SEC S19-W1 || Crypto Opportunities: Airdrops and Giveaways

Hello Crypto Lovers hope you all are well I am fine. Today I came to participate in the engagement challenge of season 19 week 1. This time the topic of the competition is Airdrops and Giveaways. Anyway, this contest has been given on a very practical and profitable topic. Let me start.

Consequently, airdrops and giveaways have long been employed in the cryptocurrency industry; they represent the ways to distribute a project’s tokens and attract people’s attention to particular projects giving tokens for free. Such measures have several objectives: to expand the number of Token holders, to attract new Users, or to create awareness of new Projects or Updates. Here’s a detailed look at both airdrops and giveaways.

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• What are Airdrops?

An airdrop is a marketing tactic in which some coins or tokens are dispersed to wallets addresses for free. They are mostly employed by blockchain initiatives to share brand-new tokens among individuals as a way to improve the tokens’ liquidation rates, encourage mass acceptance of the tokens, and offer the users a motivation to participate in the project.

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• What are Giveaways?

Giveaways, on the other hand, are normal to be carried out by the projects themselves or sometimes the influencers in the communities. These are mostly get rich quick like promotions, which aims at making people participate in certain activities that appear like formal competitions and that could see them earn cryptocurrencies or tokens through, for instance, by just retweeting a message, joining a Telegram group, or putting down a comment. People may vote for something or spread information about new projects and updates which can also be a trigger for giveaways.

Explain what a cryptocurrency airdrop is and what its main objectives are. Give examples of projects that have used airdrops.

An airdrop is a marketing practice by blockchain companies to make free tokens or coins to specific users in their wallet. This distribution can be completely random or can be in line with some parameters, which require the participants to perform some specific actions such as they have to hold a certain amount of tokens of a particular project, have to share social media posts or simply fill a signup form using their email.

Airdrops play the role of contributing to the growth of the community as people would be willing to work on the project and also share information on social media platforms that are usually created to promote the project. Through the distribution of tokens, companies want to achieve the primary objective of getting people to adopt the cryptocurrency by using it in the market most of the time, hence driving the volume up in a bid to enhance the liquidity. Airdrops are used to become more popular and attract investors to contribute to the project. The approaches mean that by placing the tokens in the hands of the users, projects are able to unlock the network effects, whereby the utility of the token rises as more people use it.It can also be applied as a motivation to the community or early investors in the project which will make them active participants in the project.

• Examples of Cryptocurrency Airdrops

A number of projects have applied the use of airdrops in the course of trying to actualize the above objectives. Here are a few notable examples.

Uniswap (UNI):

Airdrop Details: To qualify for the project airdrop, one had to fill in information from a previous transaction made on the Uniswap platform before September 1, 2020, in total, 400 UNI tokens were distributed to the participants at the end of September 2020.To encourage early-stage investors and also to create a kind of motivation for more people to continue to participate in the decentralized exchange.

Sushiswap (SUSHI):

Airdrop Details: Sushiswap self-dumped SUSHI coins to Uniswap stakes during its initial launch plan.
Objective: It wanted to get liquidity from Uniswap and set up itself as a competitive decentralized exchange.

Chainlink (LINK):

Airdrop Details: Also, in 2019, participating in Chainlink’s rounds, it was conducted an airdrop to distribute the LINK tokens.To spread the word on, and gather more users for Chainlink’s decentralized oracle network.

Crypto. com (CRO):

Airdrop Details: Crypto. com has occasionally made airdrops of CRO tokens for users who were able to achieve some specific activities or end requisite number of activities.In order to drive the detailed adoption of the Crypto. related to the com app and of the provision of its services.

Binance Coin (BNB):

Airdrop Details: The kind of airdrops has included Binance USD (BUSD) a stablecoin and Venus (XVS) among numerous others at the Binance exchange. To encourage users to trade with this Binance platform and also the use of new tokens which had been listed on the platform.

Airdrops remain as one of the prominent trends among blockchain projects, which strive to achieve a number of goals, including the enthusiasts’ attraction. All these methods are bound to become more refined and specific as the industry grows with time.

What is the difference between an airdrop and a giveaway in the field of cryptocurrencies? Explain with concrete examples, including similar initiatives with the Steem token.

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In the cryptocurrency world ‘airdrop’ and ‘giveaway’ are two similar processes of sharing tokens, but they are different in the sense of their functions and conditions. Here’s a closer look at each with examples, including those involving the Steem token.

