How Companies Profit From Crypto Airdrops

Cryptocurrencies are gaining momentum with each passing day. In a decade, what started with bitcoin, today comprises of more than 5000 different types of cryptocurrencies. Over the years, the whole industry has created its systems for fundraising, marketing, and business operations. One such unique practice that has attained popularity is the crypto airdrops.

What are Crypto Airdrops?

The cryptocurrency market is valued at billions of dollars today. The number of projects and startups based on blockchain technology is expanding each day. This growing number of ventures have made it difficult to showcase the individual project among the thousands. Hence, a unique technique of airdrops was developed to get the crypto community to notice their token.

Airdrops, specific to the crypto industry, is a mechanism through which a company distributes its tokens for free. It directly drops them into the digital wallets of thousands of potential users literally ‘free of cost’. These tokens are usually distributed to users who meet specific required criteria such as holding a particular cryptocurrency like bitcoin for a more extended period.

The first question that jumps to a reader’s mind is, why would any company distribute tokens, in some cases that are worth millions of dollars, absolutely free? While the tokens are free for users, the company does stand to benefit in several ways. Let’s look at the advantages that a startup has with crypto airdrops.

Increase in user base

Most of the airdrops that a user signs up for requires performing specific tasks. These may include filling up a google sheet, subscribing to their social media channels, retweeting or sharing, etc.

All these tasks are aimed at increasing the user base and eventually get more people interested in the project. The airdrop is a unique technique aimed at broadening the user base at a primary stage.

Generating awareness

The crypto industry does implement its tools, and airdrops are a notable marketing technique. Receiving free tokens in the wallet will get users to search or notice the token. This, in turn, generated awareness about the token. It also drives attention in the crypto community and hence promotes the token along with the project.

Diversifying users

Another advantage of airdrops is that it can be a tool to diversify a token’s user base. By distributing the tokens to a wider audience ensures that the token is not held by a few centralised founders of the project. Centralisation of any token means that it can be controlled by a few entities, thereby creating a negative impression. Furthermore, distributing the native tokens would also result in a stronger token user base at the initial phase.

Increase in liquidity

Airdrops are an effective way to increase the user-base of any token. As the user-base increases, so does the liquidity of that token. The more the users, the more the buyers and sellers of that particular token. As the liquidity increases, it can improve the chances of listing their token on an exchange through Initial Exchange Offering.

Rewarding loyal users

Another benefit of an airdrop is that it is a method used for rewarding loyal users. It is a means to encourage loyal users to keep holding their token instead of selling it on exchanges. Moreover, it is also used to show appreciation for holding a particular cryptocurrency for a longer time frame.

Targeting direct users

Most of the times, airdrops are dropped into the wallets of the users who have already been holding a particular cryptocurrency. Hence, airdrops directly target users who are familiar with the concept of cryptocurrency. This ensures that the company is building its user base who are genuine buyers of the industry.

Final thoughts

Over the years, airdrop has become a useful technique for getting a token to standout among the thousands of tokens available on the market. Moreover, they are more than a mere promotional or marketing approach. Airdrops benefit the users as well as the company that distributes these tokens. However, also keep in mind that there will always be scammers looking to find their next victim. Hence, always perform your research.

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Recommended reading

If you enjoyed this post and have a little extra time to dive deeper down the rabbit hole, why not check out the following posts on blockchain and cryptocurrency.

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Tags: Cryptocurrency , Blockchain , Guest Post