What exactly is a crypto airdrop?

In very simple terms, a crypto airdrop is the process by which a blockchain project distributes coins or free tokens amongst the crypto community.

In order to receive a crypto airdrop, most of the time all the user needs are tokens or coins from the same blockchain in their wallet. A few examples of entities that actively use airdrop in this way include OmiseGo, Stellar lumens and Byteball. At times, a crypto airdrop requires the recipient to take a specific action in a ‘bounty campaign’ such as making posts on social media; other times it will encourage users to get in touch directly with a team member on the Bitcointalk forum. So, the airdrop is part of the marketing campaign. Other airdrop campaigns are geared towards community growth; simply requiring a user to join a telegram group and submit their Ethereum address to be eligible.

A practical example of a non-incentivized airdrop would involve a project taking a snapshot of the blockchain at a specific blockheight, identifying addresses with qualifying balances (usually more than 0.1 ETH or 0.01 BTC). This is a common practice on various blockchains, though Ethereum and Bitcoin are the most commonly used protocols for this type of token airdrop.

The final type of airdrop is a ‘faucet’. This is where the airdrop recipient receives a smaller amount of crypto over a longer span of time. A classic example is when a crypto wallet that releases NEO, Dash, Litecoin, and Bitcoin, amongst others, on a daily basis.

Why should ICO projects share free tokens?

Unilaterally donating tokens to users at no cost creates a vested interest in that user for the project’s success. This implies that by carrying out an airdrop, a particular blockchain project is able to create and raise awareness about their token or ICO. By doing so, the project can bring people together who otherwise might have never heard about it. It could also lead to token appreciation, since it is no secret that tokens you own are of greater value to you than those you don’t. This is referred to as ‘the endowment effect’.

Apart from that, crypto airdrops also create networks and communities of token owners. To make this a little more visual, imagine a pie chart representing token distribution following an ICO; a large part will always be owned by the project or developers, another large part will represent the people who joined at the pre-sale stage, whereas the remainder will include users who invested in the ICO. In this case, a token airdrop adds a new segment to the pie chart; one that includes a large number of people.

Some might say that an airdrop is always an effective way of ‘planting seeds. A quick glance at Coinmarketcap will showcase a crowded list that includes thousands of coins, with 100 coins listed on the first page. However, if you’ve already heard of a particular coin that’s offering airdrop, you might be interested in searching for it specifically by name. Apart from that, if the token is mentioned in an article that prospective token holders come by, it’s easier for them to make a mental association with your particular token as they would have already heard of the name before; everyone wins.

The bigger picture

Possible future implementations might include airdropping tokens to users who already hold the same currency (in the vein of a stock split). In this case, we’d expect to see various blockchain projects encouraging other projects to airdrop crypto freebies to their respective users in order to receive additional benefits in return, such as what happened with the Waves, Komodo, NXT and Ethereum platforms.

All of this is possible due to the public nature of the blockchain, meaning a startup is able to review their current audience and choose to reward a particular market segment with free tokens.

As mentioned previously, such an action would most likely form part of an ICO’s marketing strategy, primarily because it’s the easiest way to reach a broader audience, and that’s where we’d step in.

How we can help

ICO Launch is able to supply you with the necessary ICO airdrop tools in order to take your project to the next level. Some of our most popular services include:

The social media airdrop

 This method includes rewarding users with various airdropped tokens when performing various actions across social media platforms, such as joining a telegram group, following your Twitter account or joining a mailing list.

The referrals airdrop

In this case, a project will reward all existing users with a number of tokens whenever they refer a new user to sign up to the network, creating a network effect which exponentiates the community growth rate.

Should you like to discuss an airdrop campaign for your project, get in touch for a review of how we can help.