As we gear up for the next edition of Token Mania, one of the key issues to quantify are token airdrops and forks. While ICOs are still good for fund-raising, they are becoming less democratic as investment moves from crowdfunding towards large private pre-sales. So instead of a community-backed token, companies end up essentially raising a token version of early stage financing from venture capital. Airdrops, however, are a way of driving project growth and adoption without asking users to pay for access, or to prefund development. The model is reversed – the project may already be funded, and the team is distributing value to the community to incentivize adoption.
While there's nothing new about sign-up bonuses (e.g., $100 to open a bank account), this particular version of internet growth-hacking is quite different. First, some ICOs are reserving 5-10% of their raise to distribute back out to the community, compared to 0.50% per ICO advisor, or 1% for ICO law firms. Markets see this as a legitimate incentive because many investors value protocols on a ratio of Market Value to Transactions. This means that the more transactions within a network, the higher the relative price of the token. For example, EOS surged 45% in anticipation of a planned drop. And second, the application of a growth hacking to airdrops can tie "free" tokens to bounty tasks, like following a Twitter account, joining a Telegram group, or downloading a crypto wallet. An example of this is that people who signed up for the Ontology newsletter (project on the NEO blockchain) had received tokens which are now worth nearly $10,000. The biggest enabler of this growth hacking is Earn.com, a recent $120mm+ acquisition by Coinbase and driver of much crypto community theater.
It's hard to find good data, but we were able to parse yourfreecrypto.com (so take this with a grain of salt). You can see in the chart past and planned airdrops by month. The rising tide signals that projects are in the mode of buying community, now that they've raised assets to fund development. Oddly enough, the projects want community before their software is finished -- perhaps to put pressure on exchanges to list the token, or to financially engineer positive sentiment and demand.
Two adjacent issues are worth mentioning – (1) taxation and (2) forks. Airdrops could be interpreted to be income, and taxed as such. You are receiving some value with a cost basis of $0, so watch out. And from a structural perspective, airdrops and forks both resemble dividends in some form. We had predicted 50 Bitcoin forks in 2018, which probably won't be far from the truth. Regulation, or at least economic normalization, of such financial engineering to remove scammy behavior is still desperately needed in our view. Too many opportunists are giving away free magic beans, persuading people those beans will grow, and then walking away with capital gains and no positive impact on the world.