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How to Have Passive Income? Hard Fork and Airdrop Explained

Hard forks and airdrops are forms of passive income strategies that are essentially gifts of certain tokens to users.

With a hard fork or airdrop, users who are active in the crypto ecosystem can search for tokens or projects that offer additional tokens commensurate with their holdings as rewards for various reasons. Below we explain the differences between airdrop and fork.

 

What is Crypto Airdrop and how does it work?

Crypto Airdrop is the free distribution of a cryptocurrency coin or token to existing token holders. Airdrops, usually associated with the launch of a new project or cryptocurrency, aim to attract more users in a market that is flooded with thousands of tokens and cryptocurrencies.

Purely promotional, users have no control over when airdrops occur. There are two types of crypto airdrops: retroactive airdrops and takeover airdrops.

A retroactive airdrop is usually announced when an existing blockchain protocol is planning to unveil its native cryptographic code, rewarding early adopters or those who contributed to the project before a certain date.

takeover airdrops are used when decentralized finance (DeFi) protocols want to lure users away from the competition or increase their chances of retention by offering more rewards.

takeover airdrops target liquidity providers and users who have demonstrated higher participation in activities such as staking to lure them away from competing DeFi protocols.

 

Advantages and disadvantages of crypto airdrops

Airdrops offer tremendous benefits to cryptocurrency entrepreneurs and investors, making them the best marketing tool to generate initial buzz and accelerate user acquisition.

For crypto companies looking to launch a native token for their blockchain or DeFi protocol, crypto airdrops are probably the easiest and most cost-effective form of advertising in the crypto world. Even if it involves spending a lot of tokens.

On the other hand, if too many tokens are given as part of an airdrop, airdrops can have a negative impact, reducing the token’s market value and affecting the token’s price in the process. Additionally, most addresses that receive airdrops can sell the received tokens immediately after listing, which again puts downward pressure on the token price.

In fact, for crypto wallet holders or those who hold certain crypto tokens, airdrops are a great way to earn good profits with zero investment and can be a great way to generate passive income in the crypto markets. All you have to do is connect with projects or companies that are going to offer airdrops and use them.

So, not only can you monetize crypto airdrops by immediately selling the received tokens on a crypto exchange, but you can also hold them for a longer period, potentially increasing your chances of generating higher returns.

 

What is a hard fork and how does it work?

Often, blockchain protocols change to produce a new blockchain that runs parallel to the original but may differ in terms of the final utility it provides to users and token holders.

One of the most prominent examples of such a parallel blockchain is the Bitcoin Cash (BCH) fork, which creates a P2P cash system in the process from what is essentially a hard fork of Bitcoin.

Furthermore, since the new blockchain requires a native token for user transactions, a hard fork would result in the creation of a new cryptocurrency and create value for those who invested in the original coin.

With the increasing number of new blockchain protocols being created and many others forking through hard forks, it is easy to see how investors can benefit from hard forks without considering the high risks involved.

However, not all hard forks originate from the intention of creating a new system, as some are the product of a cryptocurrency failure. An example of an Ethereum hard fork is Ethereum Classic (ETC), which even supports a different consensus mechanism and has a native ETC token that can be freely traded on cryptocurrency exchanges.

 

Advantages and disadvantages of a hard fork

Hard forks allow developers to add new functionality without having to change the blockchain, especially when there is a large user base unwilling to make any changes.

It also requires less computing power than using a soft fork and also provides more privacy.

In addition, token holders and investors will be issued additional hard fork tokens, which can be monetized immediately or held for the long term.

Aside from the possibility of price erosion, hard fork users face a greater risk of losing their token holdings in the light of an attack. Because hard forks result from blockchain splits, they are often seen as detrimental to network security, making them more vulnerable to malicious attacks.

Investors can take advantage of hard forks if they are aware of the latest developments and find the right opportunities to earn money by acquiring digital currencies through hard forks.

Source: Cointelegraph.com

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