What is a Crypto Faucet?
A crypto faucet, simply put, rewards its users with cryptocurrency for completing tasks. These tasks range from viewing ads to going through a quiz or completing a captcha, and earnings from completing said tasks are sent to a user’s wallet.
The first crypto faucet was, of course, a Bitcoin faucet. The website, aptly named The Bitcoin Faucet, was created in 2010 by Bitcoin developer Gavin Andresen and gave away 5 BTC to each person that created a Bitcoin address. As mind blowing as that sounds now, back then of course, BTC was worth a small fraction of a cent.
But what was the reason for giving out Bitcoin for free? The goal here was to spread awareness and get BTC into the hands of as many people as possible. This mechanism for raising awareness proved successful, as by the end of the faucet’s life, 19,715 BTC had been given out.
How does it work?
Crypto faucets are quite simple in design. You register an account, complete tasks, and earn. And this is on purpose as they are meant to be very beginner friendly. After all, if someone is only just entertaining a dive into crypto, they might want to first get their hands on a small amount without spending money doing so.
Since tasks can often be taking a quiz or survey or viewing an ad, it stands to reason that faucets are also built to get a lot of traffic. That way, it is worth it for an advertiser to pay to take part in the task-giving part of the operation. So how does a faucet get its traffic? A lot of faucets get the traffic they do from referral systems, where referrers can earn a percentage of the bitcoin or other crypto given to referrals that use the respective faucet site.
Sometimes, because these faucets give out such a small amount of crypto, they don’t actually give out, say, Bitcoin but rather Satoshis, which are smaller units of Bitcoin. 1 Satoshi = 0.00000001 BTC. Some sites may offer random opportunities to earn larger sums of crypto.
How does a crypto faucet make money?
Because faucet owners put up their own money to give to their users, they need to make more money from advertisers or other companies looking to conduct surveys etc. than what they put in.
The different types of crypto faucets
There are faucets that dispense bitcoin, ethereum, zcash, monero, litecoin, as well as ones that dispense multiple types of cryptocurrencies.
While many faucet sites offer one type of cryptocurrency, there are aggregator sites as well where users can pick and choose what coin they earn.
Why use one?
Since its inception, the concept behind the crypto faucet was to raise awareness for cryptocurrency. So, even today, various crypto projects that are getting started or those that want to amplify themselves and raise awareness for the services they provide may find a crypto faucet to do so. Especially if they are looking to distribute their native token.
For a user, a lot of the utility of a crypto faucet lies in the fact that one can earn some coins for relatively little effort and no money. For the crypto-curious, and even crypto-skeptical, this is an easy way to dip your toes in the water.
Risks with crypto faucets
As far as risks with legitimate faucets go, there are generally few. However, one should exercise caution when using any faucet site. Scams can range from getting users to deposit their tokens into scam wallets hosted by the faucet, or by simply not letting users withdraw their earned funds. As the adage goes, the best way to defend yourself is to DYOR (Do Your Own Research!).
was originally published in The Poloniex blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
