A Guide to Airdrops Part 3: Airdrop Scams
Read Part 2 of BTCManager’s series on Airdrops here.
In the first two parts of ‘A Guide to Airdrops,’ you have learned what airdrops are, how they work and what the most popular airdrops have been.
In this guide, you will discover how airdrops have been misused and how airdrops are turning from a gift to the cryptocurrency community into a pure marketing tool for startups looking to launch a token sale.
Types of Airdrop Scams
Airdrop scams are designed to look innocuous and innocent from the get-go to take full advantage of their victims. One of the best ways for scammers to do this is by creating a coin that is a hard fork of another cryptocurrency, which has a well established following. By co-opting the brand and following of the specific token, the scam can achieve a substantial amount of attention, which, in turn, exposes it to many people who are potential victims to their scams.
Because legitimate cryptocurrencies that are starting out will usually send out airdrops to their community for a myriad of reasons, the developers of a hard fork scam like to follow the same methodology to maintain a semblance of legitimacy while creating a pathway for ill-earned revenue.
In order to spot whether a hard fork is a scam, it is important to conduct in-depth research. One of the ways you can use to determine this is to ascertain whether the hard fork came as a result of community need or whether the developers just forked the chain in order to create profit for themselves.
Forking for Profit
Moreover, the tokens that are scams are likely to request private information in order to include you in the airdrop. This is a red flag, especially if highly sensitive information such as your private keys is required. If you give up your private keys, you are almost definitely going to lose your funds.
A good example of this is the Litecoin hard fork known as LitecoinCash. Charlie Lee, the creator of Litecoin, denounced the hard fork, as well as its motives, saying: “Since on the topic of scams, any fork of Litecoin, calling itself Litecoin something or other, is a scam IMO. Litecoin Cash, Litecoin Plus, Litecoin *… all scams trying to confuse users into thinking they are Litecoin.”
In order to receive any Litecoin Cash (LCC), community members would need to submit their private keys into a wallet that was largely new and untested. Moreover, the developers seem quite inexperienced and do not seem to have any actual reason for the hard fork aside from generating profit.
Impersonating a Genuine Airdrop
Another popular method used by scammers is the impersonation method. This is where scammers will create fake websites as well as social media pages in order to pretend that they are the legitimate page of a project that has announced an upcoming airdrop.
Scammers are more likely to create fake social media pages as it is a quicker and more accessible mode of communication to a large number of people. Moreover, it is largely cost-free to create a social media page while creating a website has some fees attached to it.
The fake profiles work by reposting all the information from the legitimate project in order to appear honest. Due to the fact that the scammers pick high profile airdrops, they amass a large following in a short amount of time. Victims will follow the steps provided by the scammers in order to sign up and claim their free tokens. Unfortunately, the scammers will require the private keys, and once they have these, they clean out the wallet of the victim.
Moreover, regard all airdrops that require a donation with suspicion. While most airdrops will require you to have a certain amount of a specified token in order to participate, the ones that need you to send funds first are certain to be scams.
The Biggest Airdrop Scams
Ethereum-based e-wallet OmiseGo, which aims to provide financial services to those unable to access them, announced it had planned to distribute its native cryptographic token denoted as OMG to its community from September 4, 2017.
The project postponed its airdrop in order to streamline the process. This gave scammers the opportunity to create fake profiles and use them to carry out an impersonation scam against unsuspecting victims.
The project is valued quite highly, and as a result, the fake profiles created by the scammers garnered a lot of attention. The official twitter page of the project goes by @omise_Go, but the fake profile went by the very similar @omise_com. This strategy managed to confuse a significant number of victims.
Once victims had given up their private information on the landing site provided by the fake profile, they did not receive any tokens. Moreover, the ether that was in their wallet was stolen by the perpetrators using their private keys.
The wallet associated with the scammers managed to amass upwards of 300 ether which at current exchange rates is an amount higher than $157,500. Another large airdrop scam was the ICON (ICX) impersonation scam.
Airdrops are Turning into a Marketing Gimmick
Initially, airdrops were used as a tool through which early adopters of a token could be rewarded. Moreover, it was a way through which a sense of community and cohesiveness would be fostered as they would often overlap with other projects that would be connected in some way. A good example of this is the OmiseGo airdrop that would give OMG tokens to those within the Ethereum network. This is because the e-wallet is built on top of Ethereum’s blockchain. Another example was the airdrop of Stellar Lumens (XLM), which were given to bitcoin holders to spread awareness about this blockchain project.
Currently, however, airdrops have been corrupted by money-hungry startups who are looking for easy funding through initial coin offerings.
Firstly, the airdrop tool is being used as a marketing gimmick for projects looking to generate a buzz for themselves. Some argue that the fact that the crypto market is so heavily inundated with new projects means developers cannot rely only on organic growth and thus they need some kind of marketing tool. This is evidenced by the fact that most airdrops will need users to perform an act, such as follow social media pages or join their Telegram channel, in order to receive the token.
Secondly, because people associate the cryptocurrency market with quick profits, users are likely to sign up for an airdrop in order to take advantage of any future rise in value. Many will do this without believing in the project. Even worse, some will participate in airdrops only to sell the tokens off once they have received them which also goes against the spirit of airdrops.
To avoid airdrop scams, like all other cryptocurrency-related scams, it is important to always conduct thorough research and not to share your private keys with anyone.
Take a look at BTCManager’s series on Airdrops here.