media-linked airdrops are simple, requiring only follow or retweet actions, suitable for beginners.

For snapshot-based airdrops, some knowledge of wallet setup and currency purchase is needed, but starting with small amounts after learning the basics allows gradual skill development. Participating in reputable projects is recommended.

Summary

Airdrops are a unique opportunity in the cryptocurrency market and, if used properly, can contribute to expanding your investment portfolio.

Key points of this guide:

• Definition: Marketing strategy to obtain free tokens or NFTs by meeting conditions
• Main benefits: Free assets, potential increase in holdings, opportunities to join new projects
• Main risks: Scams, uncertain token value, tax obligations, selling restrictions
• Sources of information: Official websites, social media, trusted media outlets
• Participation requirements: Verify reliability, understand security, prepare appropriate wallets

Since airdrop information is updated daily, regularly check trustworthy sources. Always confirm official information before participating, and carefully evaluate security risks.

With accurate knowledge and cautious judgment, you can safely and effectively utilize airdrops, broadening your possibilities in cryptocurrency investment.