Airdrops and initial coin offerings (ICOs) are only two of the many entrances points bitcoin startups use daily.

Free tokens of a new or even an existing cryptocurrency are sent to participants in an “airdrop.”

Suppose they meet the criteria for the airdrop. Any new and old cryptocurrency can be used for this purpose.

The condition might be that they do certain tasks to aid the project’s development, have a specific cryptocurrency, or have just used a service.

This essay isn’t only about airdrops; there’s a lot to know about crypto and NFT airdrops if you want to earn free tokens or coins.

First Coin Offerings (ICOs) are distributed to the crypto community like airdrops to gain exposure for a new cryptocurrency venture.

They also facilitate people’s ability to invest in the nascent bitcoin market. But an airdrop is not the same as an ICO platform.

The Distinctions between Airdrops and ICOs

One fundamental difference between an ICO and an airdrop is that ICO participants are not obligated to make any financial investment, but airdrop participants are.

If someone contributes to a project and does a good deed, they can be eligible for an airdrop as compensation.

For example, the Uniswap decentralized exchange airdrop of 2020 gave all participants 400 UNI tokens as a gesture of gratitude for their prior involvement with the platform.

None of the recipients paid for the tokens; all they required was a track record of using the Uniswap DEX.

Participants in an initial coin offering (ICO) can pay for tokens with either fiat money or another cryptocurrency, such as Bitcoin or Ethereum.

Initial coin offerings (ICOs) are a way of crowdsourcing funding for the launch of a new company.

Read also: What is the ICO and How Does it Work?

At the same time, airdrops incentivize users to engage in the project and, in most instances, use their obligations as a form of free advertising.

Why is a Crypto Airdrop important?

The Uniswap airdrop is a good reminder that airdrops can be used to encourage new users to join a platform and reward loyal users for their continued support.

In honor of the introduction of Stellar XLM on the Blockchain.com wallet, the business has given two billion XLM tokens to verified Blockchain.com customers.

Each user’s wallet was credited with 100 XLM at $25.

For this purpose, airdrops are often organized to reward loyal consumers or to attract new users to a business.

In either scenario, it serves to increase membership by attracting attention and acting in a way somewhat unlike a public relations stunt.

Why is an ICO important?

First and foremost, an ICO serves to raise funds for a new business. Most ICOs are conducted by startups or established enterprises that restart their fundraising efforts.

But why does every project have to start by seeking to get capital?

When a cryptocurrency company needs to raise money quickly, it can hold an initial coin offering or ICO.

As a result, every cryptocurrency startup’s founder has the financial means to fund the venture from the outset.

Ethereum, which started as an ICO, is currently the second most valued cryptocurrency, behind only Bitcoin.

Speculators swapped their Bitcoin for Ethereum because they believed the latter would be worth more if the successful undertaking.

It did, fortunately; nevertheless, this is not always the case, and blatant scams sometimes occur.

In some cases, projects are formed only to scam unsuspecting investors out of their money in exchange for worthless tokens that the project’s designers do not intend to use.

This has made regulators wary of ICOs, leading to a significant decline in popularity.

Read also: What are Some of the Benefits of an ICO?

Most ICOs have been replaced with safer and more reliable fundraising processes like IEOs, IDOs, and DEXs (decentralized exchanges).

To Sum it Up

In the last several years, airdrops have seen significant evolution.

Once they were as simple as handing you free tokens once you completed a few simple tasks, but now that is not the case.

Competition to participate in airdrops has increased as awareness of cryptocurrencies has grown.

While most ICOs welcome anybody who wants to join in, they have certain limitations, especially because of the necessity for investment.

Blog Credits: Medium