Complete Guide to Cryptocurrency Airdrops | From Basic Knowledge to Participation Tips

In the virtual currency market, “Airdrops” have become an important mechanism that now attracts not only novice investors but also experienced ones. Especially in recent years, large-scale distribution events related to layer 2 projects and AI-related tokens have been occurring one after another, and they are increasingly recognized as a means of value creation across the entire market.

This guide summarizes practical knowledge from the actual state of airdrops to efficient participation methods and risk mitigation that are often overlooked.

Table of Contents

• Basic Mechanism of Airdrops
• Conditions and Processes by Participation Method
• Risk Management and Safety Measures
• Points to Note When Participating
• Frequently Asked Questions and Answers
• In Conclusion

Basic Mechanism of Airdrops

What is an Airdrop in the first place

In the world of crypto assets and NFTs, an “Airdrop” refers to a marketing strategy where the issuer’s company or project distributes tokens for free upon meeting pre-set conditions.

Usually, acquiring a new token requires purchase, but with an airdrop, you can skip this process and obtain it for free. This is one reason why airdrops attract attention, but in fact, projects also have clear strategic reasons.

Between 2024 and 2025, large-scale airdrops conducted by staking-related projects like EigenLayer are analyzed to have generated market-wide value worth billions of dollars. Looking at this scale, it’s clear that airdrops are not just “perks” but a core growth strategy for projects.

Main reasons for implementation

Projects utilize airdrops for several purposes.

Increasing awareness is the primary goal. For emerging projects to become known in the market, early exposure is essential. By distributing tokens to thousands or tens of thousands of users simultaneously, they stimulate discussion on social media and media outlets.

Next is building a user base. The more holders there are, the stronger the network effects, which energize the ecosystem. As a result, liquidity improves, leading to the formation of a healthy market.

There is also an aspect of ensuring fairness during hard forks. Examples include Bitcoin Cash, which is derived from Bitcoin, functioning as a fair initial distribution mechanism to existing holders of the original currency.

Recently, the concept of “rewarding long-term users” has gained importance, with more designs that recognize contributions to the community through rewards.

Conditions and Processes by Participation Method

Airdrops are divided into several formats depending on the implementation method, each with different levels of difficulty and preparation requirements.

Snapshot Type

Requires holding a specific currency or NFT in your wallet at a designated time. A well-known example is the distribution of Flare (FLR) to XRP holders.

In this format, advance preparation is crucial. Several days before the snapshot date, you need to transfer the required amount of tokens to your wallet.

SNS-linked Type

Conditions include following official Twitter accounts, retweeting specific posts, tagging, etc., on social media. It is beginner-friendly with low hurdles and easy to participate in.

However, these activities are often automated in large quantities, so projects regularly verify the authenticity of accounts.

Service Usage Type

Conditions involve transaction history or usage period on specific platforms. An example is the distribution of UNI tokens by Uniswap, which was given to users who traded a certain amount or more on the DEX.

This format is less about promotion and more about rewarding active users.

Hard Fork Type

When a new currency splits from an existing one, the original holders automatically receive the new tokens. Since users don’t need to do much, preparation is minimal.

Multi-Condition Type

Combines multiple conditions such as holding specific currencies, social media activity, and transaction history. It’s more difficult but often results in larger distributions.

Benefits of Airdrops

Free Asset Acquisition

The biggest advantage is the ability to access new tokens without risk. Since there’s no need to invest or risk principal, it serves as an entry point for beginners to experience the crypto world.

However, don’t think “participate in everything because it’s free.” If fees or gas costs are required to meet participation conditions, these expenses might exceed the value of the distributed tokens. Simple pre-calculations are important.

Potential for Price Appreciation of Held Tokens

In snapshot-type airdrops, the prices of the tokens that are conditions for distribution tend to rise. This is because many buy orders concentrate to meet the conditions.

Users who already hold such tokens may profit from the price increase before receiving the airdrop. However, since many airdrops are sold off immediately after distribution, the spike may be temporary.

Early Access to Promising Projects

Getting free tokens of a project before it becomes widely recognized in the market is a significant opportunity. If the project succeeds and gets listed on exchanges or forms corporate partnerships, early holders can enjoy substantial returns.

