Basics Of Crypto Airdrop
Why are they managing to open an airdrop campaign?
The main expectation is to gain more sales in the ICO. And how are they achieve this goal by managing an airdrop campaign?
This is where the airdrop action comes in. There are few tasks to do in order to receive the airdrop for free. Its like some social shares, Likes, Creating posts, etc. These all tasks for promotion.
So basically, The coin organization gives you free coins/tokens, if you completed like above things related to the ICO. Simple right?
Okay, lets jump into the step by step process on how to participate in a Crypto airdrop.
How Are Airdrops Taxed In The Usa
The IRS has given clear guidance on how airdrops are taxed in America.
In: Income Tax
They consider airdrops to be a type of income, so you should pay income tax on any coin or token received from an airdrop. Use the fair market value of the coin on the day you received them to figure out how much income you received. This should be reported as other income on Form 1040 Schedule 1.
Out: Capital Gains Tax
If youre selling coins received from an airdrop, this will be subject to Capital Gains Tax. You can use the same calculation above to figure out your cost basis, then subtract this from the amount you sold them for to calculate your capital gains. This is reported on Form 8949.
Find out more about how America taxes cryptocurrency in our updated American Crypto Tax Guide.
You receive 400 UNI tokens on the 1st of September 2020. The FMV of UNI tokens that day is $2.
$2 x 400 = $800.
You report $800 of other income on Form 1040 Schedule 1.
You sold your UNI tokens 6 months later. The FMV of UNI tokens that day was $10, so you made $4,000. You already know your cost basis was $800 from your previous calculation.
$4,000 – $800 = $3,200.
You report a capital gain of $3,200 on Form 8949.
Airdrop Alert: Watch Out For Phishing And Dusting Attacks
Of course, as anyone whoâs ever read the comments sections on an Elon Musk tweet post will know, actors use free crypto methods to exploit and steal. Crypto hacks and scams are becoming incredibly sophisticated in 2021, catching even seasoned investors. Please be very cautious when searching directly for any crypto exchange or project on Google. Fake sites often pay to advertise on both search engines and social media to lure in victims.
Even accidentally mistyping an exchangeâs direct URL can direct you to a copycat fake site. When in doubt, bookmark CoinMarketCap.com, search for a project within our website and use a projectâs listed URL as a verification tool.
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What Are The Tax Implications Of A Crypto Airdrop
If a platform does airdrop crypto into your wallet, you generally have to pay taxes on the proceeds. Typically, airdrops are taxable as ordinary income at their fair market value on the date received.
If you dispose of your airdropped asset, you may also need to pay short-term or long-term capital gains on any increase in its value during your holding period.
To learn more, explore our resources:
I Lost Money In An Airdrop Scam
Unfortunately, airdrops can be used to scam unsuspecting cryptocurrency investors. Some phony projects ask for investorsâ private keys, then use this information to steal the assets contained within their wallets.
If youâve been the victim of an airdrop scam, check out our guide for how to report lost or stolen cryptocurrency on your tax return.
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How Taxbit Can Help
Keeping track of dozens of crypto transactions can be a lot of work. As your portfolio becomes more complex, using cryptocurrency tax software becomes increasingly beneficial.
If you connect your exchanges to TaxBit, the software can help track the details of your crypto transactions and use them to automatically generate the necessary tax forms.
Get started with a free trial.
What Are Crypto Airdrops
A crypto airdrop is usually a that uses the free distribution of new cryptocurrency tokens to drive awareness and build communities quickly, as well as help to put an early value to a token as recipients may begin to trade their airdropped tokens. Airdrops are therefore commonly used by startups looking to bootstrap their crypto projects. News of an upcoming airdrop is usually posted on a crypto project’s website or Medium page or third-party airdrop tracker, and shared across social media platforms where many cryptocurrency enthusiasts can see.
An airdrop involves small amounts of newly-minted cryptocurrencies and targets members of a select blockchain platform. For example, cryptocurrency startups may airdrop coins to wallet holders of the NEO, Ethereum or the Bitcoin network.
In some cases, a recipient may be required to hold particular tokens or maintain a minimum balance in order to be eligible for an airdrop. For instance, TRX holders will continue to receiveBTT airdrops consistently until February 2025.
In other cases, users may need to perform small tasks such as posting about a project on social media. Note that crypto airdrops are different from initial coin offerings â the latter are intended to solicit investments from individuals, which classifies ICOs in the U.S. as securities offerings â while airdrops are broadly used to raise awareness. Oftentimes, an airdrop may be followed by an ICO or other forms of token fundraising.
