What is airdrop (cryptocurrency)?

Airdrop (Cryptocurrency) DEFINITION of 'Airdrop (Cryptocurrency)'. Airdrop refers to the free distribution of small amounts of a certain virtual currency tokens to its community members either for free or for performing small tasks. Next Up. Initial Community Offering. Tokenized Equity. Virtual Currency.

What are airdrops and how do they work?

In the world of cryptocurrency, airdrops are a marketing strategy used by blockchain-based startups to incentivise the use of their platform. It involves providing free coins or tokens to users with public crypto wallets to promote a new virtual currency. It is similar to distributing free samples of an item in a supermarket to promote sales.

What is a Token airdrop?

Token airdrop: A crypto platform, such as a decentralized exchange (DEX), decides to create a native token. To reward its current user base, the project sends half of the total token supply to users’ wallets based on the volume each user has traded on the platform.

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.