What Is an Airdrop & Why Is It Important?
By: Fst Network
Tags: Blockchain, Airdrop, Eos, Ethereum, Bitcoin

What is an airdrop?

There are few words more exciting in life than the word “free”. When it comes to cryptocurrency, one of the primary ways to get free coins is through airdrops. Simply defined, an airdrop is the giving away of free tokens to cryptocurrency enthusiasts, and is used primarily for marketing purposes by companies to drive awareness for their coin.

Airdrops are typically delivered in one of two ways. The first is through a surprise airdrop, where certain individuals are given tokens in their wallet without knowing in advance. The second is a promotional airdrop, where companies generate attention for their coins by letting users know they will be giving away a finite amount of coins to a lucky few. The latter is typically announced on Twitter or on Telegram, the preferred mode of communication for blockchain startups.

Why perform an airdrop?

There are a handful of reasons why you could benefit from performing an airdrop, most of which center around helping your token stand out given the sheer volume of coins you’re competing against on the Ethereum blockchain alone.

Marketing: By dropping free tokens into people’s wallets, you’ll drum up attention for your coin you may not have had otherwise. Additionally, because crypto is such a tight-knit community, news tends to spread like wildfire thanks to platforms like niche blogs, YouTube channels, newsletters, Steemit, subreddits and more. This makes word-of-mouth marketing a more attainable goal for blockchain startups than it is for other industries.

There are also some external variables at play here that should lead you to invest in airdrops. The main one being Facebook recently calling for a strict ban on the advertising of ICOs on their platform, and other social media networks are bound to follow Zuckerberg’s lead. This limits the number of marketing outlets available to those launching their tokens, making airdrops a hotter commodity than ever before.

Driving Up The Value of Your Coin: Because airdrops lead to a spike in the number of people with your token, it’s only natural for the value of your token to rise as a result no matter if you’re a new company or an established one. Within their airdrops, many companies give out free tokens in proportion to the number of coins a user already owns, causing a spike in the number of coins bought overall.

Rewarding Your Most Loyal Supporters: Airdrops also perform the function of rewarding the people who support you most. Whether the person was an early adopter and holds a large sum of your tokens or if they simply follow you religiously on social media, giving away free tokens is a terrific way for you to build brand loyalty.

How to Perform an Airdrop With FundersToken

Whether you’re a Funder or a business that’s been tokenized using our platform, airdrops can provide you with an enormous benefit when used strategically. Here’s how to get started.

As a Funder: As a Funder, to be eligible to receive any sort of ERC20 tokens through an airdrop on the Ethereum blockchain, you must have an active Ethereum wallet and hold ETH. You should also follow FundersToken’s Telegram channel and Twitter account for live updates on airdrops and much more.

As a FundersToken User: In order to create airdrops for your own business that has been tokenized using FundersToken, all you need to do is to click on the CRM toolsets within our tokenisation platform, select Airdrop, insert the parameters for your airdrop and done. Simple isn’t it? You can also visit the Developer’s Resources on the FundersToken website to get started. From there, the way you promote and conduct your airdrop is completely up to you. Will you give away tokens in proportion to everyone who already holds your coin, or will the tokens be given away at random to drive curiosity and awareness?

Use Cases For Airdrops

While airdrops can benefit companies at any stage of development, there do exist some use cases where they have worked particularly well. For instance, Omisego (OMG) gave away 0.75 OMG tokens for every 1 ETH airdrop participants held in their wallet. This helped to secure the company as one of the top 30 coins based on total market cap. If you’re in a similar position at your company, then consider taking advantage of airdrops.

A Word of Caution

As with everything in business, there are also some caveats you’ll want to consider when it comes to airdrops, whether you’re a user looking to obtain free tokens or a company trying to give them away. This is mainly because of unscrupulous characters using airdrops as a front to hack into people’s wallets. As a best practice, never give away your personal information when signing up for an airdrop, always be sure you own the keys to a secure wallet, and do your research to be absolutely certain the company conducting the airdrop is who they say they are.

From the perspective of a company, there are also a couple things to keep in mind before diving headfirst into airdrops. The first is being aware that airdrops have recently come under government scrutiny, so be extra careful when it comes to knowing the rules and legalities. The next is being cautious of using airdrops to artificially drive up the value of your coin, which has ended disastrously for some companies. For example, an airdrop initially drove up the value of NXT tokens to 6-times more than they originally were worth, only to have it tank considerably soon thereafter.

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With FundersToken and other forward-thinking startups, mainstream adoption of blockchain technology will become more seamless and simple than ever before. While this will lead to an unprecedented amount of benefits for entrepreneurs of all types to take advantage of the technology, it will also inevitably cause the landscape to become crowded than it has been in the past. One of the simplest ways to rise above the competition you’ll be up against is by taking advantages of airdrops. Thanks for reading.

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