Lock Your ETH And Get Free Crypto? ‘Lockdrop’ is a New Twist On Airdrops by Commonwealth Attracting Investors
Commonwealth, a startup company focused on crypto governance, had a novel idea, to twist how airdrops work in order to attract more investors. Now, the company was able to raise $2 million USD from a group of investors which included Canaan Partners, 1confirmation and Ryan Zurrer, a former partner of Polychain.
As reported by the crypto media outlet Coindesk, the practice is called “lockdrop”. The idea behind the lockdrops is that they are able to maintain the level of interest high in the assets at the same time that they attract the right investors.
The founder of the company, Dillon Chen, has told the crypto media that early active communities are very important for the development of the ecosystem as they are the ones who create the norms that will be followed later.
How did the company draw the interest of these investors, then? 1confirmatin already invested in several crypto companies including Coinbase, so it is expected that they would do it now, however, Canaan is an older VC fund which has not invested in cryptos until recently.
The company’s first investment in this market was in Forte, a blockchain and gaming startup, and then in Skale Labs, which also uses the blockchain.
What actually attracted these companies in Commonwealth is that the company has a new idea for governance. It recognizes its importance and the fact that people value things more when they pay for it, as there is a solid value attached to them.
What Are The Lockdrops?
Lockdrops were a concept that was created by this company because they do not want investors who are only looking for crypto candy. The product of the company, the EDG token, is a governance and utility token for the Edgeware, which was already created by Commonwealth.
According to Chen, the Edgeware network will be used as a smart contract layer for Polkadot, the upcoming ETH solution created by Parity. Polkadot is focused on making the Ethereum network more interoperable.
ETH holders who decide to participate in the lockdrop will help in the security of the network, as a kind of a sidechain, according to Chen. The technology will run alongside with Edgeware and Polkadot.
The company has affirmed that the genesis block of Edgeware will be able to create a total of 5 billion EDG tokens. 90% of these new tokens will be distributed during the lockdrop and then new tokens will be emitted at a fixed rate as the blocks are mined.
To get the EDG, people will have to use their ETH. The more ETH they got and are willing to hold, the more EDG they will get. The idea is that you will get your ETH back later, so all that you have to do is to basically lock it in order to get the tokens. You are not really spending the tokens by doing this.
Basically, people will be able to choose whether they want to lock their money for only three months, half a year or then a whole year. The more money they lock for more time, the more lucrative it will be for them, so they have an incentive to lock a large amount of money for a long time. For instance, if you use 1 ETH, you will get a share for three months, 1.1 shares for six and then 1.4 for a year.
You could also decide to just signal the smart contract without locking your ETH. This would give you 0.6 shares, but you will have to wait a whole year for them.
Also, if more people will participate, they will get less money. As the company has no idea how much people will actually be a part of the ecosystem, in the end, they can only speculate so far.
Why locking the tokens? Because it will turn these people into an active part of the community. They will have a monetary interest in the ecosystem, so they will care about it. Instead of just giving people money, they are asking them to commit to this network.
The first lockdrop is set to happen on June 1. People will have until June 15 to decide how they will participate, after that, the participation will be closed up.
Prepared For The Future
According to the company, the team is ready for the future. They have looked at the crypto community very closely and decided which governance problems are the most common ones. For instance, the network will go live with a native voting mechanism already implemented, so that they will not have to create one later.
Several projects were made to be built around Edgeware, too, including an encrypted email platform. Chen wants the platform to complement both Ethereum and Polkadot and to create a live community that will be the basis of this ecosystem.