The influx of investors into the cryptocurrency industry has given rise to various new forms of investment. As more blockchain projects began to emerge and offered their digital coins for sale on the market, the idea of investing in them gained more popularity. Unfortunately, despite the current rate of the industry’s development, adoption is slow and the competition to get the attention of investors is tough. As a result, some projects struggle to achieve their soft cap.
To bypass this issue and outperform competitors, blockchain companies must evolve and come up with more creative ways to sell their tokens. There are two main ways that these projects offer their tokens:
WHAT IS AN AIRDROP VS. ICOS?
Since the beginning of 2017, there has been a substantial increase in Initial Coin Offerings (ICO) within the crypto space. Although 2018 is not over, there have been more ICOs during the year than in the whole of 2017. Although ICOs are a great way to offer up coins for sale, many projects find airdrops to be a more efficient way to achieve this. One example is OmiseGO which airdropped its tokens in 2017, to users who were already holders of Ethereum tokens.
A coin airdrop involves the free distribution of digital tokens to users of a particular asset who sign up within a specific time frame. One major reason why airdrops are preferred to ICOs is the current investigation of the latter by the SEC.
Due to the recent scams in the industry, authorities have been conducting investigations to determine whether ICOs can be classified as securities. If they are indeed classified as such, they may face the possibility of strict regulation. While this is great for investor security, it puts restrictions on so many projects. To avoid this scrutiny, developer teams prefer the airdrop route.
There are several reasons why a project may choose an airdrop over an ICO:
THE PROBLEM WITH AIRDROPS
When combined, all the reasons why airdrops are carried out tend towards one single aim: to build a community around a token and encourage participation. The general belief is that users are more likely to continue spending and buying such tokens because they acquired them for free. However, the opposite is the case: users simply accumulate free tokens without spending them.
This creates an artificial shortage of that cryptocurrency on the open market and may have negative effects on it in both the long and short term. These effects include price issues and a breakdown of unity within the community. This, in turn, leads to several more problems associated with airdrops:
The issues associated with airdrops have been around for a long time. However, a new and more efficient type of this process, known as a smartdrop is gaining popularity in the industry.
WHAT ARE SMARTDROPS?
Smartdrops are a form of airdrop which allows companies to transfer tokens to a target group of users based on a set of predetermined criteria. The model was proposed by Esteban Castano and Rahul Raina to tackle the many shortcomings of airdrops.
Both founders believe in the potential of ICOs and airdrops to jumpstart long-term growth through token distribution to a wide range of people. They also believe that both methods have been unsuccessful mainly due to the fact that most people do not use their tokens. This problem can be solved by using the Smartdrops platform to transfer tokens to the users who are most likely to spend them and promote community growth.
The SmartDrops platform by TRM labs gives blockchain projects the chance to effectively distribute their digital tokens to a wide audience. For example, Dfinity, a blockchain project announced its plans to airdrop $35 million worth of its tokens using smartdrops to users who pass an anti-money laundering (AML) and know-your-customer (KYC) verification process.
The system saves time and money since its design is geared towards ease-of-use and each smartdrop takes less than 5 minutes to launch. The platform also automatically verifies user accounts, taking the burden off the project developers. Blockchain projects are provided with analytical tools on the platform to help them analyze token performance and gather feedback. Its security system also blocks bot and spam accounts from corrupting the process.
Smartdrops are a growing trend in the cryptocurrency industry, and as the terrain becomes more competitive, companies are finding better ways to handle token distribution. While airdrops have been good, their complications far outweigh the positive results they provide. Smartdrops make the process of token transference more automated, cheaper and easier.
It is also great for community building which is the major aim of most blockchain projects at this point. However, as the industry continues to develop at a fast rate, better solutions emerge. While the problems associated with Smartdrops are still being discovered, an even better process may be developed. As long as the goals of token transference are not met, there will always be attempts at a better solution.
This article was originally posted at Mintdice.com