Complete Guide to Cryptocurrency Airdrops | In-Depth Explanation from Mechanism to Participation

In the cryptocurrency market, “airdrops” are one of the most attention-grabbing mechanisms for investors. As an opportunity to acquire crypto assets or NFTs for free, large distribution events by layer 2 and AI-related projects have been occurring consecutively from 2024 to 2025. This guide summarizes essential knowledge about airdrops, practical participation methods, and risk mitigation strategies that even beginners can utilize.

Table of Contents

• Basic Knowledge of Airdrops
• Types and Conditions of Participation
• Benefits for Investors
• Precautions and Risk Avoidance
• Frequently Asked Questions
• Final Remarks

Basic Knowledge of Airdrops

What is an Airdrop in the first place

An airdrop is a marketing strategy where project operators distribute crypto assets or NFTs for free to users who meet certain conditions. It is not merely a promotional activity but functions as a crucial part of the project’s growth strategy, effectively increasing awareness of new projects and fostering community building.

Additionally, airdrops can also occur when a new currency is created through a hard fork from existing coins. Recent trends include long-term airdrops in the form of point systems or loyalty programs, encouraging ongoing user engagement rather than one-time distributions.

Reasons for conducting airdrops

Project teams conduct airdrops with the following business objectives:

1. Increasing Market Recognition - To widely promote the existence of new cryptocurrencies or NFT tokens

2. Rapid Growth of User Base - To increase early holders and expand the project’s scale

3. Improving Trading Liquidity - To enhance market liquidity through broad distribution

4. Building an Active Community - To strengthen the initial holder base and create a supporter foundation

5. Activating the Ecosystem - To increase token circulation and energize the project’s economic zone

Large-scale distributions in 2024, such as those related to Ethereum layer 2 solutions and restaking projects (e.g., EigenLayer), are analyzed to have generated billions of dollars in new value across the market. These cases clearly show that airdrops are not just freebies but core components of project strategies.

Types and Conditions of Participation

There are multiple participation methods for airdrops, each with different requirements. Identifying the most suitable type for yourself is key to efficient participation.

Understanding each type’s features allows you to effectively leverage free asset acquisition opportunities.

Benefits for Investors

( Acquiring assets without risk

The greatest appeal of airdrops is that you can hold crypto assets or NFTs without financial risk. Usually, purchasing funds are required, but simply meeting conditions allows you to obtain assets, making it a valuable entry point for beginners to the crypto market.

Recent large-scale airdrops have also served as catalysts for rapid influxes of new users, who then generate platform usage and fee revenue, turning airdrops into investment campaigns that benefit the project.

) Potential for asset appreciation

When the condition for a snapshot-based airdrop is “holding a specific currency,” increased buying activity often occurs to meet this condition, which can lead to a price increase. Existing holders benefit from both asset appreciation and receiving the distributed tokens, creating a double advantage.

However, many participants sell after the snapshot, so price increases may be temporary. It’s important to distinguish between long-term investment decisions and airdrop participation.

Early participation in promising projects

Airdrops offer a low-risk opportunity to participate in emerging projects that are not yet widely recognized. If a token from a successful future project can be obtained for free, theoretically, returns of several times or even dozens of times are possible.

Cases where low-awareness projects achieve listings on major exchanges or form partnerships with large companies, resulting in significant token value increases, are frequently reported in the industry. Developing the ability to read market trends helps unlock the true value of airdrops.

Improving overall market liquidity

In the crypto market, trading volume and liquidity directly impact price volatility and ease of trading. Broad distribution through airdrops increases the number of holders of specific tokens, thereby enhancing overall market liquidity.

While newly issued tokens often start with low holder counts and liquidity, widespread distribution promotes healthy market formation. This reduces trading costs, minimizes slippage, and creates a more favorable trading environment for investors.

Precautions and Risk Mitigation

Beware of scams

Scams disguised as airdrops are ongoing, with malicious tactics aimed at stealing personal information or wallet private keys. The most dangerous are requests to input private keys or wallet passwords. Legitimate airdrops never require recipients to share passwords. If such requests appear, it’s a clear sign of fraud.

