What is airdrop?

A distribution of free tokens to wallet holders, usually to reward early users or promote a new project.

Not yet verifiedHow we verify

3 min read

In this entry

A distribution of free tokens to wallet holders, usually to reward early users or promote a new project.

Airdrops are often taxable as income at the value received. Many "airdrops" advertised on social media are scams that drain wallets when claimed.

Genuine airdrops are a distribution method, not a giveaway. A project hands part of its supply to people who already used it, which turns users into holders and voters and seeds a market before any exchange lists the token. Everything about the design, from the snapshot date to the claim deadline, is chosen by the issuer.

How it works

The issuer picks a snapshot, a specific block height at which balances and activity are read. Anything you do after that block does not count, and the snapshot is usually announced only afterwards, to stop people gaming it.

Eligibility rules are then applied to the snapshot: minimum activity, a number of distinct interactions, a holding period, or filters designed to remove one person operating many wallets. Those filters are why a wallet that met the published criteria can still receive nothing.

Distribution happens one of two ways. A push airdrop sends tokens to eligible addresses directly, so they simply appear. A claim airdrop publishes a list and requires you to sign a transaction to collect, which means you pay a network fee and, more importantly, you interact with a contract.

Claims almost always expire. Unclaimed tokens usually return to the treasury after a deadline set in the contract.

Example

Illustrative: a protocol allocates 5% of a 1 billion token supply to users, which is 50 million tokens, and 200,000 addresses qualify. An even split is 250 tokens each. If the token opens at $0.40, that is $100 of income at receipt in jurisdictions that tax airdrops as ordinary income on receipt. If the price falls to $0.10 before you sell, you owe tax on $100 and realize $25, and the $75 difference is a capital loss with its own separate treatment. Figures are illustrative.

Why it matters when you buy

Airdrops change supply, and the tokens are held by people who paid nothing for them. Look at how much of the float arrives at once and when the claim window opens, because a large distribution landing in a thin market is sell pressure with no matching demand. Check the schedule at the unlock pressure view and how much supply is concentrated in few hands at the concentration view.

Questions

Do I owe tax on an airdrop I never asked for?

It depends on your jurisdiction. Several tax authorities treat tokens as ordinary income at their value when you gain control of them, whether or not you requested them. Check the rules that apply to you at the tax pages.

Why did I get nothing when I met the published criteria?

Issuers apply anti-sybil filters that are not fully published, and they exclude patterns they judge to be one person running many wallets. There is usually no appeal.

Are tokens that just appear in my wallet safe to ignore?

Yes, and ignoring them is the right default. Unsolicited tokens cost nothing to receive, but interacting with one, including trying to sell it, can route you into a contract designed to take approvals.

Guides that use this term

  • Crypto Tax in Australia: CGT, Records, and the ATO

    In Australia the Australian Taxation Office treats a crypto asset as a capital gains tax asset, so disposing of it by selling, swapping, or spending it is a CGT event, while tokens you receive from activities such as staking are treated as income when you receive them.

  • Crypto Tax in Canada: How the CRA Treats Cryptocurrency

    In Canada a crypto disposal produces either a capital gain or business income, and where it is a capital gain the Income Tax Act makes one half of that gain taxable and adds it to your income for the year at your marginal rate.

  • Crypto Tax in Germany: The One-Year Rule and Everything Around It

    Germany taxes privately held crypto as a private sale transaction under section 23 of the Einkommensteuergesetz, which means a gain is taxable only where less than one year passed between acquisition and disposal, and even then stays free of tax if your total private sale gains for the calendar year came to less than 1,000 euros.

  • Crypto Tax Basics: What Triggers a Taxable Event

    A taxable event happens when you dispose of crypto or receive it as income, so selling for cash, swapping one token for another, spending it, and receiving staking rewards or an airdrop are all reportable, while buying and simply holding is not.

  • How to Spot a Crypto Scam Before You Send Money

    Nearly every crypto scam ends with you sending funds to an address that cannot be reversed, so the defense that works is to stop at that moment and check three things, who contacted you first, whether you found the platform yourself, and whether the promised return is possible.