Advantages and Disadvantages of Cryptocurrency Airdrops
Advantages of Cryptocurrency Airdrops
Given the extreme competition among cryptocurrency startups, an airdrop is an attempt to stand out from the crowd. Some businesses devoted to crypto airdrops offer alerts to users and listing services to startups, plus a range of marketing services to fine-tune their airdrops. As always, there are good businesses and bad in this space.
Michael J. Casey, Chair of CoinDesk's advisory board and an advisor at MIT's blockchain research initiative, argued in a post on a CoinDesk blog that some type of marketing is essential if a cryptocurrency is to succeed. "A currency is nothing if it is not widely used. And that can't be achieved unless people make some cost-incurring effort to encourage widespread usage," he wrote.2
Certain crypto airdrops also have the advantage of rewarding loyal patrons of specific blockchain networks. In addition, sending airdrops to all wallet or existing token holders widely distributes tokens in a manner that may not happen naturally in an open market.
Disadvantages of Cryptocurrency Airdrops
However, there are several issues to consider in regard to crypto airdrops. The obvious concern is network safety, especially the nature of "redeeming" airdrops. For example, some airdrops may claim users must connect their wallet to suspicious websites; once the connection to web3 is made, the thief may now have access to the user's keys or password.
Crypto airdrops may also not be legitimate projects. Though enticing due to the nature of receiving free money, some projects lure stakeholders into increasing the stake of their airdrop by buying more tokens. Ultimately, the long-term goal may be to "rug pull" investors by dumping large amounts of tokens into the marketplace at once, crashing the price and making prior airdrops worthless.
Airdrops may be seen by some as low-quality projects. Some may prefer to instead focus on rewarding miners or other contributors of a network instead of releasing free tokens to non-heavy contributors of a project.
Last, since airdrops may lack liquidity, airdrops may literally be worthless if they can not be traded on an open exchange. Often the result of the infancy of a project, airdrops may claim to have a value of thousands of dollars. However, without the ability to openly trade the airdropped tokens, the free gift to wallet holders may prove to be worthless.
Crypto Airdrops
Pros
- Rewards early adopters or people engaged with a project with a stake in the project
- Raises awareness of a project due to the marketing aspect of an airdrop
- Encourages the use and adoption of a newly issued token
- May distribute tokens across holders in a manner that would not have naturally happened in an open market
Cons
- May pose security threats if wallet holders must connect wallets to suspicious sites to claim airdrop
- May prove to be "pump-and-dump" schemes
- May dissuade some investors from participating if they prefer different ways of distributing tokens
- May prove to be worthless if the token does not have liquidity on an exchange
What Was the First Crypto Airdrop?
The first cryptocurrency airdrop is attributed to AuroraCoin (AUR) on March 25, 2014. Intended to be the cryptocurrency for the nation of Iceland, every citizen or permanent resident who submitted their national ID received 31.8 AUR.6
What Is an NFT Airdrop?
Did the Country of El Salvador Do a Bitcoin Airdrop?
Yes. To encourage Bitcoin adoption as the country expanded its legal tender to Bitcoins, El Salvador credited everyone who installed the government-built wallet with $30 worth of BTC.7
How Do I Find Crypto Airdrops?
Crypto airdrops are often communicated and marketed to the general public to raise excitement and awareness regarding a token. Many of these airdrops can be found by subscribing to airdrop newsletters or following blockchains on social media.
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