What is a cryptocurrency airdrop?

A cryptocurrency airdrop is when a platform gives away its native token for free. Such airdrops have been going on for years, and they represent a way for blockchain platforms to grow their communities quickly, and for cryptocurrency investors to get their hands on new tokens at a very low (or non-existent) cost.

How do airdrops work?

Airdrops are generally promoted on the company's website, social media, and cryptocurrency forums. Coins or tokens are sent only to specific wallets based on the blockchain network or coins held in existing wallets. To qualify for the free gift, a recipient may need to hold a minimum quantity of the crypto coins in their wallet.

Do you have to pay tax on crypto airdrops?

Finally, since airdrops are considered income by the U.S. Internal Revenue Service, it means whenever you received an amount of “free tokens” you’ll actually need to pay tax on them – whether you wanted the airdrop in the first place or not. The cryptocurrency industry has recently seen a few crypto airdrops that took users by surprise.

What are the requirements for receiving crypto airdrops?

The main requirement for receiving crypto airdrops is having a cryptocurrency wallet with a balance. One can't receive or claim an airdrop without having a wallet address. Using an exchange address is convenient but not suitable for airdrops.