Cryptocurrency Airdrops Controversy: Philanthropy or Effective Marketing Strategy?

The concept of airdrops were first introduced to the cryptocurrency industry in 2014. During that time, a crypto project called Auroracoin was launched and tokens were given away to participants as a way to generate some buzz.

Courtesy of the buzz that was generated, the cryptocurrency’s value jumped to over 1000 percent of its initial value. Some of the early token recipients figured its growth wouldn’t last that much longer, and cashed out, walking from the deal with significant profits.

Those who didn’t, lost out as the token’s value crashed and was ultimately abandoned. While there have been questions about the founder’s intentions for the airdrop and its attendant effects, no one has been able to get to the bottom of the scandal.

Nevertheless, even though the project itself didn’t work and ultimately crashed and burned, the idea of airdrops didn’t die.

People –crypto founders and developers- saw the handwriting on the wall and started doing more of it. Unfortunately, unlike the auroracoin that was seemingly philanthropic in nature, many airdrops these days are anything but that.

Is This A Bad Thing?

Not necessarily. It’s just that it has become so commercialized that you tend to hear all sorts of shady and crazy offers. In 2018 alone, we’ve seen hundreds –if not thousands- of airdrops done by all sorts of crypto projects.

Some of these are legit projects that are actually just rewarding loyalty and so on. Others are using it to garner some attention. In fact, there’s one coming up very soon by a popular cryptocurrency called Stellar Lumens (XLM).

The company plans to distribute $125 million in XLM tokens in the near future. Unsurprisingly, this announcement has triggered a series of controversies and debates about the validity and viability of airdrop.

There are arguments about whether they serve a real purpose of improving token usage for example, or just another cheap way to promote the token in the bid to pump the price. Most times though, it is usually a mix of the two –with the promotion aspect meant to draw in more users –not necessarily create an artificial price increase.

Is The Airdrop For Project Improvement Or Personal Enrichment?

Stellar’s impending airdrop is meant to help introduce new crypto assets in the form of a utility token that people can try and trade with, within the Stellar ecosystem without worrying about security issues, network problems and so on.

Jed McCaleb, cofounder of the Stellar Development Foundation hopes that this will help increase the network’s capacity and utility tremendously.

Unfortunately, crypto critics don’t share the company’s enthusiasm. In fact, many of them are wary about it, calling it a potential scam designed to increase wallet usage across the world.

More, they’re worried that the KYC procedures that will follow the airdrop will provide a data pool of individuals that they can mine, sell to or do some other thing with.

Crypto Branding

While there’s so much controversy around crypto airdrops being a form of marketing, it’s important to note that all forms of currency adoption first requires some marketing to become widely used.

And the best way to go about this is to give the target users a sample of what the currency can be used for. It’s no different than encouraging people to try a new product by offering some free or highly discounted samples. The more you give away –within reason, of course- the better for its promotion.

The same goes for airdrops. These aid and accelerates adoption within the community. The proof of its usage and viability are integral to these things.

For instance, governments of countries looking to promote their country’s fiat currencies often do so through the deployment of a series of complex, subtle marketing strategies.

They often promote their economic strength, and give out free cash in the form of welfare packages. This way, citizens are encouraged to keep using the currency for the purchase of whatever items they want.

This currency branding effort therefore makes it very easy to speed up the arte of adoption and acceptance in the economy. This is the exact same strategy that cryptocurrency founders use –with a few slight modifications of course- when they airdrop their tokens.

While we can argue that crypto founders’ intentions aren’t as objective as that of governments, the truth is that the end result is the same: rapid token adoption.

For instance, bitcoin’s early adopters knew they needed more users and adopters. So, they started distributing free bitcoins through bitcoin faucets, as well as the occasional donations. Even more, the founders invested in building up the community and rewarded active participants with the occasional airdrop.

Anyone familiar with the crypto space understands this and knows that airdrops are integral to the success and viability of any cryptocurrency. The one thing that most can’t stand however, is the barefaced profit making airdrops, done with the sole intent of ripping people off through pump and dump schemes. Airdrops like this are responsible for the flak that the crypto sector is getting.

While it’s true that profit is mostly at the heart of most crypto projects, it shouldn’t be the sole driving intention. Project viability and success is more important. Profits only come later when the project has been adopted by an active community.

Airdrops Should Be Done Properly

The idea of airdrops is fantastic actually. We have nothing against it. What we do have problems with is blatant profiteering that arises from simply manipulating the demand for your tokens so that the value becomes artificially inflated.

Crypto projects should carry out more airdrops, but with the right intention and purpose –an equal mix of growth and adoption. Smart investors too need to be wary of outrageous airdrops that promise you the moon.

The more outlandish they sound, the higher their chances of being a scam. Most unreasonable airdrops are often pump and dump schemes designed to help make the founders money.

The reality is if there’s an increased proliferation of these airdrop schemes, it would further damage the currently frail reputation that cryptocurrency and blockchain has. This, will in effect, adversely affect the industry.

Retail investors therefore, shouldn’t jump at every airdrop offer that they see listed on any of the many sites that curate airdrop events.

Vet every project, ensure they have a working prototype at the very least, and look like a real business. The best crypto projects to partake of their airdrops are those that have real world applications, a transparent management team and are actually working towards the fulfilment of their goals.

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