Cryptocurrencies can be difficult to understand at the best of times.
Born out of a technological dream to disrupt the traditional financial establishment, the cryptoworld lingo is filled with jargon and obscure terms which may leave you scratching your head. Fiat, whale, bearish, FOMO: the lingo is fraught with implications and nuances that are hard to understand unless you delve deep into it.
And so the target of this piece comes into focus. Airdrops.
What are they, what does it take to create one, and what makes them successful?
Airdrops: a bit of history
By definition, an airdrop is the act of dropping people or equipment from an airplane using parachutes. The term was first coined towards the end of World War 2 and became widely used during the Berlin Airlift, when American bomber aircraft dropped thousands of tons of essential supplies for beleaguered German citizens displaced by war.
There are no parachutes in the cryptoworld, and aircraft sure don’t fly around dropping coins on people all over the place, but one can draw certain parallels between the ‘traditional’ airdrop and the crypto airdrop.
Tokens away! Definition of an airdrop
In the world of crypto, the term airdrop is applied when an ICO (another one of those terms) distributes a certain number of tokens to the wallets of a few (or all) users free of charge. Think of an airdrop as one of those free samples of stuff you sometimes get around supermarkets. Taste before you buy.
Such events may be pre-planned to coincide with certain milestones, for example, or carried out as a surprise. The reasons for choosing one airdrop type over the other are subjective. Startups may announce the airdrop event in advance, to maintain interest and cryptobuzz around the internet. More established ICOs may decide to launch an unannounced airdrop as a reward for users, for example, or for bootstrapping and acquiring further leads.
But why give out free tokens?
There is only one thing in life that is worse than being talked about, and that is not being talked about. According to Oscar Wilde at least.
If there is no such thing as bad publicity, when it comes to startup ICOs they want to get as much of it as possible.
Airdrops done at or near the starting date for the actual ICO help incentivize the potential investor to participate, to get a taste and feel for what the ICO is about and, crucially, to tell others about it. This fosters growth at a time when it’s really needed. The airdropped tokens may hold little value to start with, but if investors choose wisely and the project blooms, those tokens may rise in value quite significantly.
In practical terms, airdrops promote the network effect, which is governed by certain laws and conceptual ideas. Growth in terms of social network means a lot for an ICO, as it provides larger returns in contributions, which in turn helps the ICO succeed.
Airdrops are regular occurrences across the cryptoworld. These events serve great and useful purposes for ICOs, helping to generate buzz and interest, or simply maintain momentum.
The key to participating in a successful airdrop is to understand both the theory and the mechanics behind the event, but always do your own research into what an ICO offers, and how, and exercise due caution and diligence when participating in an airdrop.
Written by: Fernando Sanchez