Faucets & the free crypto myth
What you'll learn
- What a bitcoin faucet is
- The history of bitcoin faucets
- How bitcoin faucets work
- Risk vs reward of bitcoin faucets
If you commute into a city or a big town you’re probably used to being offered tasters of new products such as soft-drinks, shampoo or energy bars. It is a low-cost and effective alternative to online or TV marketing for a completely new product - putting it directly in the hands of a large number of consumers for free, hoping they like it and will buy it in the future.
When Bitcoin launched - back in 2009 - it faced an extreme challenge in increasing adoption. It wasn’t just new, it was completely different to existing forms of money, had no company or individual behind it you could review, and no marketing budget.
There were no cryptocurrency exchanges - the most popular way adoption grows today - so the only way to buy bitcoin was by sending funds to a miner willing to sell some of the coins they had earned as rewards.
This was fine if you were comfortable with the risk of sending money to a stranger, but it was clear that in order to grow, Bitcoin needed an easier incentive system to build up its user base.
It shouldn’t therefore be a surprise that attempts to spread the word involved putting bitcoin directly in potential users' hands (virtually speaking) just like the energy bar at a train station; this is how the bitcoin faucet was born.
The birth of the bitcoin faucet
In 2010 a Bitcoin developer called Gavin Andresen had the idea of creating something called a bitcoin faucet, to do just that. This was essentially a mechanism for drip-feeding small amounts of BTC to anyone willing to claim it.
The faucet took the form of a simple webpage with a captcha to prevent spam or bots. Visitors who completed the captcha were awarded 5 BTC. Yes, that is correct, over $250,000 - in today’s terms - for clicking a button.
With the benefit of hindsight it seems crazy, but back then, bitcoin was worth less than a dollar and struggling to gain traction.
That first bitcoin faucet dispensed almost 20,000 BTC during its lifespan - worth over $1 billion and counting - and in retrospect participating seems like a no-brainer, but hindsight is a wonderful thing.
Would you click on a random link today claiming to reward you with a mystery currency you’d never heard of, and which you couldn’t really do anything with?
Of course Bitcoin is now established and in great demand, so no one is gonna give away 5 BTC for clicking a button, but the good news is you can still earn money from bitcoin faucets. You just need to be fully aware of how they function, the motivations behind the faucet, and what you have to do in return.
How faucets work
Any website owner can now create a bitcoin faucet by funding a cryptocurrency wallet with BTC and connecting it to a simple script that runs on their website.
Faucets are quite easy to set up; there are even Wordpress plugins that automate the process. The wallet is programmed to pay out Satoshis at predetermined intervals, and there may be a minimum withdrawal threshold set.
For instance, you may be entitled to claim coins from a particular faucet once every 24 hours, and able to withdraw your coins once you have accumulated 1,000 satoshis (0.00001 BTC).
Most faucets require you to register using an email address and password, before compelling you to complete tasks that will entitle you to free coins. These tasks can include watching videos, clicking on ads, completing quizzes, rolling dice, and solving puzzles.
Some of these tasks may sound fun, but they can quickly become repetitive, particularly in an environment where you are bombarded with banner ads and other promotions.
Each bitcoin faucet will limit the amount you can claim per account and often by IP address too, to prevent people from creating duplicate accounts.
However, there is nothing to stop you from signing up for different faucets, and working your way around them, claiming coins from each site as you go. While laborious, this can provide a system for accruing a very modest amount of cryptocurrency. Some people go further and use bots.
Incidentally, bitcoin isn’t the only cryptocurrency that can be claimed in this manner: there are faucets for many of the most popular cryptocurrencies on the market. Given its value, and its history of outperforming most other cryptocurrencies, however, you may reason that bitcoin is the best faucet to choose.
A good bitcoin faucet, relative to other faucets, will have a high number of users (since this suggests that the site is trustworthy) and offer payouts that are above the market average. It will also have low withdrawal fees and ideally allow you to withdraw your BTC at any time.
Free crypto comes at a price
Even if the sums that can be earned from bitcoin faucets today are miniscule, you might reason that they’re worth using anyway. After all, just like with Andresen’s faucet in 2010, holding onto the Satoshis you receive could prove a highly profitable play a few years from now. That’s why ‘stacking sats’ is a very popular, and sensible, bitcoin philosophy.
While it’s true that bitcoin could be worth significantly more in the future than it is today, the greatest exponential growth occurred in bitcoin’s early years when it was still being discovered. Thus, a few dollars’ worth of bitcoin earned from faucets today probably isn’t going to make you rich, no matter how long you hodl, but 4x in a year does suggest that there is some upside.
As a reality check, look at this faucet payout schedule in USD from early 2020
- Min withdrawal: 2.48 USD
- Min transaction fees: 0.066USD
- 0.0017 USD dispensed per hour so 1 USD = 588 hours
- A faucet user would have to spend 73 working days accumulating BTC to meet cash out thresholds
Clearly that is a lot of effort for such a small reward, though you do have to factor the increase in BTC price of 400% in 2020.
If you are clear about the effort/reward dynamic, it shouldn’t deter you from experimenting with faucets; they’re a useful way to acquire BTC for free and familiarise yourself with how a bitcoin wallet works, given they are built into your faucet account.
Faucets are also gamified, so there is a fun element and combined with some of other suggestions in our Earn Crypto section, can add up to a modest sum which you might then apply other tactics to grow further, such as trading or gambling.
That being said, those “free” coins you earn every time you interact with a faucet come with a price, namely your time, attention, and data.
Faucet operators aren’t giving away bitcoin out of the goodness of their hearts; they’re doing for commercial purposes. Typically because they earn money from advertisers for forcing you to watch commercials or submit your personal data, which is used for marketing purposes.
In some cases users are encourage to try and gamble with their free bitcoin on casino games, to win their way to a sum that can be withdrawn. Given the bitcoin came for free you may not see any issue with this, but the idea is to habituate the playing on games such that you end depositing your own bitcoin. The faucet funds are the proxy for free spins at a regular online casino.
You may conclude that this doesn’t sit well with Bitcoin and everything it stands for: financial freedom and the ability to transact in relative privacy.
Most sites that offer free bitcoin via faucets do not disclose how your data is used or who it’s shared with. After weighing the evidence, you might find that faucets simply aren’t worth the trade-offs they carry, or mitigate this by using an email especially for this purpose.
Not all faucets work the same, however, and you may find some that provide a fairer deal in terms of what they demand of you and reward you. Assess each site on its own merits, and decide whether the faucet in question is worth your time and precious data.
Benefits to using bitcoin faucets:
- Can claim free BTC on a regular basis.
- No requirement to already own cryptocurrency.
- Little technical knowledge required.
- Multiple faucets can be used to maximise earnings.
Drawbacks to using bitcoin faucets:
- Only dispense small quantities of BTC at a time (usually a few cents’ worth).
- Many faucets have a minimum withdrawal threshold, meaning you can’t claim your coins until you’ve earned enough from the faucet.
- Require sharing your data with third parties.
If you like the idea of earning free cryptocurrency, but aren’t convinced by the concept of faucets, there are plenty of other ways to acquire crypto for free, as you’ll discover in our next guide.