Airdrops can be described as a marketing technique through which tokens of a particular cryptocurrency project are distributed to various wallets for free. Easier access means that there are standard procedures to gain access to the token or simply increasing the tokens’ available in circulation and the users who hold those tokens.

Example: Steemit Airdrop The company based on the Steem Blockchain conducted the AirDrop of the STEEM tokens with the aid of the Steemit using different patterns of activity. This was due to the fact that the project’s model centered on content creation and interaction, which incorporated a token reward system to motivate users. The airdrop itself was not an event that happened once, but a series of actions carried out by users who received tokens for their actions on the platform.

Giveaways can be considered as similar to airdrops, but in this case, tokens or any other type of crypto assets are awarded to winners in a kind of a contest. These are normally owned by projects, influencers, or community members, and mostly come with some activity that one ‘has to’ do.

Example: In this sense, Steem Giveaways It is a practice whereby the members of Steem encourage others to participate in the promotion of various aspects of the same Steem ecosystem. For instance, an ardor Steem supporter might offer a contest such that the winner will be awarded a fixed amount of Steem tokens. Likely, to join the particular SCT, the participants might be encouraged to post something on Steemit concerning a particular theme, comment or perform an action that would be considered valuable for others in the community.

Airdrops and giveaways are two major instruments that are relevant in the world of cryptocurrencies and whose primary function is not the same. Whereas, airdrops are more about distribution and reaching out as many people as possible, giveaways are about the community and carrying out promotions. The Steem token, via airdrops and giveaway, has been applied in a way to build a strong community and to support several operational activities.

What are the advantages and disadvantages of airdrops for project developers and participants? Use cases involving the Steem token if possible.

Airdrops are uniquely used in the Crypto Space as a distribution means of tokens that go to numerous wallets. It can be noted that they act as promotional material for project developers and often can provide gains for the participants. Below, you will find detailed information about the benefits and drawbacks from sides of such use cases with the help of the Steem token.

For Project Developers Advantages:

Airdrops can enhance the number of users dramatically since tokens are distributed to the community widely, therefore, more people are aware of it.This aspect of the airdrop increases the market liquidity of the token since more and more people will be holding it for trading.Airdrops can have a network effect as the more users, the more valuable the token which is a good example of the use of Steem token for voting, commenting and others.Airdrops can be considered as cheap promotion since people will get to know about the existence of the project having invested a small amount of money in marketing.

Disadvantages:

If not well controlled, airdrops cause dilution of existing tokens hence the value of the token drops.While some audience is active and will hold the tokens in the long-term, the method attracts short-term oriented speculators who soon may dump the tokens on the market, putting the price at risk.They might also have legal and regulatory concerns especially on securities laws in the case of airdrops together with AML/KYC requirements. Of course, the organization and holding of an airdrop may be some time-consuming and financially demanding.

Advantages:

Users also can freely get tokens and they can hold them, exchange for other digital assets or use it in products and services of the project. Opportunity for Profits: Some participants may gain from price increase of the token and thus sell for an amount higher than what they paid.To sum it up, airdrops motivate increased activity of the community and its support thereof resulting in a more productive community. Avid participants get familiar with new projects and technologies which expand their knowledge and awareness of the cryptocurrency market.

Disadvantages:

A possibility of getting entrapped by fake airdrop scams thereby resulting in loss of the stakes inserted, or loss of identity.In some jurisdictions, airdrop tokens received count as income and they have be reported in the tax return. The tokens that are airdropped can also destabilise the market hence making it hard to find the actual position of the Token in the market.They might need to spend time and effort for getting such airdrops and this could mean they have to create posts on their social media pages, hold certain tokens, or perform other tasks.

Steem Token Use Case

As mentioned above, Steem which is a blockchain-based social media platform employed airdrops as a strategy of engaging its user base. Authors are paid in Steem which is the currency of the platform for their input in the content. This cession not only broadened the base of user but also added the value to the platform through more diverse and useful content which in turn attracts more users.

Airdrops can serve as one of the effective tools to achieve the founders’ goal of expanding the community of users and making circulation larger, while people simultaneously have a chance to receive free tokens and make a good profit. However, they are not without their flaws that are associated with problems such as dilution risks which are as follows: Thus, airdrops can be an opportunity to interact with new projects and make a profit, but participants can become victims of fraud, or the projects they invested in may lose their value due to the fluctuation of rates.

