Airdrop Guide

An airdrop in crypto refers to the distribution of free tokens or coins to a group of people, often to promote a new crypto project or reward existing holders of a specific cryptocurrency.

What’s the objective of an airdrop?

Airdrops are typically used to launch, to bootstrap the economy or to market a new crypto project. It’s often part of the TGE (Token Generation Event) of a project. Airdrops can serve as a marketing tool to increase awareness, boost user engagement, or create a community around a new crypto project. They can also serve as a reward mechanism for loyal users or early adopters.

An airdrop can boost a project's visibility, encourage community participation, increase liquidity, and facilitate the wider distribution of the project’s tokens / coins.

What are the conditions to receive an airdrop?

Airdrops are distributed based on criteria decided by the team developing the project or cryptocurrency. For example, some eligibility conditions to receive an airdrop can include holding a certain crypto coin at a given time (what is commonly referred to as “at the time of the snapshot”), engaging with the project’s protocol or dApp (decentralized Application), completing community tasks such as signing up for a newsletter, joining a Discord channel or a Telegram group, following a social media account, or sharing content.

Examples of types of airdrops:

• Holder-based airdrop: Airdrops to existing holders of a specific crypto token, typically captured by taking a snapshot at a specific block height.
• Usage-based airdrop: Airdrops to early users of the protocol or the dApp of a project.
• Engagement-based: Airdrops distributed to users who perform certain tasks or engage with the project on social media.
• Fork-based: Airdrops resulting from a blockchain fork, where holders of the original crypto receive an equivalent amount of the new crypto.

How do I claim an airdrop?

There are usually two ways to claim an airdrop for which your crypto address qualifies:

Automatic claim: In this case, the tokens are sent directly to the crypto addresses that are eligible for the airdrop. This is common for projects that airdrop to existing token holders.

Manual Claim: Some airdrops require you to claim the tokens manually. This process might involve visiting a specific website, connecting your wallet, and following the instructions provided to claim the airdrop.

Are there risks with airdrops?

Just like anything else in crypto, airdrops can be the target of scams or phishing attacks, where malicious actors pose as a legitimate project to steal your crypto. Whenever you interact with a project, especially one that requires to perform an action to receive an airdrop, you must make sure that the project is legitimate, that the airdrop is real, and that you are interacting with the correct smart contract. To avoid scams and being hacked, you should:

1. Stay Informed: Follow announcements, forums, or social media accounts related to the crypto project you’re claiming an airdrop.
2. Verify the Source: To avoid scams, ensure the airdrop announcement comes from a legitimate source. Check the official website, social media accounts, or reputable crypto news sources.
3. Slow Down: Scammers and hackers will often try to create a sense of urgency by saying that the airdrop is quantity-limited or will expire soon. This is usually done to make you interact with a compromised or fake contract to steal your assets. Once you find out you qualify for an airdrop, take your time to research to make sure it is legitimate – there’s no rush.
4. Secure Your Private Keys and Seed Phrases: NEVER share your crypto addresses’ private keys or seed phrases. Legitimate airdrops will never ask you for this information.

Are crypto airdrops taxable in Canada?

Another to thing to keep in mind is that receiving an airdrop may have tax implications in Canada. At the time of writing this, the Canada Revenue Agency (CRA) has not provided specific guidance as to how to treat airdrops, and the tax implications of receiving a cryptocurrency airdrop will therefore depend on your specific situation, the context through which you received the airdrop and the relevant Income Tax Act dispositions. Some questions to ponder:

• Is a crypto airdrop a tax-free windfall or gift?
• Can a usage-based airdrop or engagement-based airdrop be considered a source of income?
• Is an airdrop farmer running a business?
• If you sell an airdrop, are the proceeds capital gain or business income? What’s the ACB (adjusted cost base) of your airdrop?

These questions are best answered by a tax professional such as a tax lawyer or CPA (Chartered Professional Accountant) who specializes in crypto.

How can I find out if I’m eligible for an airdrop?

To find out if you are eligible for airdrops, you can use a variety of resources and tools designed to track, announce, or analyze airdrops. Here are some popular tools to verify your airdrop eligibility:

• Bankless Claimables
• Earndrop
• Solana Airdrop Checker
• Various Twitter (X) accounts, for e.g.: @its_airdrop @defi_airdrops

What is Airdrop Farming or Airdrop Hunting?

Airdrop farming and airdrop hunting refers to purposely performing specific activities related to a project that is expected to eventually airdrop a token. The activities include the ones we mentioned above in our What are the conditions to receive an airdrop? section.

Airdrop farming involves 1) identifying new projects with a high likelihood of releasing a new token and 2) performing the activities (engagement or dApp usage for example) that will qualify you for the future airdrop.

Bankless, through its Airdrop Hunter feature, and Earndrop both specializes in identifying these projects and suggesting the activities and tasks to perform.