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Airdrop is a term used when discussing blockchain and cryptocurrency technology. It refers to the process of distributing digital assets to users, which may involve holding a specific token or sending funds to an active wallet address on a certain blockchain.

However, this is different from distributing tokens or coins at an ICO event, during which a digital asset is usually bought with another token or coin. Airdrops do not require the recipient to make a purchase — the asset distribution is free.

It’s common for airdrops to be a form of marketing, used to boost public awareness of the token or coin to be distributed. It can also diversify the number of people holding the respective asset.

How do airdrops work? To be considered eligible, a user needs to hold a specific number of the asset in a public wallet when the snapshot is taken (capturing the blockchain’s state at that exact time).

Here’s one well-known example. In 2017, OmiseGo ran an airdrop to Ether holders on the Ethereum blockchain. Five percent of all OmiseGo tokens were distributed, at a ratio of 0.075 OMG per ETH to every wallet containing over 0.1 ETH when the snapshot was taken.

As with forks, some consider airdrops to be a type of dividend payment that users earn through holding a specific digital asset, as it’s an extra premium given to those holding tokens (on a pro-rata basis).