What Is A Bitcoin Airdrop?

TL;DR

A Bitcoin airdrop is when a new cryptocurrency project distributes their coins to existing holders of Bitcoin as a way to bootstrap liquidity and economic activity. It also can work as a promotional mechanism to raise the marketing of a project by appealing Bitcoin holders to take an interest because they have some economic stake in it.

At forkdrop.io we maintain a complete directory of these airdrops.

Blockchain Fork Basics

It is first instructive to understand how a blockchain fork works. Airdrops are not forks, but the are somewhat similar in concept, although slightly more complicated. We recommend reading our What Is A Bitcoin Fork? guide.

The UTXO Set

The important thing to focus on for a bitcoin airdrop is not the blockchain like a fork, but rather Bitcoin's UTXO set, an acronym meaning Unspent Transaction Output, which is a log containing the current ownership of bitcoin and associated addresses. As new blocks are mined with a new set of transactions on the Bitcoin network, the UTXO set is modified to incorporate the change of ownership reflected by those transactions.

utxo set

The UTXO set is fairly small in size as it contains no historical information about which address used to hold Bitcoin as that information is stored in the blockchain itself. For example: if Alice owned BTC in the past but later sold it, she no longer has a corresponding entry in the UTXO set. However, the record of when she received and when she sent it away stays in the full record of the Blockchain. Roughly speaking (and this varies over time), the UTXO set is about 1/60th the information of the full blockchain data.

Bitcoin Airdrop Projects

Since the Bitcoin blockchain provides a public-private key address system and an open ledger of balances that continues to operate. It is reasonable to assume that these keys and UTXO entries belong to engaged cryptocurrency users, ideal candidates for a new cryptocurrency project looking to grow its own user base.

The interesting part is that Bitcoin airdrop projects incorporate the UTXO set of Bitcoin, or some modified version of it in order issue the new coins. The same private keys which hold authority over BTC on the Bitcoin blockchain are then issued coins on the new chain in some proportional amount. The block number which the project chooses to take the UTXO set from is called the snapshot block. It is conceptually very similar to the fork block for forks, but with the additional caveat of the different architecture for the resulting system. So while these projects do not need to build on the Bitcoin blockchain like a bitcoin fork project, they can still benefit from the public dataset of the Bitcoin blockchain.

Passive Airdrops

If you are just now getting up to speed on these topics and have held some BTC for a while, this is the category of most interest to you. Passive airdrops are projects that have issued coins to some set of BTC holders without any participation from those individuals. Depending on how long you have held BTC and how much, you likely have some of these tokens which you are able to claim by some method.

In a way, these are kind of like coupons or free casino chips which you have been given, just by virtue of showing up and holding some economic potential as a customer of these projects. On forkdrop.io we categorize these projects to give you an entry point into figuring out which projects you might own some value in.

An Simple Example Of A Passive Airdrop

This is a hypothetical example of an airdrop project that creates a new, independent chain from Bitcoin's UTXO set.

passive airdrop

The UTXO transformation function might be important in the design of the blockchain's economics. For example, they could cap the amount they give to high-BTC-balance address to limit the amount of influence the single actors can have in the new economy. Another strategy might be to not credit small-BTC-balance addresses in order to prune away the tiny balance holders to 'clean up' the blockchain.

A More Complex Example Of A Passive Airdrop

Airdrop projects may be targeting a certain economic design, and these tools give them a lot of freedom. It is likely we will see a lot of innovation in these designs going forward. It is also not certain that the project will be building a blockchain, as these tokens could be kept on a transactional ledger by other technologies.

mashup airdrop

For each specific project, it might take a bit of study to truly understand how the economics are designed.

Active Airdrops

On forkdrop.io we categorize airdrops as registered participation, or airdrops which require some active participation. Often they require you to sign up to the project and demonstrate some sort of interest.

Many projects credit addresses only if the address signs a cryptographic message and provides that to the project demonstrating that the address a) holds a BTC balance and b) is interested in the project. Often they will credit coins in proportion to the BTC balance demonstrated.

Further Reading

We keep an up-to-date directory of Bitcoin forks on our main page. We also track a Bitcoin fork projects, which are similar to airdrops, detailed in our What Is A Bitcoin Fork? guide.

To be sustainable as blockchains, the coins need to be traded for some value such that the miners or validators continue to validate blocks for the mining rewards. Our main page also tracks a list of exchanges that trade some of these coins.

Since airdrops are a little more complicated than forks, and can substantially vary from project-to-project, it is more difficult to speak generally about how to claim them. It is important context to first understand the forked project and how to figure out whether you own them. You can find out more on this in our How Do I Figure Out Which Bitcoin Fork Coins I Own? guide.

If you do own some of these forked coins then you will need to follow a procedure to make claim to them. We have an in-depth guide which covers the process for claiming this value while preserving your security and privacy: A Novice's Guide To Claiming Forked Bitcoin Value Securely And Privately

Once you are comfortable with working with and claiming forked coins, you should have skills and depth of knowledge that prepares you for figuring out getting airdrop value for each project.