Introduction
Airdrops in the cryptocurrency world continue to grow in popularity because they allow blockchain-based projects to promote their services and reward those who help get the project started. The distribution of free tokens (cryptocurrency) to qualifying users allows companies to increase awareness of their services, motivate people to participate in building their community and ultimately attempt to attract more people to invest in cryptocurrencies.
As the use of crypto airdrops continues to grow, so too do the people that attempt to take money, wallet credentials and/or personal information using fake crypto airdrops under the guise or pretense of giving away cryptocurrency. Scammers will use different methods to try and convince potential victims through creating fraudulent websites, creating social media accounts that look like they belong to legitimate crypto projects and creating fake messages that mirror or resemble legitimate projects. In order to protect yourself and your digital assets from fake crypto airdrops you need to learn what to look for to be able to identify fake airdrops. In this article, we will discuss the most common characteristics of a fake crypto airdrop and provide some practical tips to help you to protect yourself while participating in airdrop programs.
What Is a Crypto Airdrop?
A cryptocurrency airdrop is a marketing strategy by a blockchain company to give users free crypto tokens. Airdrops are frequently used for rewarding loyal members of the community, encouraging users to adopt wallets, advertising new tokens, or increasing the awareness of a decentralized application.
Legitimate airdrops generally involve simple tasks such as becoming part of the company’s community, holding a particular cryptocurrency, or interacting with the company’s blockchain. The most important characteristic of an authentic airdrop is that users are not required to give up private wallet information.
When you can get a better understanding of what a actual airdrop looks like, you are able to recognize what a fake one looks like.
Why Fake Airdrops Are So Common
People are drawn to the idea of receiving free cryptocurrency, and scammers take advantage of that hype by creating false campaigns that encourage people to act fast without confirming if the sponsor is legitimate.
As the amount of people using crypto continues to grow, the sophistication level of fake airdrop operations also increases. Many times, criminals will create campaigns that look exactly like a reputable company by copying its branding and using social media accounts that mimic those of well-known companies to appear credible.
Once people send money or disclose their wallet passcode, the transactions usually cannot be undone since most blockchain transactions can’t be reversed. Therefore, chances are extremely low that you will be able to recover your money if you fall victim to this scam.
Warning Sign #1: Requests for Your Recovery Phrase
Be on high alert for any airdrop that asks for your wallet’s 12- or 24-word recovery phrase (also known as a private key). Legitimate projects will never require this information from you. Your recovery phrases give someone access to all of the funds in your wallet, thus allowing them to steal from you.
If a website, email, or customer support representative asks for your recovery phrase to “verify” or “claim” an airdrop, it is almost certainly a scam.
It’s essential to keep your recovery phrase confidential at all times.
Warning Sign #2: Upfront Payment Requirements
One of the oldest scams in cryptocurrency is when the scammer will ask an individual to first send them funds before they receive an “airdrop” (free tokens).
Some individuals have created schemes that require payment of a “processing fee,” “gas fee,” “activation fee,” or “verification deposit” before they will release the free tokens that are supposedly to be sent.
In legitimate airdrops, the participant does not need to send any type of cryptocurrency to the project. There may be standard fees associated with a blockchain transaction (or blockchain network) but those fees are paid to the blockchain and not to the person that is reportedly giving away free tokens.
Warning Sign #3: Fake Websites and Social Media Accounts
Scammers will often build websites that can be mistaken for real project sites.
The fake sites might have similar branding (logo, colors, etc.) and domain names (often with just small spelling changes). Likewise, there are many fraudulent social media accounts for legitimate blockchain projects that use pictures of the real project’s logo/profile and/or usernames.
Be careful when you are going to participate in an airdrop to ensure that you can verify the official website, social media page, and any type of community notification prior to doing so. Just one letter off the website address could give way to a functional phishing site created to collect your wallet information.
Warning Sign #4: Unrealistic Promises
Generally speaking, if an offer appears to be too good to be true, it is likely fraudulent.
Many fraudulent airdrop schemes will offer their participants thousands of dollars worth of cryptocurrency for very little effort or by just connecting a wallet. Many of these schemes will even falsely created an urgency associated with the offer, suggesting that only a handful of winners are left or that the offer will expire in just minutes, causing participants to rush into the transaction without properly vetting the opportunity.
Most legitimate blockchain-based projects spend a significant amount of time developing long term communities. They typically do not make over-the-top promises for instant wealth.
Taking a healthy amount of skepticism toward extraordinary offers can help you make better decisions and avoid a substantial financial loss.
Warning Sign #5: Suspicious Wallet Permissions
While many airdrop scams will not request your recovery phrase, they will request large amounts of access to your wallet through excessive wallet allowance permissions.
When connecting your crypto wallet (such as MetaMask) with a decentralized application (DAPP), pay attention to what permissions that DAPP is requesting. If you see that the DAPP is requesting permission to approve unlimited transactions on your tokens, or other clever tricks, the DAPP is likely trying to steal tokens from your wallet.
Make sure to read through the terms of any transaction before approving it to ensure that you understand precisely what authorization you are granting to the DAPP.
How to Verify a Legitimate Airdrop
To determine if an airdrop is legitimate, there are numerous steps that can be taken. The first one being to visit the official website of the project as well as their verified social media pages to check for any announcements, and educating yourself about the project by reading all documentation and looking for consistent information amongst multiple trusted sources.
Also look into the community’s conversations regarding the project on reputable cryptocurrency forums, and validate that the project’s communication channels have been around for some time and have established legitimacy, rather than being recently created accounts that don’t have much activity.
Taking some time to investigate may save you a lot of money!
Best Practices to Stay Safe
The first step to avoiding fraudulent crypto airdrops is adhering to security fundamentals.
Do not disclose your recovery phrase or private key as well as password combinations with anyone. Use a different wallet when experimenting with new decentralized applications to ensure that your primary assets remain separate. Always enable two-factor authentication for your exchange accounts and make sure you upgrade your wallet software from legitimate vendors routinely.
Be on the lookout for uninvited messages sent via email, chats and social networks. Many times these scammers will act as though they are project admins, or customer service reps in order to get people to trust them.
Learning about typical crypto scams provides the best way to protect yourself.
Conclusion
Crypto airdrops are an excellent way to find new blockchain projects and receive tokens for free, while being a popular tool for hackers. Fake airdrops use phishing sites, impersonation, exaggerated rewards, and fake requests asking users to provide their wallet information or to make payments to trick them into providing sensitive information.
By knowing what warning signs exist, using reputable sources to verify information, and maintaining good security practices with your wallets, you can safely participate in legitimate airdrops and reduce your chances of falling victim to scams. As an ever-changing industry within cryptocurrency, the most effective method you have today to protect yourself from fraud is to remain careful and to protect yourself through education.