Phishing scams are also increasing, with fake sites mimicking official ones, leading users to connect wallets unwittingly.

Safety tips

• Always verify the official website URL multiple times
• Never share your wallet’s private key with anyone
• Avoid connecting your wallet to unknown or suspicious sites
• Prepare a separate wallet dedicated solely to airdrops
• If unsure, refrain from participating

Tokens received may have no value

Tokens distributed via airdrops are not guaranteed to have market value. If there is no demand for the received tokens, they become essentially worthless.

For example, receiving 1,000 tokens worth about 0.1 yen each results in a total value of only around 100 yen. Free does not always mean profitable, and expectations should be realistic.

Additionally, if you purchase specific assets to meet participation conditions, you face the risk of price fluctuations of that purchase capital. High gas fees or transaction costs can also turn expected gains into losses. It’s essential to estimate total costs beforehand and compare them with potential returns.

Tax treatment of cryptocurrencies

A commonly overlooked point is that crypto assets obtained via airdrops are generally taxable. They are not tax-exempt just because they are free; proper tax handling is crucial.

Typically, tokens received are recorded as “miscellaneous income” at the market price at the time of receipt. In Japan, crypto tax regulations are currently being revised, and tax rates could reach approximately 55%.

Tokens from unlisted projects may not be taxed at the time of receipt but could be fully taxable upon sale. The Financial Services Agency and industry groups have proposed changes to treat them similarly to stock trading with separate declaration, including the possibility of carrying forward losses for three years.

If annual side income is below 200,000 yen, filing is not required; exceeding this amount obligates reporting. Managing records across multiple exchanges can be complex, so using tax tools or consulting professionals is recommended.

Restrictions on selling on domestic exchanges

Most tokens received via airdrops are not listed on Japanese domestic crypto exchanges. If the token is not available domestically, converting to Japanese yen requires using overseas exchanges.

This situation presents challenges such as:

• Opening accounts on overseas exchanges
• Managing assets across multiple platforms
• Complicating tax calculations during reporting

Frequently Asked Questions

Are airdrops safe?

Safety depends on the project and implementation method. Airdrops conducted by reputable companies or exchanges are relatively safe, but caution is advised with unknown projects.

Features of safe airdrops include clear announcements on official sites, no requests for private keys or passwords, and transparent participation conditions. Be wary of suspicious emails, DMs, or excessive personal information requests.

Most importantly, never share your wallet’s private key. Legitimate airdrops only require your wallet address; requests for private keys are a sure sign of fraud.

Can beginners participate?

Yes, generally beginners can participate. SNS-linked airdrops, which involve simple actions like following or retweeting, are especially suitable for beginners.

Snapshot-based airdrops may require some knowledge of wallet setup or purchasing specific assets. It is recommended for beginners to acquire basic knowledge, start with small amounts, and choose reputable projects.

Is preparing a wallet necessary?

Participation in airdrops generally requires a crypto wallet. For snapshot-based airdrops, holding specific assets at the designated time is a condition.

Mainstream options include hot wallets like MetaMask and hardware wallets like Ledger. Confirm the participation requirements in advance and prepare an appropriate wallet to ensure smooth participation.

Final Remarks

Airdrops are a unique aspect of the crypto culture and, if used effectively, can be a valuable means to expand your investment portfolio. They offer free asset acquisition and early participation opportunities in projects, but also carry risks such as scams and tax issues.

Summarizing the key points from this guide:

• Airdrops are events where you can obtain free crypto assets or NFTs by meeting certain conditions
• There are five main participation types, each with different requirements
• Benefits include free asset acquisition, potential for asset appreciation, and early access to promising projects
• Precautions include scam risks, tokens with no value, tax considerations, and selling restrictions
• Ensuring safety involves verifying reliability, protecting private keys, and preparing wallets

Market information updates daily, so regularly check trusted official sources. Always verify official information before participating and proceed cautiously, paying attention to security risks.