Developing an eye for identifying projects transitioning from unknown to famous can maximize the value gained from airdrops.

Improving Overall Market Liquidity

Newly issued crypto assets usually have limited holders and very low liquidity initially. Wide distribution through airdrops increases trading participants and helps form a healthy market.

In markets with high liquidity, trading costs decrease, and large trades have less impact on prices. This benefits all participants.

Risk Management and Safety Measures

Protecting Against Scams

Airdrop scams are ongoing. The most dangerous are cases where they ask for your wallet password or private key.

Legitimate airdrops do not require any authentication information of your wallet. If asked for your private key, it’s definitely a scam.

Phishing sites mimicking official websites are also common. Always verify URLs carefully and access via bookmarks.

Practical countermeasures include:

• Reject input of any info other than wallet address
• Never connect your wallet to suspicious sites
• Prepare a dedicated wallet for airdrop participation
• Skip participation if security is unclear

Risk of Token Value Loss

It’s common that tokens received are not valued in the market. For example, receiving 1,000 tokens worth about 0.1 yen each results in only 100 yen total asset value.

If the project fails to gain market support, the free distribution could end up being “worthless.” Be mindful of this risk.

Before participating, weigh the “total cost” of participation against the “expected distribution value.”

Tax Filing Complexity

It’s often overlooked, but tokens received via airdrops are taxable. The market price at receipt time must be declared as “miscellaneous income.”

In Japan, the maximum tax rate can be around 55%. The Financial Services Agency is proposing a reform to treat it similarly to stock income (about 20%), but under current rules, high taxes apply.

If the market price isn’t established at distribution, the entire amount may be taxed as profit upon sale. Using multiple exchanges complicates tax calculations, so utilizing specialized tools or consulting a tax professional is recommended.

Restrictions on Selling on Domestic Exchanges

Many airdropped tokens are not listed on Japanese domestic crypto exchanges. To convert to Japanese yen, using overseas exchanges is often necessary.

This leads to issues such as:

• The hassle of opening accounts on overseas exchanges
• Complex asset transfers between platforms
• Increased calculation burden during tax filing

Points to Note When Participating

How to Assess Reliability

Look for clear announcements on official websites, transparent participation conditions, and no requests for private keys. Judging comprehensively is necessary.

Start with trusted projects, and as you gain experience, your judgment will improve. Be cautious of suspicious emails or DMs; they are often scams. Always verify information through official channels.

Practical Wallet Preparation

For snapshot participation, wallet setup is essential. Common options include hot wallets like MetaMask or hardware wallets like Ledger.

Check participation conditions in advance, and set up your wallet on the relevant network (Ethereum, Polygon, etc.) for smooth participation.

Step-by-Step Approach for Beginners

Start with SNS-linked types. Following, retweeting, and engaging on social media can be done without deep crypto knowledge.

As you gain experience, gradually move to snapshot and multi-condition types, minimizing risks while learning.

Frequently Asked Questions and Answers

Q: Are airdrops really safe?

A: It depends on the project and implementation. Major, well-known projects are relatively safe, but unknown projects require caution. Requests for private keys are always scams.

Q: How much are taxes?

A: The market price at receipt is taxed as miscellaneous income. The maximum rate can be around 55%. If annual side income is below 200,000 yen, no tax return is needed; above that, filing is required.

Q: Is a wallet necessary?

A: For snapshot types, yes. For other formats, a wallet is generally needed to receive tokens.

Q: Can beginners participate?

A: Yes. Starting with SNS-linked types is recommended. Building experience gradually helps minimize risks.

In Conclusion

Airdrops are a unique culture within the crypto market and, if used properly, can be a powerful means to expand investment opportunities.

Summarizing the key points: You can acquire assets for free, but there are risks such as scams, value loss, and taxation. Always check official information before participating, and protect your private keys.

Since airdrops reflect market trends, regularly monitoring the latest crypto news enables more effective participation.

If you have doubts about safety, it’s wise to refrain from participating. Prioritize risk management and aim to deepen your understanding of crypto assets over the long term.