Crypto PR essentials — token airdrops

Originally featured on VentureBeat

Token airdrops seem to be a thing in crypto PR right now. An airdrop is basically when a blockchain project decides to distribute free tokens, or coins, to the community. This happens after their ICO is completed and the token has become tradeable on the open market.

In most cases, to be eligible as recipient of an airdrop the only requirement is that you have some Ether stored in your wallet. You need to be keeping your coins somewhere that has you in control of your own private keys, i.e. not on an exchange (which there really aren’t any good reasons for doing anyway, unless you’re using the coins for trading).

The format of these giveaways is usually like this: At a pre-announced point in time the project behind the event will take a ‘snapshot’ of the blockchain, and anyone holding Ether at that point will receive an equal amount of free tokens. Or they have some formula where holding X amount of Ether gets you Y amount of their token.

One company with an upcoming airdrop, and the first one on Ethereum, is Omise (who became the first Ethereum unicorn with a market cap of $1 billion this week). This week they will be giving away 5 percent of the total amount of their token, OmiseGO. Any wallet address that held a balance over a minimum threshold of 0.1 Ether at the point of their snapshot, which was over 450.000 addresses, will receive a share of this 5 percent that is proportionate to their share of Ether.

Blockchain projects SingularDTV and Golem have announced they will re-airdrop the OmiseGO tokens, meaning they will distribute the tokens back to their respective token holders. More companies will probably do the same.

There are also organizations, like the Blockchain Education Network, who organize airdrop events to raise awareness on cryptocurrencies in general. Events like this are a great way to increase adoption and introduce new people to the concept of cryptocurrencies, while the Omise approach works for companies and projects who want to ensure a wide distribution of their coins, among people already ‘in the know’. Omise stated, this is their way of ‘rewarding participants and supporters and increasing the usage of ERC20 tokens which will further reinforce trust between investors, developers, and miners’.

The mood I’m picking up from the Ethereum community is that the gesture is appreciated and a nice way to say ‘thank you’ to all those investors speculators who couldn’t get in on their ICO.

When something is free you’re the product

Now, companies obviously don’t do airdrops just because they’re such nice guys. It’s all part of an elegant PR plan, which ultimately will lead to an increase in token value. In addition to an airdrop being free advertisement, it connects people already in the crypto community to your project, and gives everyone the same incentive — token price appreciation.

The Endowment effect suggests that individuals value something higher just because they own it. In the case of OmiseGO, there will suddenly be half a milion people who see OmiseGO as more valuable than other tokens simply because it was dropped into their wallets. Many will also keep on accumulating now that they already feel like investors. Basic tendencies towards risk aversion, hoarding and completionism probably also comes into play, with some being tempted to buy more OmiseGO to achieve round numbers, and increasing their current stack instead of diversifying further with new tokens they don’t know and thus consider to have higher risk.

Looking forward, possible airdrop developments could be projects starting to gift tokens to users who hold tokens in projects that overlap or have some synergy with their own. We could also see projects encouraging other projects to airdrop to their token owners and receiving some benefit in return.

If you are an investor holding a diverse portfolio of coins you are likely to be receiving more and more free money as this concept keeps gaining popularity.

And as always when venturing into cryptoland, beware of scam airdrops trying to steal your coins. Never give out your private keys or wallet file or click suspicious links.

Now go check your wallet, there might be some coins there you didn’t know about from a previous airdrop.