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How To Get Started With Cryptocurrency Airdrops
Obviously, the first task to get started with crypto airdrops is locating them. In years gone by, those looking to claim crypto airdrops would have to keep their ear to the ground within the cryptocurrency community and liaise with industry insiders. However, there are many dedicated websites for airdrops, as well as social media accounts that monitor and announce daily updates on new airdrops. Telegram and Twitter appear to be the best places to find out about new airdrops. Telegram is a chat application akin to WhatsApp, while Twitter needs no introduction but is hugely effective at aggregating sources within the crypto industry.
What Should I Do If I Havent Received My Crypto Airdrop
Although in most cases things are going well, there are sometimes situations where people have not received their airdrop.
Often the conditions have not been fully met , but it is also possible that something has gone wrong in the distribution of tokens.
We, therefore, advise you to keep any confirmation and evidence well. If you have not received anything after the distribution of the airdrop, we advise you to contact the customer service of the respective airdrop. In most cases, you can simply go to their Telegram channel.
Please note that we are only intermediaries in this process and merely point to the airdrop possibilities. However, if you still have any questions, you are free to contact us.Do you want to sell your airdrop? That and more we tell you here.
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How To Claim Airdrops Safely
- Verify websites. Youd be surprised how often scammers impersonate legit crypto projects and create fake websites and social media accounts that mirror genuine projects. Always do your own due diligence and check if the airdrop registration URL matches the official one.Of course, do not stop with domain checking. Its best to investigate the whole project. Some red flags are an anonymous team, incomplete details about the crypto project, unclear airdrop steps, or a website that looks unfinished, slightly different than the original brand, or stuffed with broken links.
- Avoid registration via third parties. Sometimes airdrop issuers ask you to fill out a registration on online survey administration software, like Google Forms. Legit crypto projects seeking to establish themselves in the market invest in their digital presence and usually do not use low-cost solutions, as it could damage their reputation.
- Never share your private keys. Legit crypto players do not ask for private keys that give them permission to open your wallet and send your cryptos. Private keys are not public keys, which act as your wallet address. There is absolutely no legitimate reason why airdrops would ask for private keys in order to send you free tokens.
- Trust your gut and common sense. If you feel that something is not right or too good to be true, trust your gut and stop.
Everything You Need To Know About Crypto Airdrops
To qualify for an airdrop, users are required to hold a minimum quantity of crypto coins in their wallets.
Sounava Ray Sarkar | New Delhi | May 29, 2021 2:55 pm
Airdrops are generally given only to current holders of crypto wallets, usually those of Bitcoin or Ethereum.
Cryptocurrencies have become a trend these days. The majority of the people are curious to learn more about them and how these new-age currencies can help them financially. Today, we will discuss the least discussed topic, Crypto Airdrops.
What is a Crypto Airdrop?
In the world of cryptocurrency, an airdrop means a marketing stunt that focuses on sending small amounts of the coins or tokens to wallet addresses of active members of the blockchain community. The primary aim of this exercise is to create an awareness of the newly launched digital currency.
Understanding Crypto Airdrop
Now that weve understood the motive behind a crypto airdrop, we need to shift our focus on why companies opt for such a marketing style? The reason is simple, the digital currency is the new kid in the block, and its company want more people trading in it when it gets listed on an exchange as in an initial coin offering or ICO.
Who can receive these airdrops?
Airdrops are generally given only to current holders of crypto wallets, usually those of Bitcoin or Ethereum.
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Are Crypto Airdrops Safe
Some users have also fallen victim to fraudulent airdrops in the past. During the ICO craze of 2017 and 2018, there were many fake crypto startups that were actually frauds.
Amid an industry with much more hype than regulation, some savvy scammers devised a way to attract investment funds without actually creating anything. They would create a coin or say they were planning on creating a coin, and then claim to have plans to airdrop crypto.
Sometimes the companies would require small fees to be eligible for the alleged airdrop, or other speculators would make investments believing that the airdrop itself would lead to a successful project.
While these types of scams might be less common today than they were three or four years ago, investors would still do well to be wary when it comes to crypto airdrops.
Looking at the idea of safe from another perspective, few would argue that the coins received in an airdrop could be considered a safe investment. Altcoins in general can be highly speculative, and that goes double for any new coin that has been airdropped.
As we saw in the Auroracoin example, airdropped crypto can lose nearly all of its value.
How Can I Learn About Future Airdrops
There are many websites dedicated to reviewing and listing airdrops such as airdropalert.com, and airdrops.io. You can join a mailing list, a telegram group or even follow a twitter account in order to learn about future airdrops. Be sure to stay up to date with current crypto news and strive to be an active participant in the cryptocurrency community to be updated with recent airdrops.
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How Are Airdrops Taxed In Australia
ATO have been very clear that they consider airdrops to be a kind of income and therefore subject to Income Tax. As well as this, if you make a capital gain when you sell coins or tokens from an airdrop, this is subject to Capital Gains Tax.
