An airdrop is a distribution of cryptocurrency to addresses meeting some criterion, usually as a marketing or community-reward mechanism. Famous airdrops include Uniswap (UNI, 2020), Ethereum Name Service (ENS, 2021), Arbitrum (ARB, 2023), and Jupiter (JUP, 2024).
Common eligibility criteria: - Having used the protocol before a "snapshot" date. - Holding a specific NFT. - Interacting with specific contracts during a qualifying window. - Being a testnet participant.
Why projects airdrop: - Decentralize token distribution (and arguably the regulatory status). - Reward early users who took risk before the token existed. - Generate marketing buzz and re-activate dormant users. - Bootstrap governance voter base.
Airdrops have created spectacular individual windfalls — early Uniswap users received UNI worth tens of thousands at launch — and have motivated professional **airdrop farming**, where users perform scripted interactions across dozens of protocols hoping to qualify for future drops.
Tax treatment: airdrops are usually taxable as ordinary income at fair market value when received, in most jurisdictions. Track receipt carefully.