What is Airdrop?
A distribution of free tokens to wallets, usually to bootstrap a user base or reward past activity.
Airdrop: A distribution of free tokens to wallets, usually to bootstrap a user base or reward past activity.
What it is
An airdrop distributes tokens without charge, typically to addresses meeting some criterion — having used a protocol, held an asset, or been active before a snapshot date.
Why projects do them
- To distribute a governance token to actual users rather than to buyers.
- To reward early usage and encourage continued activity.
- To create a broad holder base at launch.
- To satisfy a decentralisation objective in the token's design.
Airdrop farming
Because some airdrops have been substantial, a practice has developed of using protocols specifically to qualify for future distributions. Projects respond with criteria designed to distinguish genuine users from farmers, and the arms race continues in both directions.
The realistic assessment: most airdrop farming produces little relative to the time and gas spent, and the distributions that were large are the ones people remember.
Airdrop scams
Airdrops are a common attack vector, and the mechanism is worth understanding.
- Fake claim sites — a site that asks you to "claim" and instead requests a signature that authorises draining your wallet.
- Unsolicited tokens — tokens appearing in your wallet designed to lure you to a malicious site when you look them up.
- Approval phishing — a claim transaction that is actually an unlimited token approval.
The defence: never connect a wallet to a site you reached from a message or a token in your wallet, read what you are signing, and use a separate wallet with minimal funds for claims.
Tax in India — two events, not one
This is where airdrops cost Indian recipients most. Tokens received are generally income at their value on receipt, taxed at your slab rate. A later disposal is then taxed at 30% under Section 115BBH on any gain.
The consequence is that you can owe tax on value you never realised: tokens received at a high value, held, and then collapsing leave you with an income tax liability on the receipt and a loss that cannot be set off. See airdrop tax in India for the full treatment.
Snapshots and eligibility
Most airdrops are based on a snapshot — a point in time at which wallet state is recorded. Activity after the snapshot does not count, and the snapshot date is frequently not announced in advance, precisely to avoid last-minute gaming.
This is why retroactive airdrops reward genuine prior use rather than a rush of activity once a distribution is rumoured. It also means that chasing an anticipated airdrop involves spending real gas on speculation about criteria that have not been published.
Claiming safely
- Reach the claim site only through an official channel you verified independently, never through a link in a message or a token in your wallet.
- Use a separate wallet holding minimal funds for claims.
- Read what you are signing — a claim should not require an unlimited token approval.
- Revoke approvals after claiming.
- Be sceptical of any claim requiring a payment to receive tokens.
The last point covers a large share of airdrop fraud: a legitimate airdrop never requires you to send funds in order to receive it.
Related terms
Educational content, not financial or tax advice. Indian tax rules change — confirm your position with a qualified chartered accountant.
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