Cryptocurrency airdrops have emerged as a popular way for blockchain startups to promote new crypto tokens and attract users to their projects.

The guide below has all the details that crypto enthusiasts should know about airdrops, how they work and how to avoid scams.

Airdrops are best understood as a way for crypto startups to raise awareness while launching new virtual currencies. The startups will send tokens to the virtual “wallets” of users who sign up. The coins are usually distributed for free or in exchange for a service, such as posting on social media about the crypto project.

It’s a long shot, but if the crypto coin surges in popularity and gains a following online, its value can skyrocket, providing a windfall for the user.

“The upside of legit airdrops can be huge, some early users of protocols like Arbitrum, Uniswap, or Celestia made thousands of dollars for actions they took months before token launch,” Cryptex cofounder and CEO Joe Sticco told The Post.

While potentially lucrative, airdrops can be very high-risk and are sometimes associated with “rug pulls” or “pump and dump” schemes, while project leaders quickly sell off their holdings after launch.

Experts stress that crypto users should be cautious and conduct due diligence to ensure that they are being offered by a reputable outlet.

“Risks include phishing, spam tokens or even smart contract exploits, so tread carefully,” Cryptex’s Sticco said. “If it sounds too good to be true, it probably is.”

Users should look carefully at the URLs of project websites to ensure they look legitimate and attempt to identify token launches that come with “transparent roadmaps and real use cases,” according to Patrick Young, an executive at airdrop distribution tool Galxe.

It’s also critical for users to protect their crypto wallets by only connecting to verified pages. Users should never share their private wallet keys or seed phrases — the sequence of words used to access their crypto wallet.

“If anyone — especially someone claiming to be from the project — asks for your seed phrase, that’s a major red flag,” Young said.

Some experts suggest using an alternative wallet as a safeguard against potential fraud.

“The best advice is to look for projects evincing transparency, admin accountability, and engagement from project devs/managers,” added Peter C. Earle, senior economist at the American Institute for Economic Research.

For those interested in hunting for crypto airdrops, experts advise looking out for insider communities on social media platforms, including X, Discord and Telegram, or on specialized crypto sites that are set up to provide access for airdrops.

Alec Strasmore, the founder of Epic Loot Labs, suggests that users study the “tokenomics” of specific projects to get a sense of key details, such as how much supply of a given token is being given away in an airdrop. Community excitement and levels of engagement of public posts serve as a way to gauge whether certain projects may take off.

“General sentiment about the project also matters a lot because it determines how many people want to buy the token once its live,” Strasmore said.

Blockchain startups will usually announce an airdrop online and detail any requirements to participate, such as having users follow a certain social media account or sign up to their website.

Users provide their wallet address and receive a specific amount of coins, which varies from project to project. From there, they can buy, sell or hold the coins as they see fit.  

Look for wallets that are compatible with a wide array of blockchains and cryptocurrencies, have strong security settings and are non-custodial – meaning the user, not the platform, has control of their own private keys.

Top options include Best Wallet, which distributed its own token $BEST via airdrop, as well as popular services like MetaMask, Exodus and Rabby.

Leading exchanges like Kraken, Coinbase, and Binance occasionally support airdrops. Other sites like CoinMarketCap, Galxe and Airdrops.io also curate airdrops.