Airdrops and bounties are promotional tools that cryptocurrency developers use to publicize their new blockchain projects. Though many legitimate airdrops and bounties do exist, scam versions exist as well. Read this guide to learn how to determine whether or not an airdrop / bounty program is a scam.
Scams Abound In Cryptoland
Cryptocurrency is still going through a wild west phase. Though some progress has been made, authorities are still struggling to understand blockchain technologies. This situation has made it easy for cryptocurrency companies to get started. In most regions, very little paperwork is required. At the same time, this unregulated market has become a magnet for scammers of all types and varieties.
In order to help their projects get off the ground in an increasingly crowded market, cryptocurrency developers have invented new types of promotional tools. When used in a legitimate way, these promotions benefit both the participants and the companies that use them to spread word about their new platforms. Scammers, on the other hand, use airdrops and bounties to steal money and harvest sensitive information.
Governmental authorities are starting to take notice of fraudulent promotions. Last month, the Security and Exchange Commission shut down a crypto startup called Tomahawk. According to the ruling, the company used inflated projections and made false claims about its coins:
“Tomahawk Exploration LLC attempted to raise money through the sale of blockchain-based digital tokens called “Tomahawkcoins.” The SEC’s order finds that the defendants’ promotional materials used inflated projections of oil production that were contradicted by the company’s own internal analysis and misleadingly suggested that Tomahawk possessed leases for drilling sites when it did not.”
The SEC also noted that while the company was unable to raise money through its ICO, it did manage to issue tokens by giving them away through its bounty program. Now that Tomahawkcoin is worthless, it’s now clear that whoever participated in the promotion in exchange for the cryptocoin wasted their time.
Airdrop vs. Bounty: What’s the Difference?
The main difference between airdrops and bounties is the level of effort required to participate.
Airdrops are low-effort promotions that are often distributed automatically. Some types of airdrop programs require participants to provide their email address or fill out a form.
To receive a bounty reward, you have to complete a series of promotional tasks. These tasks usually involve posting tweets and/or forum posts, creating YouTube videos and other similar assignments.
How Much Money Do Bounty Hunters / Airdrop Collectors Make?
Though Initial Coin Offerings aren’t raising as much money as they were a few months ago, the Coinschedule chart depicted below shows that substantial sums continue flowing in. August was a relatively slow month for ICOs, but cryptos still raised nearly $1,000,000,000.
Some percentage of the money generated during ICOs gets funneled airdrops, bounties and other promotions.
In an interview with Bloomberg, Saransh Sharma, president of cryptocurrency startup 4New, explained why cryptocurrency companies invest large amounts of cash into promoting their projects:
“It’s really a very cost-effective mechanism for developing a brand. Before you know it, there’s a snowball effect.”
Hackernoon recently surveyed a group of full-time bounty collectors to see how much they manage to earn and find out what their motivations are. Apparently, some full-time bounty hunters earn several hundred dollars a month or more. One of the individuals they messaged compared collecting bounties to other types of internet-based work:
“Completing a cryptocurrency bounty is completely different from doing regular freelance work. There are countless bounties out there posted by people that will never pay you, or where the compensation is sent in the form of a worthless coin or token. A big part of the job is making sure that you are working for somebody that isn’t trying to scam you.”
Cryptocurrency companies have invested a significant amount of cash into bounty programs and airdrops. One platform called Bounty0x Alpha has +25,000 active bounty hunters and has hosted +$7M worth of bounties since its launch. Other similar sites include Bounty Portals, BountiesAlert, BountyPlatform, BountyLord and ICObench.
The Most Common Type of Airdrop Scam
The most common type of airdrop scam is the impersonation scam. This type of scheme is just as straightforward as it sounds. The scammers simply pretend to be a legitimate coin on social media, then they try to harvest private keys from their victims. Impersonation scams tend to achieve high visibility once exposed, since the affected coin team always tries to alert their users and warn them against giving out their personal information.
The OmiseGo impersonation scam
In September of last year, some airdrop scammers created a fake OmiseGo Twitter profile to trick their victims into believing that they were working for the official OmiseGo development group. They managed to swindle over $30,000 worth of ether from the people that they conned. The victims apparently sent the crooks their private keys. Further information about the scam is available on CoinTelegraph.
The ICON impersonation scam
A similar phishing scam occurred a few months later during the ICON airdrop. Scammers masquerading as the official ICON team on Twitter tried to gain unauthorized access to their victims’ crypto wallets. The real ICON team reacted by posting the following tweet:
The TRON impersonation scam
In the same month that the ICON impersonation occurred, Singapore-based cryptocurrency project TRON was plagued by a similar problem. The TRON team posted the following message to warn its user base about what was happening:
“Since December 15th, there are lawbreakers, embezzling and copying the contents of the official website of TRON to establish fake website tronlab.co, fake accounts on Twitter and Medium, claimed that they will make airdrop of 7% TRX, to induce supporters of TRON to transfer TRX to the specific address, so as to cheat TRX of TRON supporters. Currently, it has caused millions of TRX losses.”
