Various methods like staking, lending, cloud mining, profit farming (yield farming) has grown in popularity over the past few years, and investors will receive monetary or token rewards for investing in this mechanism.
However, with a hard fork or airdrop, users are active in the ecosystem cryptocurrency may receive additional tokens or projects that provide holders with an additional amount of tokens in proportion to their holdings.
Since both are aimed at increasing the popularity of the project or as part of an advertising campaign, the hard fork and the airdrop have different modes of operation and are born through completely unique mechanisms.
Here are the differences between airdrops and hard forks and how users can benefit from them when investing in the market. cryptocurrency long term.
What is an airdrop and how does it work?
Considered like a surprise help for crypto fans willing to experiment with different projects, airdrops require minimal technical knowledge and lower potential risks.
An airdrop is a distribution of coins or tokens to existing holders, also known as token giveaways. Often associated with the launch of a new project or cryptocurrency, the purpose of an airdrop is to attract more users in the marketplace with thousands of different tokens and projects.
Its essence is purely advertising campaign, users have no control over when an airdrop occurs and it is usually done by developers or businesses, rewarding free tokens or coins to holders. present.
The number of tokens distributed is based on the amount of investment or contributions made to a project, similar to how traditional brands offer freebies to popularize a new product.
There are two types of crypto airdrops: retroactive and takeover, with the main difference between the two being at what stage they are offered and for a specific purpose.
A retroactive airdrop is usually announced when the protocol blockchain is currently planning to reveal its native token and reward early users or those who contributed to the project by a specific date.
It is a very popular tool to create hype around upcoming tokens. Meanwhile, it also serves as a liquidity generator and helps in user engagement by giving out tokens in exchange for retweets, feedback or even increasing social media followers.
Airdrop takeover is used when decentralized financial protocols (DeFi) wants to entice users away from the competition or increase their chances of retaining them by offering greater rewards.
While this is a relatively more aggressive form of airdrop, the takeover airdrop is targeted at liquidity providers and users who have shown higher participation in activities such as staking to lure them away. protocol DeFi compete.
DeFi aggregator 1INCHON conducted several airdrops with the specific purpose of enticing users Uniswap of competitors migrated to its platform, rewarding specific user groups in a series of airdrops and serving as a prime example of how free crypto airdrops are used.
Advantages and disadvantages of airdrop
They have long been seen as an unorthodox form of radical marketing in the crypto space, but cryptocurrency issuances are becoming increasingly popular. Many projects use this approach to drive adoption of their new crypto tokens.
Takeover airdrops provide outstanding benefits to crypto businesses and investors, making them the most preferred marketing tool for creating hype, attracting users, two important factors for with the success of a new coin.
For companies aiming to launch native tokens for the protocol blockchain or DeFi, the airdrop is possibly the simplest and most cost-effective advertising method in the current cryptocurrency world. While it involves spending a lot of tokens, these tokens represent only a fairly small portion of the total supply that will be put into circulation. This is a surefire way to generate excitement for holders as they earn crypto from free airdrops.
If tokens increase in popularity and demand, then these airdropped tokens are likely to generate more profits as their value also increases. By simply following a project on various social networks or sharing news about the project with friends, crypto airdrops will reward users with free tokens, with values up to to hundreds of dollars, absolutely no strings attached.
In fact, for crypto holders or those who hold a particular token, airdrops are a great way to make a profit, with zero investment and can be a great way to generate income. passive in the market. All users need to do is follow the projects or companies that are planning to offer airdrops and take advantage of them.
Not only can the airdrop be monetized by instantly selling the tokens received on a cryptocurrency exchange, users can choose to hold them for a longer period of time and potentially increase their chances of generating a larger profit. .
What are hard forks and how do they work?
Blockchain protocols often undergo changes to create a new blockchain that works in tandem with the original, but may differ in the end utility it provides to users and token holders.
Forks Bitcoin Others, such as Bitcoin Gold, are created by changing the code of the underlying protocol to create a parallel version that is used for a different purpose. The newly created blockchain requires native tokens for users to trade, a hard fork will create new tokens and create value for those who invested in the original coin.
For example, in August 2017, during the Bitcoin Cash fork, holder BTC received an amount of tokens BCH ONLY equivalent and earn a large profit when BCH ONLY can be sold for $ 900 on cryptocurrency exchanges.
With more and more new blockchain protocols being created through hard forks, investors can benefit from this without incurring high risks.
However, not all hard forks are rooted in the intention of creating a new system, with some being the product of a project's demise in the space. For example hard fork Ethereum, Ethereum Classic (ETC), has moved to support another consensus mechanism and its ETC token can be freely traded on cryptocurrency exchanges.
With the intention of implementing a new decentralized business model for commercial and non-profit organizations, KNIFE suffered an attack that resulted in some users withdrawing a third of its funds to a sub-account.
When the community Ethereum voting to hard fork the original blockchain to recover lost funds, it split the blockchain into two forks and made up Ethereum Classic.
For investors, there are often many opportunities to invest in blockchain protocols prior to the hard fork and profit from freely distributed tokens. However, it is important to conduct thorough research and only invest in projects that have a good foundation.
Pros and cons of hard fork
The hard fork offers developers the opportunity to add new functionalities without having to change the original blockchain, especially when there is a large number of users who do not want any changes to be made.
It also consumes less computing power than using a soft fork and provides better privacy.
Furthermore, token holders and investors are free to sell tokens received from the hard fork or hold them for higher profits in the long run if the hard fork succeeds and becomes prominent in the crypto space. chemical .
However, holding the token may not always be the case, as demonstrated by BCH, as it has been trading near ATL since its release in 2017.
In addition to the possibility of a drop in value, hard fork users also face the risk of losing their tokens due to an attack. Since a hard fork is essentially a blockchain fork, it often has several security holes that leave the network vulnerable to malicious attacks.
This is especially true if a split occurs between nodes and miners, as bad actors can then use computing power to bypass the security of the network and steal funds.
Regardless of the type of attack, the aim is to weaken the network's reputation, cause the token price to plummet, or steal coins and move them to accounts on other networks.
This will result in investors losing all of the hard forked tokens as well as the original tokens. Therefore, it is important to study the actual improvements being made during a hard fork and whether the developers are taking the necessary precautions to keep the fork away from any attack. any or not.
Investors can benefit if they stay abreast of the latest developments and find the right opportunities to generate income by earning more free tokens through the hard fork.