What are Lockdrops?

When the popularity of the crypto world increased immensely, tons of companies and organizations started to enter the field for various reasons. They wanted to make a name for themselves and create huge profits or they wanted to raise money for projects, whatever the reason, the crypto world prospered because of it all.

Whenever a new project or cryptocurrency is launched, a lot of things are associated with it like staking and holding of tokens, airdrops and lockdrops, etc. You might be familiar with some things like staking or airdrops but if you find the concept of lockdrops new or confusing, we are here to help you.

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This article will explain what lockdrops are along with how they work and all the advantages they provide when you encounter them. There are certain similarities between airdrops and lockdrops so we will try to differentiate them as well.

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What are Lockdrops?

Lockdrops basically distribute new tokens to the users but to understand them, you should first know what airdrops are as they both are related. An airdrop is when you take part in some project and do some tasks or when you provide your fund to its liquidity pools, and for doing that, you receive some free tokens.

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These tokens from airdrops are given to you for your support of the particular project which is usually based on the amount of tokens you hold. The difference with lockdrops is that they are operated by the smart contracts. 

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Lockdrops are when you stake a token for a definite amount of time to receive a new token along with the one you staked when they are released. In short, if you are supporting a project and you stake ETH, then when the native tokens for that project get released, you will get the native token as well as the ETH tokens that you staked.

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All these tokens are locked in the smart contract set forth by the project organization. More often than not, the amount of tokens that you stake and the duration you stake them for, will determine how many tokens you receive when they are released.

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The whole concept of Lockdrops is so interesting because the users are rooting for the project they stake their tokens for and this helps the project to grow. They are used to build a community that is more engaging.

Advantages of Lockdrops

Now that you know what lockdrops are, let us tell you about what advantages they bring over airdrops or any other token distribution methods.

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1. Lockdrops search for users that will make use of the token and not just people who are interested in free tokens and that helps both the project and the users grow.

2. Lockdrops do not require any permissions and they are also decentralized and hence, the overall security is increased.

3. The distribution process of the lockdrops does not depend on how the market is behaving at the moment of the distribution, the tokens are distributed to a wide community regardless of anything.

4. Lockdrops don't face the issue of possible-shutdown as the chance of regulation compliance is very strong.

How Does Lockdrop work?

Now that you know what lockdrops are, it's time to learn how they function. You're probably wondering how these lockdrops are made, how to obtain them, and what you can do with them. To obtain a clearer idea, let's talk about it all. 

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Lockdrops, unlike airdrops, are the product of smart contracts and are not delivered voluntarily like airdrops. A lockdrop is created when a predetermined number of tokens are secured in a smart contract, allowing you to receive some tokens for nothing. At the end of the lock-in period, you will get your locked tokens along with tokens gained from lockdrop.

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The criteria and conditions for lockdrop are determined by the project team, so lockdrops can differ from project to project. When the team makes an announcement about a lockdrop, users must meet the said requirements, such as holding a specific token for a specified period of time.

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If you are someone who is curious about a new network, participating in a lockdrop is a cost-effective method to become an early shareholder. Instead of buying and staking tokens, you can take part in lockdrops to increase your holdings. 

Lockdrop vs Airdrop

Although the objectives are the same, Lockdrops and Airdrops work on very different principles. Both of these come with their set of benefits and risks.

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From the project’s point of view, when it comes to promoting your product or service, lockdrops are more effective than airdrops. They require a greater level of dedication. Your crypto must be staked on a new and unknown protocol in order to participate in a lockdrop.

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Whereas the Airdrops can generate a short-lived buzz that fades away fast. Depending on how much you contribute to the new network, you may be rewarded with an airdrop. Furthermore, if the project isn't well-known, airdrops can sell out quickly or go completely ignored.

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Conclusion

Be it a lockdrop or airdrop, both methods can bring the attention of people towards the project. You will notice that lockdrops is a go to choice for many practical and major projects. Lockdrop is no doubt a more serious means of promoting your project but also it gives assured benefits to people participating in it. 

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We hope this article gave you an idea about lockdrops and how they compare to airdrops. We bring such new and exciting articles for you frequently. If you liked this article, check out our other articles on cryptocurrencies and NFTs and keep an eye out for more interesting articles. 

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