The EOS impersonation scam
One of the latest impersonation scams occurred this year in June, when the EOS mainnet went live. EOS had raised the equivalent of over $4 billion during the lengthy ICO. Hackers infiltrated EOS developer Block.one’s Zendesk support system website around the time of the mainnet launch. Once the support site was compromised, they started using it to send out official looking emails that promised a free giveaway and directed users to provide their private keys. Several million dollars’ worth of cryptos were stolen from victims according to CoinTelegraph.
How to Identify a Possible Airdrop Scam
Airdrop scams involving impersonation are easy to identify. However, other types of airdrop scams are harder to pinpoint. A large percentage of cryptocurrency startups fizzle out after their ICOs are over. Many seemingly failed projects may in fact be successful phishing scams in disguise. If you’re not sure if an airdrop is legitimate, look for these red flags.
- The coin that you get is already valuable and established. Airdrops and bounties are promotional tools that companies use to spread the word about new blockchain technologies. Established blockchain companies don’t need to give away their valuable assets because they already have a large number of users.
- The crypto press isn’t talking about the company that issued the airdrop. If CoinDesk, CoinTelegraph and other big name crypto blogs haven’t mentioned the airdrop that you’re about to participate in, it could be a scam.
- All the social media accounts are brand new. Legitimate crypto projects take time to develop. If all the social media accounts associated with the airdrop are brand new, odds are high that there’s something fishy going on.
- The main website is littered with mistakes. Don’t be lured in by a slick looking website. Dig deeper and check for spelling and grammar issues. If you find a lot of errors, the airdrop may not be for real.
- You have to pay to sign up. If the company behind the airdrop wants you to pay a signup fee, walk away. There’s no way to get your money back once you initiate a cryptocurrency transfer. That means that there’s no guarantee that a company issuing an airdrop will actually give you the airdrop that you paid to receive.
- You have to pay to withdraw your reward. Some particularly sneaky airdrop scammers try to seem legitimate by advertising free signups. But once you join, they turn around and charge a hefty airdrop withdrawal fee. Remember: you shouldn’t have to pay to participate in any type of airdrop.
- The reward is too good to be true. If a reward of $100 worth of cryptocurrency or more is involved, the promotion is likely a scam. Similarly, companies that promise guaranteed returns should also be viewed with suspicion. New tokens and cryptocurrencies take time to increase in value. For example, the price of ether hovered around $1 USD for more than a year after it was released.
- The company wants to know everything about you. Do some investigation before you give out your information for an airdrop or bounty. Some airdrop scammers use KYC (Know Your Customer) standards as a pretext to harvest sensitive information about their victims.
Seven Tips for Avoiding Airdrop and Bounty Scams
If you follow these seven tips, you will be able to identify and avoid taking part in fake airdrops.
Tip 1: Don’t pay to participate
Paying money to take part in an airdrop or bounty is never a good idea. Once your money leaves your crypto wallet, there’s no way to get a refund.
Tip 2: Don’t give anyone access to your wallet
A legitimate blockchain development team would never ask for the private key to your crypto wallet. If you encounter a company does ask for that information, you’ve identified a scam.
Tip 3: Use a different email address when you participate
Many airdrops– legitimate and illegitimate alike– require participants to provide an email address. Using a separate email address for airdrops is a good idea because it prevents you from receiving unwanted promotions. And if the airdrop turns out to be a scam, your main email address will remain off the scammer’s radar.
Tip 4: Use a unique password
This tip goes hand in hand with tip #4. If you use the same password for everything and you sign up using your main email account, you’ve just provided a scammer with everything they need to access your email account. This is why you should always use unique passwords when signing up for airdrops and bounties.
Tip 5: Be wary of providing personal data
Always exercise due diligence before giving any type of information to a cryptocurrency project team. If you see too many red flags, it’s probably not a good idea to provide any information at all.
Tip 6: Don’t use your main crypto wallet to collect crypto rewards
Using an empty crypto wallet to collect airdrops and bounty rewards puts yet another layer of protection between you and potential scammers. If they do somehow manage to get your private key, there will be nothing for them to steal once they gain access to your wallet.
Tip 7: Research the company behind the airdrop
Most airdrop scammers don’t even bother to invest the time required to create a convincing looking website. If the website does look legitimate, investigate the team members behind the crypto project. Do they have LinkedIn accounts? Are their photos real, or copied from other sites? Using Google’s reverse image search can lead you to the right answer.
It’s not hard to avoid getting scammed when collecting airdrops and bounty rewards. Impersonation scams, in particular, are easy to spot. Other types of scams, however, are harder to identify. Fortunately, most of the safeguards that will protect you against getting swindled involve the application of common sense. The golden rule of avoiding a scam is: do your homework and safeguard your private keys. If you always do that, then your crypto assets will remain safe.