If you’re new to cryptocurrency, there are a lot of terms to learn. Two of the most important terms to understand are “forks” and “airdrops,” because they have the potential to translate to “extra” money.
HODLers (holding on for dear life) of popular cryptocurrencies Bitcoin ($BTC) and Ethereum ($ETH) have benefitted from much more than the price of the coins themselves. When these projects hard forked, they created new coins.
Let’s breakdown what crypto forks and airdrops are to better understand where the money is made.
How to Get Free Crypto
From CoinMarketCap to Coinbase (NASDAQ:COIN) crypto firms offer users free crypto throug a variety of channels. Sometimes you must perform an action, such as referring friends to use the app or taking a quiz.
Other times, you simply need to own a particular crypto that attracts third-party projects through token support. Ethereum, for example, is a blockchain development platform that allows developers to create their own tokens using available Ethereum request for comment (ERC) standards. This leads to so-called “airdrops” on Ethereum.
By HODLing you can also benefit from forks. That’s because democratizing finance and technology leads to disagreements, segmentation, and eventual splits, or forks, in the roadmap.
What Is a Fork In Crypto?
Your hardware, operating system, and every app on them all require periodic updates. That’s because software development is an ongoing process as technology continues to evolve. Blockchain development is no different, and both Bitcoin and Ethereum have undergone a lot of updates over the past decade.
A crypto fork occurs when a community changes protocols; often it’s accompanied by miners refusing to upgrade their costly equipment. Forks don’t occur just on blockchains – plenty of software forks occur, especially on open-sourced code.
A real world example is when an enterprise IT department updates all devices in the workplace simultaneously. A similar process applies, albeit is more decentralized on blockchain, and backwards compatibility determines the type of fork.
Soft Fork
A soft fork is an update that expands the functionality of the underlying network. Because the changes are backward-compatible, every node can continue processing the same blockchain. It’s like updating your desktop’s Windows and porting the old programs to the new platform.
However, sometimes there are deeper issues that split the community based on a variety of philosophical differences. That creates what is known as a hard fork.
Hard Fork
A hard fork is an update that is not backward compatible with earlier blocks. Miners who process the original blocks are separated from those processing the upgraded transactions, creating an entirely new program.
They will share the same digital ledger until the fork, and at that point will run independent of each other. Several popular hard forks include Bitcoin Cash, Bitcoin Gold, and Ethereum Classic. Dogecoin is also a fork of Lucky fork, which in turn is a Litecoin-based fork, making it a fork of a fork.
Steem ($STEEM) also had an infamous fork when Justin Sun, CEO and founder of Tron ($TRX) acquired Steemit and the community migrated to the Hive ($HIVE) blog.
Like a stock split, if you held Bitcoin, Ethereum, or Litecoin ($LTC) when these forks occurred, you end up owning the new coin too. There are about 74 active Bitcoin forks and five Ethereum forks.
That’s just the start of the “extra” crypto long-term hodlers were gifted. Airdrops are another major source of free crypto.
What Are Crypto Airdrops?
While forks involved the technical programming and governance of a crypto project, airdrops are a method of delivery of these coins or tokens. Airdrops occur in a variety of situations, including buying an initial coin offering (ICO) or as a promotional marketing stunt to launch a project with crowdfunding. You can find a list of active and historic airdrops at sites like Airdrops.io.
Ethereum Name Service ($ENS) held one such airdrop of its ENS token in late 2021. The company acts as a web domain registrar on the Ethereum blockchain.
In order to participate, users had to follow steps like purchasing a domain, following the company on Twitter (NYSE:TWTR), displaying their .eth domain name on social media, and joining the company’s Discord server.
Although gas fees were expensive, the launch went down as the biggest airdrop in history at that point. Those who participated earned thousands to tens of thousands of dollars compared to around $100 in gas fees paid for the transaction.
Crypto Forks and Airdrops: The Bottom Line
Crypto forks and airdrops are two enticing ways to increase your crypto portfolio holdings. Tracking the price of a crypto like Bitcoin or Ethereum doesn’t take into account the price of the forked holdings if you held at the right time. This has historically been a great benefit for long-term hodlers.
Airdrops and forks are different but both have the potential to boost your portfolio holdings. Just beware that not all airdrops are free, and many of them remain worthless or go defunct. Sometimes you get what you pay for, even in crypto.
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