Blockchain marketing has many things in common with traditional digital marketing, but it does some things differently. ICO bounties and token airdrops are two types of blockchain marketing for which there is no obvious corollary in the rest of the marketing world.

With ICO bounties, people sign up to perform specific tasks in exchange for receiving a token bounty in the form of crypto tokens. With airdrops, people simply submit their wallet address and receive tokens from new crypto instruments.

While many airdrops do not place any constraints on what recipients do with their tokens, some do. They may, for example, require that recipients hold the token for a specified length of time before selling it. As you may expect, token airdrops as a blockchain marketing tool have advantages and disadvantages. Here are some of them.

Token Airdrops: Pros

For recipients, the main advantage of token airdrops is that they’re fun; who doesn’t like receiving the equivalent of free money, especially when it may increase in value? Airdrops are also terrific ways for token issuers to build loyalty and spread their coin to a wider user base.

With airdrops, word spreads quickly, so it’s not difficult finding people to participate. The costs of marketing airdrops are low. A well-planned, well-timed token airdrop can encourage recipients to educate themselves about the token, giving them a feeling of having a real stake in the future of the token. In fact, airdrops can be excellent fundraising methods.

Token Airdrops: Cons

Deciding how many tokens to give out can be fraught. Give out too few, and your marketing and community-building impact won’t produce results. Give out too many, and you risk diluting the market value of your tokens. Last year, U Network actually ran out of tokens after an airdrop, forcing them to buy tokens back from airdrop recipients.

Man appearing surprised while looking at his laptop computer.

Another disadvantage of token airdrops is the simple fact that a lot of people who receive airdrops will turn around and sell them the moment they become tradeable, causing the value to plummet if not enough airdrop recipients hold onto their tokens. As a result, later token buyers will see the value of their investment drop, and that’s not good for loyalty.

Token Airdrops
Pros: Cons:
Great at generating “buzz” for a token project People may sell immediately, decreasing the value
People love free money Later token buyers may see their value drop
Tokens can spread to a wider user base Issue too few tokens and impact is minimal
Marketing costs are low Issue too many tokens and dilute the token value
Encourage education about a token project It’s possible to run out of tokens (U Network)
Can be successful as a fundraising method KYC and AML checks need to be done
Word spreads rapidly about airdrops Toxic users seek airdrops exclusively to sell

What About Regulatory Authorities?

Earlier this year, the Securities and Exchange Commission (SEC) issued a somewhat confusing regulatory framework surrounding digital assets. In it, the SEC said that airdrops could constitute securities, which would make them subject to securities laws, but the agency didn’t provide much clarity beyond that.

The result has been both confusion and consternation. However, securities lawyers say that first of all, the framework isn’t legally binding and second, there’s no case law, and parts of the framework are unlikely to hold up in court, if they make it that far. Still, compliance services have sprung up to help ensure that airdrops comply with known regulations.

Token airdrops are a form of blockchain marketing similar to ICO bounties. There have been enough of them that projects considering airdrops can learn from previous ones. Ultimately, it looks like airdrops can be a good blockchain marketing technique, as long as the right number of tokens are released, recipients are made to feel they have a stake in the project, and airdrop campaigns take steps to ensure they stay on the right side of existing regulations.

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