Airdrops
Introduction
An airdrop is a means to distribute a cryptoasset to a wide audience in order to spur initial engagement. While they are distributed for free, they can still act as a source of funding for founding teams who can control a certain percentage of the tokens and subsequently sell them once there is liquidity.
Airdrops offer an alternative to an Initial Coin Offering (ICO) so the token can get in the hands of a larger number of people and avoid being labeled an illegal securities offering. Airdrops are often distributed to wallet addresses of existing crypto holders that hold a minimum threshold of an existing cryptoasset. Some airdrops are also used as a marketing strategy and may require participants to join a telegram or retweet a post on twitter.
Airdrops have received criticism since often times people will get the tokens only to sell them immediately since they are essentially free money. This lowers engagement and could crash the price of the token in the secondary market.
On the surface, hard forks appear like airdrops where owners of an existing chain receive a token for doing nothing. However, hard forks are typically the result of an ideological split from the existing chain as opposed to a means of distribution and funding for a new project.
Suggested Reading
The Trend that is Increasing the Urgency of Owning Bitcoin and Ethereum - Spencer Bogart discussing the objectives and benefits of a token sale versus an airdrop.
Airdrops are a Marketing Ploy (And That’s OK) - Michael J Casey posits airdrops can be viewed as marketing expenses to increase awareness and promote the project’s brand. While the potential for pump and dump exists, airdrops can potentially be a useful strategy to increase the utility of a cryptoasset by increasing the size of its network.
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