How to earn crypto passive income with forks and airdrops?

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When cryptocurrencies like bitcoin (BTC) go through bear phases like the ones we currently find ourselves in, the idea of ​​earning passive income from one’s holdings becomes all the more appealing to long-term investors.

related: Decentralized Finance: A Beginner’s Guide to Earning Passive Income with DeFi

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Various methods such as staking, lending, cloud mining and yield farming have become popular over the years and involve rewarding investors with money or tokens for the crypto tokens invested in the system.

However, with hard forks or airdrops, users who are active in the crypto ecosystem can fodder for tokens or projects that offer additional tokens in proportion to their vested holdings for various reasons.

Since both are aimed at increasing the popularity of the project or as part of a promotional campaign, hard forks and airdrops work differently and come into existence through completely unique mechanisms.

Let’s look at what differentiates crypto airdrops from hard forks and how they can be beneficial when investing in the crypto market for the long term.

What is crypto airdrop and how does it work?

Considered like manna from heaven for crypto fans looking to experiment with different projects, crypto airdrops require minimal technical knowledge and potentially low risk.

A crypto airdrop is a free distribution of a cryptocurrency coin or token, also known colloquially, as a token giveaway, to existing token holders. Usually associated with the launch of a new project or cryptocurrency, an airdrop is intended to gain more user traction in a market filled with thousands of crypto tokens and coins.

Purely promotional in nature, users do not have control over when an airdrop can take place, and this is usually done by developers or crypto entrepreneurs to reward existing token holders with additional tokens or coins for free. .

The amount of tokens awarded is based on the amount invested or contribution made to a project and is similar to what traditional brands offer freebies to popularize a new product offering.

There are two types of crypto airdrops: retroactive airdrops and takeover airdrops, the key difference between the two being the level at which they are being offered and their specific purpose.

A retrospective airdrop is typically announced when an existing blockchain protocol is planning to unveil its native crypto token and reward early users or those who contributed to the project before a specific date. Is.

This is a very popular tool to spread the word about the soon to be launched token. Meanwhile, it also acts as a liquidity building mechanism and helps in audience participation by offering tokens in exchange for retweets, feedback or even growing followers on social media.

Takeover airdrops are used when decentralized finance (DeFi) protocols want to drive users away from competition or increase their chances of retaining them by offering more rewards.

While it is a comparatively more aggressive form of an airdrop, takeover airdrops are targeted at liquidity providers and users who have demonstrated high engagement in activities such as competition to steer them away from competing DeFi protocols.

DeFi aggregator 1INCH has the specific intention of moving rival Uniswap users to its platform, rewarding specific user sets in a series of airdrops, and serving as a classic example of how free crypto airdrops are used. Organized several airdrops from

Advantages and Disadvantages of Crypto Airdrops

They have long been considered an unorthodox form of radical marketing in the crypto space, but crypto airdrops have become increasingly popular. Numerous projects use this method to drive adoption of their new crypto tokens.

Airdrops offer excellent benefits for crypto entrepreneurs and investors alike, making them the most preferred marketing tool for creating initial hype and catalyzing user traction – two elements that are critical to the success of a new coin.

For crypto firms aiming to launch a native token for their blockchain or DeFi protocol, crypto airdrops are the simplest and most cost-effective way of advertising in the crypto world today. Even though it involves spending a lot of tokens, and that too, for free, they make up a small fraction of the overall tokens in circulation and are a sure-shot way of generating excitement among other crypto token holders. Because they see users earn crypto from free airdrops.

Airdrops, on the other hand, can have a negative impact if too many tokens are given out as part of the airdrop, reducing the token’s market cap and affecting the token’s price in the process. Furthermore, most addresses receiving airdrops may sell the tokens received immediately after listing, which will again put downward pressure on the price of the coin. For users, it is also important to do proper research to weed out dump airdrops or crypto scams which are becoming more sophisticated over time.

If the token grows in popularity and demand, these airdropped tokens could potentially generate even higher returns as the value of the token increases. By following a project on its various social media handles or sharing news about it with friends, Crypto Airdrop rewards crypto users with free tokens that can be worth hundreds of dollars, with no strings attached. .

