What is a crypto airdrop?

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Traditionally, airdrops are a marketing strategy used by crypto projects to encourage their platform.

The concept appeared in 2017 and has gained much popularity this year.

In the simplest terms, airdrops are a way to acquire cryptocurrencies without buying.

Crypto airdrop transfers newly created crypto project tokens to users’ wallets. There are several situations in which a project usually decides to run an airdrop, but the effect is always the same.

The user of the application/protocol receives a certain amount of tokens, usually to perform a simple task.

Crypto airdrops can be prizes for subscribing to a newsletter, following the project’s social media pages, or another way to draw attention to a brand and attract more people to the platform, but they are most often awarded for just using the platform. Projects most often run governance tokens. In addition to monetary value, management tokens give owners a voice and allow them to influence significant project-related decisions. Why do crypto enthusiasts love airports? Almost all crypto investors, especially those with smaller investments, see airports as free money and a way to increase their wealth significantly.

And in most cases, the token price rises over time, providing huge profits with almost zero capital.

Airdrops, of course, use the project that launches it to attract attention, but recipients of free tokens certainly reap many benefits.

Win-win situation. 4 examples of successful airdrops: Uniswap (UNI) airdrop In 2020, Uniswap, the most popular decentralized exchange office (DEX), launched all the original token, UNI, and all wallets that used the platform and made at least one transaction before September 1, 2020, received 400 tokens.

1inch airdrop

In December 2020, 1inch DEX airdropped 90 million 1INCH tokens to more than 55,000 addresses. Users had to trade at least $ 20 and make four trades before airdrop day to qualify.

ENS airdrop

Ethereum Name Service is a distributed, open naming system based on the Ethereum blockchain. The job of ENS is to map human-readable names such as “Alice. eth” to machine-readable identifiers such as Ethereum addresses, other cryptocurrency addresses, content hashes, and metadata.

Ethereum Name Service has airdropped 25 percent of the total offer to .eth domain owners as of October 31, 2021, and eligible users have to download tokens until May 4, 2022.

dYdX airdrop

The crypto derivatives exchange dYdX has launched its original token in one of the most significant distributions of decentralized finance (Defi).

Most of the dYdX will go to future retailers, and a quarter of the initial billion tokens will be distributed over the next five years.

Four reasons why crypto projects decide on airdrop

Creating consciousness

Awareness-raising is the primary reason why crypto startups run airdrops. In the early days of crowdfunding, ICOs took center stage.

However, problems soon arose. The flood of startups occurred during the 2017 gold rush, often with fragile and partially plagiarized white paper, causing saturation and numerous scams.

Also, countries like China have directly banned ICOs, and regulators like the SEC have begun targeting ICOs that target U.S. investors. Soon new projects needed a more enticing and legal method to create hype.

The answer was simple, sharing free tokens. The popularity of airdrops has led many projects to start aggressive promotion. But it is becoming increasingly clear to recognize when it comes to the so-called. “Pump and dump” scheme.

Rewarding users

The sad reality is that many crypto investors are looking for only the highest return on investment (ROI) and do not care about the project’s long-term sustainability. So they jump from one task to another, selling their tokens and making huge profits at the expense of small investors without providing any real value to the protocol.

Some projects are implementing token distribution airports to reward loyal users who use their platforms to counter this.

Decentralization of token distribution

Deep-pocket investors can take advantage of their great wealth and secure a bargain purchase during the initial capital raising rounds, allowing them to amass a substantial amount of circulating supply. The problem is that large amounts of tokens in the hands of a few create centralization, which is currently one of the main drawbacks.

In such cases, projects may implement airdrop to balance token distribution.

Attracting investment

When a project is launched and implemented by airdrop, the generated buzz, if successful, helps increase the price of the token because the recipients have “skin in the game” and aim to promote the project in the best light. Especially in today’s Internet economy, where any interaction metrics can be measured and used to attract investors, such as trendy Google search terms, mentioning brands on social media, and the number of followers in the community on Twitter and Telegram. Therefore, airdrop, which significantly and provenly increases community engagement, could seriously increase the overall capital of the project.

Finally, it should be noted that airdrops are directly related to the very concept of ownership, which is the center of Web 3.0. Imagine being rewarded as an early user with Uber shares because you were one of the first to try the transportation service or, in the case of Airbnb, because you tried a new accommodation concept.

The idea seems unattainable in the traditional financial world, but in the crypto space, it makes sense because it does not neglect the ordinary user and does not view him as an object but as a critical link in an inclusive system.

For assistance with the registration process of a cryptocurrency company, please get in touch with our Russian lawyers.

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