They say that there’s nothing in this world, such as a free lunch.
I find the word “Free” to be the most ironic word in the history of spoken languages. Everything ever offered to you free of cost usually comes with an attached T&C, or is contingent on an item you purchase prior to it, or is of subs-standard quality, or is 100 different reasons which I choose not to list.
Hence, I usually run the other direction when someone pitches a “Free of cost” product to me.
However, the world of Crypto doesn’t care about the rules and standardized systems of the normal, traditional world.
Crypto follows no rules, regulations, or constructs of the typical market. It has its own mind, own systems, own set of ethics and own ecosystem.
And guess what, in the world of Crypto, you absolutely CAN get a free lunch, or a coffee, or a Toy Lambo by just registering for Airdrops.
A while ago Token Start-ups realized that there is a lot more value when their token is held on as many wallets as possible. More coins lead to more interest and exposure, which in turn greatly increases the Trading Volume of a particular coin when it gets listed on an exchange.
An indigenous solution was created – Airdrop. And no, I am not referring to the software update here.
Participating in an Airdrop is simple. You discover, or are informed of an Airdrop, fill out a Telegram form, give your Ethereum (or relevant coin) wallet address and Voila! Free Tokens in your wallet a few weeks from then.
What it also does is create marketing waves in the crypto ecosystem.
People start discovering and talking about “free” tokens and the word spreads around the community about that particular Token. The word reaches thousands of people, where the cost of advertising is zero.
Compared to an ICO, which initially involves a Private Sale (basically the rich getting richer), followed by a Public sale, where small time investors purchase tokens for ETH or BTC. An Airdrop takes away the payment bit of this process, instead giving more value towards informing people of their offering and giving every one the chance to own some tokens.
Let’s dig in to understand the viability of this approach and most importantly, its implications for Bitcoin and Ether holders.
You’re probably thinking – Why would a project distribute its tokens for free instead of selling them? In many ways, the airdrop (or hard fork) method of distributing tokens is a better way to accomplish the same objectives of an ICO, which are usually three-fold:
1. Raise Popularity: Getting your token to as many wallets and people as possible for building a strong base of active users, who just might end up being real customers. Breadth of distribution is typically the important metric, particularly given that many projects are trying to jump-start a network effect.
2. Raise awareness: A lot of monetary interest is built once the token hits exchanges.
3. Raise capital: To fund the future development and build-out of the project.
Advantages of an airdrop or hard-fork
Breadth of Distribution
The earlier option involved an ICO, or an Initial Coin Offering, through which participants use BTC or ETH to buy tokens. However, the tokens ended up in the hands of a narrow demographic, usually just 30 or 40 thousand odd people. While there’s certainly a lot of money involved right here, there is less awareness.
For a quick retrospect, Bitcoin and Ethereum have millions of users. An airdrop effectively puts your token in the hands of millions. Even if only 1% of users actually engage your project, you’ve likely achieved significantly broader distribution and more engagement than even the most successful token sales.
One of the ancillary but important benefits of token sales is that they help raise awareness for your project.
At any given time, there are a handful of ICO’s and coin hopefuls screaming for your attention. The ecosystem just isn’t designed to handle this and in the end, only a couple projects at the most end up with the exposure they require.
However, your target community might be more likely to take a serious look at your project if they’ve been given a stake, rather than the burden of making a purchase decision. A very subtle, yet important difference.
People are in a different position when they’ve been given a stake and must decide what to do with it (Sell? Hold? Buy more?). At the very least, this will typically encourage some portion of the community to educate itself about your project.
In this sense, giving away tokens in an Airdrop or hard-fork is similar to a guerrilla marketing campaign.
While a handful of the highest-profile ICOs ultimately raised hundreds of millions of dollars, most raise a tiny fraction of those amounts.
Again, Airdrops can be (and have been) at least as successful in this regard. There are many potential approaches that a project could take here.
A simple example would be to Airdrop 95% of tokens to all holders of Bitcoin (or Ethereum) while the project itself and the team behind it reserves 5% of tokens to fund future development.
Perhaps the most important point of them all. A lot of regulator run-ins occur when there is cold, hard cash involved.
The governments have shown us time and again, they are VERY interested and suddenly affected when a product is sold and revenues are been made and capital is being generated.
Eliminating this risk is simple – conduct an Airdrop. An airdrop could be the path of least resistance (and maximum effect), considering all the above noted points.
When something is free you’re the product
Now companies obviously don’t do Airdrops just because they’re such nice guys. It’s all part of an elegant PR plan, which ultimately will lead to an increase in token value.
In addition to an Airdrop being free advertising, it connects people already in the crypto community to your project and gives everyone the same incentive: token price appreciation.
The endowment effect suggests that individuals value something higher if they own it. In the recent case of OmiseGO, there were suddenly half a million people who saw OmiseGO more valuable than other tokens simply because it was dropped into their wallets.
Many will also keep on accumulatingthe currency now that they already feel like investors. Basic tendencies towards risk aversion, hoarding and completionism probably also comes into play, with some being tempted to buy more OmiseGO to achieve round numbers and increasing their current investment instead of diversifying further with new tokens they don’t know and thus consider to have higher risk.
Looking forward, possible airdrop developments could be projects starting to gift tokens to users who hold tokens in projects that overlap or have some synergy with their own. We could also see projects encouraging other projects to Airdrop to their token owners and receiving some benefit in return.
If you are an investor holding a diverse portfolio of coins you are likely to be receiving more and more free money as this concept keeps gaining popularity.
The final word
As always when venturing into cryptoland, beware of scam Airdrops trying to steal your coins. Never give out your private keys or wallet file or click suspicious links and always do your research before attempting anything like an Airdrop collection.
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