Basically, it's simply a matter of distributing certain tokens for free. A holder of a cryptocurrency receives further units of cryptocurrency without any action on their part. This means that they do not have to pay for the cryptocurrency received by airdrop.
One of the best known and at the same time allegedly one of the largest airdrop programs was the 2018 airdrop of the Stellar Lumen Token (XLM).
In order to receive airdrops, one needs a suitable wallet, which should be able to receive as many different cryptocurrencies as possible. Wallets that work on the basis of the Ethereum blockchain have proven to be particularly practical, because many airdrops are backed by ERC-20 tokens based on this blockchain. Thus, for example, a credit of cryptocurrencies can be issued to the wallet on which the beneficiary holds a certain amount of the cryptocurrency ether (ETH).
It is also possible to get access to a new cryptocurrency by proving that you hold a certain amount of cryptocurrency (e.g. Bitcoin) on another blockchain. The cryptocurrencies issued by airdrop are either created directly in the wallet of the recipient or are transferred from a pool of the issuer to the recipient wallet.
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The reasons for giving away cryptocurrencies are numerous. Often it is a matter of drawing attention to a new cryptocurrency. For instance, many startups use airdrops to make their cryptocurrency more widely known. Crypto exchanges such as Binance also use airdrops to reward customers for their loyalty. This is more or less a bonus program.
The airdrops, which a user gets on a wallet, on which he holds an appropriate cryptocurrency (like e.g. Ether), are safe. However, caution is required if the user would like to participate in an airdrop and is required to give too many personal details or even share the private key to do so.
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In the context of an airdrop, the user receives cryptocurrencies without having purchased them or provided any other service for them. The cryptocurrencies are not transferred to the user from the legal sphere of a third party. Rather, they come into "existence" only in the user's assets. The cryptocurrency is created directly in the wallets of the users, and the wallets must fulfill certain criteria. In this respect, airdrops resemble a lottery win or a chance find (so-called windfall profits).
In the absence of a purchase transaction, taxation in accordance with Section 23 (1) No. 2 of the German Income Tax Act (EStG) is not possible in the case of a subsequent sale. If the user does not provide services, other income as defined by Section 22 No. 3 EStG is also not applicable. Therefore the sale of airdrops is tax-free.
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