In fact, for crypto wallet holders or those holding specific crypto tokens, airdrops are a great way to make a decent profit on basically zero investment and can be a great way to generate passive income in the crypto markets. One only has to keep up with the projects or companies that are ready to take advantage of and offer airdrops.

Thus, not only can you make money from crypto airdrops by immediately selling the tokens you receive on a crypto exchange, you can choose to hold them for a longer period and potentially increase your chances of generating even higher returns. Huh.

What are hard forks and how do they work?

More often than not, blockchain protocols undergo changes to create a new blockchain that runs parallel to the original but may differ in terms of the ultimate utility provided to users and token holders.

One of the most prominent examples of such a parallel blockchain is the Bitcoin Cash (BCH) fork, essentially creating a P2P cash system in the process from a bitcoin hard fork.

RELATED: Soft Fork vs Hard Fork: Differences Explained

There are other bitcoin forks, such as bitcoin gold, and they demonstrate how hard forks are created by changing the code of the base protocol to create a parallel version of it that is intended for a different purpose.

Furthermore, since the newly created blockchain requires a native token to transact with its users, a hard fork results in the creation of a new crypto token and creates value for those who need to invest in the native coin. it was done.

A notable example of this was when in August 2017 each BTC holder received an equal amount of BCH tokens, giving a huge return considering the $900 listing price for Bitcoin Cash on cryptocurrency exchanges.

With an increasing number of new blockchain protocols and many more branches being created through hard forks, it is easy to see how investors can benefit from hard forks without assuming high risk.

However, not all hard forks arise with the intention of creating a new system, some of which are products of the crypto debacle. Take the example of the Ethereum hard fork, Ethereum Classic (ETC), which also supports a different consensus mechanism and has a native ETC token that can be freely exchanged on cryptocurrency exchanges.

Unlike the “official” Ethereum blockchain, it came into existence in response to an attack on Ethereum’s most notable project, The DAO, and issued tokens in a 1:1 ratio to all existing ETH holders.

Originally intended as a new decentralized business model for commercial and non-profit entities, The DAO was subject to a vulnerability attack that caused some users to move up to a third of their funds to a secondary account.

When the Ethereum community voted to hard-fork the original blockchain to recover lost funds, it split the blockchain into two branches and renamed the unforked blockchain to Ethereum Classic.

For savvy investors, there are often many opportunities available before a hard fork to invest in the blockchain protocol and potentially take advantage of additional new tokens on offer. However, it is important to do thorough research and invest only in tokens that have good fundamentals to make money from hard forks.

Advantages and Disadvantages of Hard Forks

Hard forks provide an opportunity for developers to add new functionality without changing the original blockchain, especially when it has a large user base that no one wants to change.

It also involves less computational power than applying a soft fork and also provides greater confidentiality.

What’s more, token holders and investors are issued additional hard fork tokens, which can be immediately monetized or held to profit from long-term appreciation, a highly likely scenario if the hard fork succeeds in its purpose. and gains prominence in the crypto space.

However, this may not always be the case, as demonstrated by BCH, which is trading at an all-time low since its 2017 release.

In addition to the potential for a price drop, users of hard forks face a high risk of losing their token holdings in light of the attack. Since a hard fork occurs as a result of the split of the underlying blockchain, it is often seen as detrimental to the security of networks, making them more vulnerable to malicious attacks.

This is especially true if there is a split between nodes and miners, as it exposes the blockchain and its forks to bad actors who can use their computing power to take over the network to steal funds. .

Regardless of the type of attack, the intent is either to undermine the reputation of the network, causing a drop in value for the native token, or to steal funds from the network and send them to accounts on other networks. Is.

This would result in investors losing capital on hard fork tokens as well as native tokens. Therefore, it is important to research the actual improvements being made to the hard fork and whether the developers have taken the necessary precautions to protect the fork from any attacks.

Investors can benefit from hard forks if they stay abreast of the latest developments and find the right opportunities to generate income by earning crypto through hard forks.