Cryptocurrency airdrops and forks explained
Either trading crypto or browsing through cryptocurrency news or forums, we hear about “forks” and “airdrops” all the time. While they’re similar in some ways, it’s crucially important to understand their differences, as it’s essential for understanding the principles of crypto trading. Let’s dive in!
What is an airdrop?
In short, airdrop is a distribution of new tokens/coins through awarding them in a certain proportion to existing holders of a particular blockchain currency – Bitcoin, Ethereum, etc. Put simply, if you hold one type of coins, you are automatically eligible to claim other coins or tokens just because you were holding the parent coins or tokens on which airdrop was done. That is also the reason why airdrops are often called “free droppings.”
The reasons for them to occur range from marketing to distribution and decentralization. In some cases, an airdrop takes place as a means of boosting recognition of a new token or coin. Often, Bitcoin traders are surprised to find a new set of coins in their wallet, as from time to time these drops come unannounced. Such free giveaways can create a surplus in the cryptocurrency market, and make their holders sell them, which would essentially bring the token’s value down. In other words, airdrop might result in the generation of a new cryptocurrency, which may or may not succeed.
What is a fork?
Forks, or hard forks, historically are one of the most-hyped moments in the cryptocurrency world. Put simply, forks are the creation of another branch of an already-existing currency, using the same basic code. Most of the times, a hard fork occurs after the discussions between the developing and investing communities. If the ideas on how to drive the coin’s future are different among the groups, hard fork appears to be one of the most popular solutions, since it essentially divides one type of the coin into two.
However, forks are not necessarily the reason of a dispute or a discussion – often they are just simply an attempt to create a different version of an already existing coin. Some of the most famous forks are Bitcoin Cash, Bitcoin Gold, Bitcoin Diamond and Litecoin Cash.
How forks and airdrops are different?
One of the main differentiators is that hard forks lead to the creation of two tokens, while airdrops are essentially token distribution operations. While forks occur mainly with a purpose to create a new type of cryptocurrency, airdrops can happen following a number of reasons, including even a distribution of total token supply, to reward faithful early investors, to increase the awareness about a crypto, or just for marketing and hype purposes.