As we all know a faucet is a tap, usually a source of water. A bitcoin faucet is a source of Bitcoin and they have been around for some years. A Bitcoin Faucet is a rewards system whereby Bitcoin or fractions of one rather are given as a reward for performing or completing a task described on a website. Some faucets also dispense other cryptocurrencies.
The very first Bitcoin faucet was developed in 2010 by one Gavin Anderson, a software developer in the US. His ideas were so innovative that he was designated by the inventor of bitcoin, Satoshi Nakamoto to lead the development of the client software for the bitcoin network which is now known as Bitcoin Core.
How it works is fractions of a Bitcoin, such as a satoshi (a typical payout os less than 1000 satoshi – see glossary) are offered as a reward for completing tasks such as a captcha completion for example. Mining fees are reduced by accumulating up these small increments in ledgers and when there is sufficient are sent to a user’s Bitcoin address.
According to Wikipedia the purpose of Faucets is to “introduce new people to bitcoin, or to altcoins. A majority of faucets provide information to new users as well as offering them some free coins so that they can ‘try before they buy’, experimenting with a test transaction or two before putting real money on the line. Since this whole experience is so new and a bit complicated to people, who perhaps don’t quite trust it with their hard money, this is a beneficial way to promote digital currency and bring in new users. Faucets are also high traffic sites. When you are giving away free money it is not that difficult to increase visits to a web page. It is a great way to introduce new people to Bitcoin. It is not easy making money from a faucet website as the cost involved giving away Bitcoin does not always cover the revenue made. It required some experience and strict business understanding to make it work.
Advertising generally makes up the revenue for a Bitcoin Faucet website. And an integrated payments processor/manager is required to organise the payments to users.
Most Bitcoin Faucet sites have a referral system where a proportion of new user’s earnings are used as rewards to existing users. Earnings do not percolate to the top so this is not a pyramid scheme.
Due diligence should always be used when intending to participate in a Bitcoin or other alt coin Faucet system One needs to also check the regulations relating to bitcoin in one’s country of residence.
This article is for information purposes only and is not to be construed as financial information for any purposes such as investment or speculation and it is the responsibility of the reader to perform proper due diligence before acting upon any of the information provided. We recommend that you consult with a licensed, qualified investment advisor before making any investment decisions.