Free money is something that comes to mind when you think about high-risk, high-yielding investments such as ICOs but in fact free money do exist. And for a good purpose. There are several benefits for crypto startups to distribute a portion of their coins in an airdrop for free before the beginning of the official token sale or even a pre-sale. There are two main benefits of doing a cryptocurrency airdrop:
1. Tokens are distributed across many wallets which increases their value in the market, so the more people own them, even for free, the wider is the adoption and the more useful the coins become. Tokens can be used in the newly launched platform or traded in the cryptocurrency exchange. Offering free tokens that end up in as many wallets as possible creates a strong army of early adopters, the ones that can become potential users of the platform or a solution. Such early adoption dramatically improves its value and attractiveness to ICO investors.
2. Free token distributions lead to increased awareness of the startup and their solution. The solution is becoming popular even before the coin sale event. People usually receive coins for their activities in social media as they help spread the word and create hype and buzz about the new cryptocurrency and the upcoming token sale event.
Unlike “buy one get one free” promotional activities in the traditional commerce, airdrop doesn’t come with numerous stipulations where and how the tokens may be used. The terms and conditions are usually easy to understand. In order to qualify for a free coin via airdrop the user must already be a holder of several tokens in this cryptocurrency.
Joining the event is also easy: once you learn about the airdrop, you fill in a simple questionnaire, provide details of your Ethereum or Bitcoin Cash address and you receive new shiny coins a few days later. Some events are done via posts in forums or social media. Other blockchains can also be used, but Ethereum remains the most popular with airdrop organizers because the majority of ICOs are launched on this platform.
This way the company creates a viral effect on their new offering and the rumor of the cryptocurrency event is carried out by the army of early supporters. Among other reasons for carrying the airdrop sale is rewarding loyal customers who now have even larger portion of tokens to spend on the platform or trade in the cryptocurrency market.
Compared to the traditional investment when the public, private or other forms of the sale of company shares is limited only to the institutional or professional investors, the airdrop even democratizes the whole investment process so that everyone has a chance to own a token that can become a new Ether one day. Airdrop can lead to massive adoption of the solution even before it has been built. By offering free coins the project brings more people than a traditional media campaign could, and the costs comparison is in favor of the airdrop.
While it’s tempting to offer as many tokens as possible via an airdrop, the company allocates only a small portion of coins before the big event. This is done to maintain their value and attractiveness to investors. While during an actual ICO event tokens are sold to a relatively small group of investors, not more than 50 thousand of them in a case of a successful event, the airdrop widens the user base massively. When done right, tokens can land in wallets of millions of users. They will be interested in learning more about the project and spread the word around. Even if only 2 percent begin using these tokens on your platform, the conversion rate would be very encouraging. By offering free coins (remember, tokens are not costing the company anything before the ICO and even before the solution has been built) the clever startup reaches a large audience without investing a fortune in marketing. That’s why some companies choose to distribute as much as 80 percent and more tokens via the airdrop, leaving a small portion “in-house” to finance the future development needs.
Increasing the follower base, creating a community and building brand awareness are strong benefits of a successful airdrop that can lead to a fruitful ICO event. Those who receive tokens that are perceived as a share in the company will become much more dedicated users and evangelists. Some airdrops allow their loyal users to suggest solution features and participate in its design.
Another attractive attribute of airdrops is that they are not raising any red flags in eyes of finance authorities. Technically speaking, the startup is rewarding its early followers with freebies, as there is no movement of cash involved. So until the project reaches the phase where it generates profit, airdrops can be done at the company’s will.
As with all cryptocurrency investments, participating in activities such as airdrops should be done with caution. Make sure to choose the most technologically viable solution and investigate the team behind it with the same scrutiny as you would do when paying cash for these tokens. After the ICO, successful or not, many crypto investors tend to continue buying the currency that they have obtained for free. This strategy diminishes the risk. Others like to diversify their portfolios with new coins and balance the risk. Startup are aware of these tendencies, and the area of growth for airdrop could awarding free tokens to those early supporters who hold tokens in similar projects, and that can be combined for a synergistic effect. Some projects can even join forces and co-promote their token events by offering free coins at the same time, which effectively doubles the already large follower base for each project.
When your investment portfolio grows, you will gain experience and will confidently pick new coins to receive profit in the future. Remain vigilant when collecting free money because as this method of marketing gains popularity so does the number of con artists trying to steal your private keys or steal your coins through scam websites.