What are the security and regulatory challenges related to cryptocurrency airdrops and giveaways? How can these challenges be managed?

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Airdrops & Giveaways a well-known method used by projects to gain more usage and popularity of their product and to gain more participants in new blockchain endeavors. However, such methods are characterised by several major disadvantages.

Security and regulatory challenges:

Crooks imitate genuine airdrops solely for the purpose of harvesting the users’ private details, or their wallet seeds. They can open bogus Web sites, social networks’ accounts, or even email addresses that are tricky to distinguish from original ones. Do not trust the source of airdrop information that you received. Look at official press releases on the website of the project or in the social networks’ profiles which are identified as official.

It is potential that cybercriminals use links and files connected with airdrops as a way to infiltrate user’s devices and wallets. Always avoid clicking the links or downloading files from the inconspicuous sources. Always use a recognized antivirus, if any and ensure it is updated as often as possible. High traffic airdrop Lead to traffic jam in the network hence affecting the rate at which transaction is processed in the network and also can be a security concern. Projects can delay airdrop distributions or upgrade the network capacity prior to such time.

Regulatory Challenges:

For this reason, the IRS and other tax authorities regard airdrops as taxable events that can attract sanctions as well. Self-claimed value of cryptocurrency availed when the airdrop was being done has to be declared by the users. Documentation of all the airdrops that have been received and seek legal advice on how to declare them. In the context of anti money laundering and combating the financing of terrorism, it is possible that some projects shall incorporate AML, and KYC measures that are sometimes costly, and time consuming. The AML/KYC policies must be well-defined in projects and possibly work with third-party services to manage the verification part.

Securities Regulations:
In some jurisdictions such airdrops can be classified as a security issuance and that is a field that is highly regulated. Projects should assess legal risks to the airdrop and consider whether or not it comes under securities laws and possibly looking at the SAFT template for safety. Innovation in cryptocurrencies implies that various projects are located in the context of regulatory regimes, some of which may be rather strict. These airdrops must be legal in most of the world’s markets, and the projects should surely have no presence in countries that have illegitimate them.

Security and legal considerations also come into play when planning cryptocurrency airdrops and giveaways; therefore, it’s crucial to stick to the best practices. The project and the participants should keep abreast with the current threats and the legal provisions which governing such activities to avoid breaking the law.

Propose a detailed plan to organize an airdrop using the Steem token. The plan should include eligibility criteria, required participant actions, implemented safety measures, and promotional strategies to maximize impact.

Purpose and Objective

The airdrop is geared to drive the circulation and use of Steem tokens and thereby increase infection with the ecosystem, allowing contributors for more engaging applications. The airdrop will work as a marketing tool to bring in new users into the Steem ecosystem and introduce them with blockchain.

Eligibility Criteria

For Steem Users: Any activity of posting, commenting or voting at least 30 days before the airdrop date on the activities governed by blockchain-based reward system.New Users That signup and post their first informative content within the 1 week of the airdrop announced.

Required Participant Actions

Activity Rule: Participants must have written a minimum of 5 deals (posts, comments or votes) in the past 30 days before consideration for an airdrop.

Invite your Friends: This below referral bonus); For every new user that signs up and stays active another type of reward will be earned by the referrer as well as an incentive for the new users.

Implemented Safety Measures

Smart Contract: Enable a secure smart contract to control and lock the token distribution until all conditions have been satisfied for any invested value.

Whitelist: Introduce a whitelist system to avoid bot spam and multi-account manipulations. This can be a mix of account age, activity history and voting behavior.Fraud Detection Keep a watch for the activity or behaviors that looks out of pattern and could be fraud

Airdrop Sent Post-Audits: After the airdrop is sent out, an audit should be done to verify that all recipients were real and report any seen double-handled traffic for further investigation(i wg.

Promotional Strategies

Community engagement: Run a series of community events before the airdrop, in the form but not limited to writing challenges, AMA sessions and educational workshops.Lets kick off a content campaign, on media to highlight the advantages of the Steem ecosystem and promote the airdrop.We should team up with players and groups in the crypto and blockchain scenes for their support and mutual promotion. Encourage users to bring in members by rewarding them with extra tokens, for successful referrals. Getting featured in cryptocurrency-focused media platforms can help us reach an audience.