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What does Airdrop mean in crypto terms?

An 'airdrop' refers to a method in which free tokens or coins are distributed to the holders of a particular cryptocurrency. This is typically done as a strategy to promote a new cryptocurrency or to reward loyal users of a blockchain network.

Airdrops occur when project developers decide to distribute free tokens to the holders of an existing blockchain currency, such as Bitcoin or Ethereum. The objective can be to create awareness, incentivize behavior, or simply to extend the reach of their blockchain technology. For example, if a new token is being launched on the Ethereum blockchain, the creators might decide to perform an airdrop where they distribute a certain amount of the new token to existing Ethereum holders.

This not only creates awareness about the new token but can also lead to its wider adoption, as a large group of people suddenly find themselves in possession of the token. It's important to note, however, that while receiving free tokens may seem like an obvious benefit, it can also have tax implications, as some jurisdictions may treat airdropped tokens as taxable income. Moreover, one should also be wary of airdrop scams that ask for private keys or other sensitive information.

Always make sure to perform due diligence when participating in airdrops.

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