In: Income Tax
Out: Capital Gains Tax
When you sell coins or tokens that you received from an airdrop, if you have a capital gain this will be subject to Capital Gains Tax.
Both income and capital gains are reported in the Individual Tax Return Form, which you can do online with MyTax.
Find out more about how Australia taxes cryptocurrency in our updated Australian Crypto Tax Guide.
You receive 300 1INCH tokens from an airdrop. On the day you receive them, the FMV per token is $3.5. Your tokens are subject to Income Tax, so you need to calculate their total worth.
$3.5 x 300 = $1,050. You report $1,050 of income on your Individual Tax Return Form.
You sell your 1INCH tokens a couple of days after. The FMV per token is $4, so you make $1,200. You can use the calculation above as your cost basis.
$1,200 – $1,050 = $150. You report a capital gain of $150 on your Individual Tax Return Form.
Which Wallet Is Needed Is At The Relevant Air Drop
Telegram is a must-have to participate in most airdrops because much of the communication is via telegram channels.A wallet for keeping your tokens Twitter account and/or Facebook sometimes projects that organize an airdrop ask for a like or part action, in this way you provide them with free marketing, and in return, you get a number of tokens.To view the list of airdrops we are participating in, you need at least Telegram, click here for the list of airdrops we have chosen.
Data that can be requested at airdrop participation are often an email address, a wallet address and often the Telegram Group is asked to follow and stay in that group until after the coin is issued.
Please note that most tokens will be sent to your wallet when the Initial Coin Offer âFirst token editionâ is finished.
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What Are Batch Transfers Why They Matter And How They Can Help Spur Adoption
Most of the media focusing on blockchain and cryptocurrency these days focuses on institutional players entering the space whether it be through the upcoming launch of Bakkt or companies like Fidelity opening up digital asset management branches. An often overlooked area of development is the B2B landscape.
Basically, what tools are being created to help developers and business owners in the space.
Bakkt is an incredibly exciting development, dont get me wrong. However when were thinking about blockchain mass adoption, its infrastructure thats needed to help move it along. Bakkt helps bring digital assets as a new asset class to the forefront of mainstream media, infrastructure developments quietly help give the people in the industry the tools they need to bring the technology to where it needs to be for mainstream success.
Something youre probably familiar with if youve dabbled in cryptocurrency is airdrops. Airdrops are like mass email blasts for tokens. Essentially, they are when a cryptocurrency distributes token by collecting Ethereum addresses from people interested in your coinand mass sending them tokens to create a market for said coin.
Its impossible to ensure the success of a token, but not getting it into the hands of as many people as possible is a great way to ensure it doesnt succeed.
Distributing your token is one of the most important aspects of the token generation process.
Proof of Lack of Sexiness
Complete The Required Tasks
Each crypto company on the list is clickable and once you click on it, it will show you the mechanics on how to participate on the airdrop.
Lets click on one of them to check what the tasks are shall we?
For this example, Bakery Swap is giving away a total of 3,000 $Bake to 1,000 participants. So, that would be 3 $Bake per chosen airdrop winner.
To be qualified for the promotion, you will have to complete the tasks itemized on the page and you also have to provide your Binance Smart Chain Wallet Address, Twitter Handle, and Telegram Handle.
The Binance Smart Chain Wallet Address is needed because this is where they will send the airdrop. The rest of the information being asked is required so they could check if you have completed the task .
The schedule is also available on that page. In this case, the promotion runs from May 29, 2021, to June 5, 2021. The airdrop schedule is not specified though, but Im guessing that itll be right after the promotion period.
And thats it!
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How To Plan Taxes Around The $ens Airdrop
ENS protocol allows you to claim $ENS until May 4th, 2022. There are couple of actions you can take to reduce and defer taxes on the $ENS airdrop. First, you can wait until the prices go down before claiming the token, if you think that they will. Going with the example above, assume you claim $ENS in December 2021 when the price is $20 per coin. Here, you’d report $20 of ordinary income instead of $30. On the other hand, if the price rises, you would end up reporting more income.
Second, you can claim your $ENS between January 1st, 2022, and May 4th, 2022. By doing so, you can defer the taxable event to the 2022 tax year. If you are subject to a lower tax bracket in 2022 compared to 2021, this will reduce your taxes on the airdrop. Further, 2022 taxes are due by April 2023. This gives you ample time to observe the prices and sell when the price is at Its highest.
Either way, it is also important to set aside some money to pay the related taxes on the income reported on the airdrop. The amount to be set aside varies depending on your filing status and the tax bracket. If the airdrop is a large amount, it is recommended to talk to a tax adviser and calculate the estimated taxes on the airdrop.