What is a Cryptocurrency Airdrop?

As the NFT sector expanded, so did cryptocurrency airdrops. A cryptocurrency airdrop involves a network distributing its native tokens at no cost. This strategy enables blockchain networks to rapidly grow their communities and allows investors to acquire new tokens either at a minimal expense or entirely free.

Understanding Cryptocurrency Airdrops

To participate in an airdrop, users and investors might need to obtain an existing cryptocurrency and transfer it to a specific exchange or wallet. Some airdrops are exclusive to individuals who have registered and linked their wallets. The primary objectives of a cryptocurrency airdrop are to:

• Establish a market that provides liquidity for the new token and its native platform.

• Create an ecosystem of holders who can use the token to engage with the platform.

A Brief History of Crypto Airdrops

The concept of cryptocurrency airdrops dates back to 2014 with Auroracoin, designed as a national cryptocurrency for Iceland. Utilising Iceland’s comprehensive national records, Auroracoin distributed its native cryptocurrency, $AUR, to the entire Icelandic population, allocating half of the total coin supply to residents. By registering, citizens received 31.8 AUR. Although Auroracoin aimed to become the first national cryptocurrency, it did not achieve this ambitious goal.

Since then, the industry has witnessed significant airdrops. For instance, the Stellar Development Foundation (SDF) aimed to distribute 19% of its initial total supply of lumens (XLM), equating to 19 billion XLM, to Bitcoin holders. This initiative began in 2016, with an initial distribution of three billion XLM to BTC holders through various participating exchanges. The remaining 16 billion XLM were allocated in 2017 based on the amount of BTC held by users across different exchanges.

Distributing such substantial amounts for free garnered extensive media attention, with many outlets referring to these airdrops as some of the largest consumer giveaways ever conducted.

Recent Developments in Airdrops

In recent years, airdrops have evolved into sophisticated token distribution strategies. Projects now employ both on-chain and off-chain participation methods to qualify users for these opportunities. For example, in January 2025, Hyperliquid conducted an airdrop, distributing 28% of its HYPE token supply to early users. This airdrop’s value exceeded $7 billion, marking it as one of the most significant in history.

Several upcoming airdrops are anticipated later in 2025. Projects such as Meteora, Hyperliquid, Kaito, and Corn are among those to watch, offering potential opportunities for participants to acquire new tokens.

Regulations Surrounding Airdrops

Globally, the regulatory landscape for cryptocurrency airdrops remains complex. Some nations, notably China, have imposed outright bans on such activities. In the United Kingdom, the Financial Conduct Authority (FCA) introduced stringent crypto financial promotion rules effective from 8 October 2023. These regulations prohibit incentives, including free NFTs and airdrops, when used alongside promotions encouraging cryptocurrency investments. While the distribution of airdrops and NFTs themselves isn’t banned, their use as promotional tools to entice investments is restricted.

Taxation policies also vary by jurisdiction. In the UK, the treatment of airdropped tokens depends on the circumstances of their receipt. If tokens are received without providing any service or expectation of one, they may not be subject to Income Tax upon receipt. Disposing of these tokens could trigger Capital Gains Tax. Conversely, if tokens are received in exchange for services or as part of a trade, they are subject to Income Tax based on their market value at the time of receipt.

How to Qualify for an Airdrop

Eligibility criteria for crypto airdrops vary across projects. A common requirement is holding a specific amount of a particular cryptocurrency in a recognised wallet. For instance, holders of the OMG Network’s OMG token qualified for the Boba Network’s BOBA airdrop in November 2021. Participants needed to possess OMG on a supported exchange or have transferred OMG to a Boba Network address to receive BOBA tokens on a 1:1 basis.

Other airdrops might necessitate different actions, such as creating a wallet and completing a know-your-customer (KYC) process, engaging with a platform on social media, or trading a specific amount of a token before a set deadline. To stay informed about upcoming airdrops, interested individuals can consult platforms like airdrops.io, icomarks.com, airdropalert.com, and CoinMarketCap, which provide detailed information and participation guidelines.

Unclaimed Airdrops

Individuals may have unclaimed airdrops, especially if they held qualifying tokens during specific snapshots but were unaware of the distribution. To verify, users should examine their exchange accounts or personal wallets for any unexpected token deposits. If eligibility criteria were met, but no tokens are present, it’s advisable to contact the relevant exchange or platform for clarification.

Tax Implications of Crypto Airdrops

In the UK, the tax treatment of airdropped tokens depends on the nature of their receipt. Tokens received without any associated service or trade may not incur Income Tax upon receipt but could be liable for Capital Gains Tax upon disposal. Conversely, tokens received in exchange for services or as part of a business are subject to Income Tax based on their market value at the time of receipt. Subsequent disposal of these tokens may also lead to Capital Gains Tax on any realised gains.