What are faucets?
Faucets are sometimes mistaken for crypto-mining when beginners first explore crypto-currencies. However, they are actually promotional avenues for encouraging the acceptance of these currencies. Users of these faucet applications earn digital coins from performing user tasks set by promoters of a particular or several crypto-currencies. Such tasks include watching video advertisements, taking surveys, downloading other applications, playing games and sharing referral links. As a reward for the successful completion of these tasks, users then trade their activity points for digital coins or are rewarded with digital coins directly.
The majority of faucets are offered as mobile apps. The main reason behind this is to encourage users to install digital crypto-wallets on their smart devices; whether it is a phone or tablet. A digital crypto-wallet is an app used to store a particular type of crypto-currency, like Bitcoin or Ethereum. Thus, whilst users are playing the games and performing tasks on faucets, they will usually receive an advertisement encouraging them to download a digital wallet that relates to the crypto-currency they would be rewarded with.
Digital wallets or e-wallets are not new concepts. In the gaming world they were used to store reward points earned from completing levels or accomplishing tasks. These rewards were often used to purchase upgrades for the avatars in the game.
In the commercial world, these e-wallets held pre-purchased credits that could be spent on e-Commerce platforms. Sony and Amazon were a few of the first that promoted such e-wallets to allow clients to make digital payments within their platforms, reducing the frequent use of normal banking transactions.
However, these were centralized private ledgers and the credits were not exchangeable. Also, they were often vulnerable to hackers who often were successful in changing the ledgers and stealing credits or impersonating actual customers and spending their credits.
The advent of the Blockchain Technology, introduced by Bitcoin, resolved the issues of exchange, double spending, security and the integrity the ledger. As the ledger is public, accountability and transparency made Bitcoin more acceptable.
Crypto-currency wallets unlike their predecessors are not kept on an e-Commerce platform’s central infrastructure but rather are held in the individual users’ devices on a Peer-to-Peer network infrastructure. This is one of the benefits of a decentralized payment system.
Though faucets are known to payout smaller amounts of digital coins than mining does, there exists the probability of maximizing earnings by running multiple faucets. Faucet applications use less processing power and so; if utilized properly, faucets can altogether be leveraged to collect multiple digital coins. After which, depending on the crypto-currency exchange one decides to use, the user may exchange these different digital coins for his/her desired crypto-currency.
Payouts are made to crypto-wallets. Therefore before attempting to cash out the rewards collected, users first must download and install the correct crypto-wallet for the digital coin offered as the reward. For example, a user should download and install a Bitcoin wallet for Bitcoins or Ethereum wallet for Ethers.
A crypto-currency exchange is quite similar to a foreign currency exchange except that the currencies traded there are crypto-currencies rather than fiat currencies. The most familiar exchange is Coinbase, though others like Binance have become popular as well. In a crypto-currency exchange, a registered user can trade one digital coin for another and so one could collect different coins from different faucets then trade them for his/her preferred coin. For example, collecting coins like Litecoin, Ether, XRP and BAT and then trading all four individually for Bitcoin. Traders should bear in mind though that each different crypto-currency on the exchange has a different value against another; which is, in principle, similar to how the normal foreign exchange market operates.
It is important to mention that, if you open an account on a crypto-exchange then you will be given separate crypto-wallets to use on the exchange for every crypto-currency offering. These wallets are different to the wallet(s) you have installed on your device. Therefore, when making transactions between your personal wallet, on your device, to your wallet on a crypto-exchange, be sure you correctly enter your wallet addresses in the send or receive address appropriately according to which way the transaction is to be made. That is, when sending from the exchange wallet to your device wallet, enter your device wallet’s receiving address in the sending address of the exchange wallet’s transaction action request. This is done in reverse when you are sending to the exchange.
Simply put, enter your receive wallet address in another wallet’s send to address to receive digital coins.
Lifespan of faucets
The lifespan of a faucet depends on the demand for the crypto-currency it promotes. Faucets that offer multiple crypto-currencies as rewards tend to endure longer than those with single offerings. This is due to the value of the digital coin on crypto-exchanges. Many crypto-currencies have been de-listed due to poor demand. This in turn leads to the decommissioning of faucets promoting these failed currencies.
Another thing to note is that, as a crypto-currency becomes more popular, the reward payout of faucets reduces proportional to the supply held by the promoters. In a few instances, faucets delay payouts because the limit of its daily supply is reached. This supply is set by the sponsors whose apps/applications, advertisements or surveys are promoted by faucets as the tasks users perform to earn rewards.
As a way of gaining acceptance, faucets are a lightweight and provide fun pastime activities for those who are new to crypto-currencies. However, for those more knowledgeable, it is an alternative to the expensive crypto-mining methods of obtaining rewards if leveraged profitably.
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.
© 2020 Daniel Sakumai