Airdrops refer to the distribution of cryptocurrency tokens by a cryptocurrency enterprise to a number of users without any charges. These are usually conducted by the blockchain based companies to bootstrap their project. Its usage is not limited to firms as those, other blockchain based institutions have also been integrating the use of airdrops to their ends. The concept is rather new and it is deemed to be a very smart marketing strategy, as the rewards are dumped on people specifically on their Ethereum addresses. Yeoman’s capital founder and longtime investor David Johnson has been encouraging numerous blockchain startups to realize the enormous impact airdrops can have. He wrote a paper, which in his word provides the best practices for smart airdrops,
“As a means of fast-tracking community growth, raising brand awareness and incentivizing early adopters that are highly aligned with the values of your project. Intelligently targeting the recipients of an airdrop and giving away a meaningful amount of value provides large benefits to your project, primarily: increased network effect and allowing many new users to access your technology.”
Moving to on how the smartdrops actually work, the blockchain based startups usually use it to bootstrap the project. The users usually have to preinstall the software and perform a number of tasks that would ensure that they be qualified for the airdrop. When a company releases tokens, the users can then claim their rewards. For the blockchain based companies that already exists, they publicize an airdrop that is going to be released, the users may claim their monies by doing the list of task and then be eligible for the airdrop.
To back this up, let us take the example of Open Garden. They run a messenger app called FireChat, which has 5 million users. They intend to distribute 1 billion OG tokens to encourage people to use its platform for peer to peer internet sharing and publicize it as well. Their smartphone app incorporates mesh networking built on blockchain, which is used by individuals to sell and pay for internet connection using the OG token. Talking about airdrops, Open Garden’s CEO, Hainsworth said;
“We’re launching the product, doing an airdrop to give people tokens so they can start using it in the network, demonstrating utility, and then once we have sufficient utility in the network, then we’ll distribute our tokens to investors.”
This however does not sum up the usability of smartdrops. They are mainly used by blockchain based startups to
- Promote a new cryptocurrency
- As an incentive to keep devotees intact
The airdrop tokens can be used as a very powerful incentive for rewarding loyal users and customers. They keep the users interested and motivated to utilize their services like exchange and trade of cryptocurrency. This can be rightfully classified as a marketing strategy similar to that of companies that provide vouchers and discount coupons.
A technique such as this was incorporated by Binance. They airdropped 500 TRX of their cryptocurrency to all of their customers and users. As mentioned there were eligibility requirements,
- They had to have at least 0.003 BTC in their account
- They needed to have completed at least one transaction using their account.
The airdrop lasted for over half a month i.e. from the end of October 2017 to mid of November 2017.
Like every other product that is released in a previously overcrowded market, a new blockchain based cryptocurrency also needs to be properly publicized so it will not go unnoticed. That is where airdrop comes in to play. As previously mentioned, the greatest use of airdrop is to use it for the promotion of a blockchain based startup. It can be used to attract attention of old crypto users so that they would install new accounts, which is often a requirement for receiving airdrops, enabling the new company to bootstrap their cryptocurrency with ease.
Such is the example of bitcoin cash. After the updates that were made to bitcoin, bitcoin cash came into being. The developers of bitcoin carefully contemplated the situation and decided to reward bitcoin holders by giving them bitcoin cash amount relative to the number of bitcoins they originally held in their accounts. This led to be a very successful marketing strategy as bitcoin soared high into one of the top 10 cryptocurrencies.
Looking at the beneficial usages that airdrop has to offer, it is deemed safe to say that they are here to stay and will progressively be used by new blockchain based startups to get an impetus for their cryptocurrencies.