Want free crypto coins? The new method of airdropping seems like a win-win scenario for both developers and users, but what are the true intentions and consequences of offering free cryptocurrency?
What is airdropping?
If you already own well-established coins like Bitcoin and Neo, then you might get a surprise in your account to opt into a new currency created by the same developers or offshoots of their blockchains. Yes, new currencies are “dropping” from the sky for free. This may sound too good to be true, but let’s take a closer look at why these coins are being offered at no cost to determine if it is a scam that gets buyers’ hopes up or an opportunity to invest in a new thriving coin.
If you have ever signed up for a promotional subscription or received a marketing product with a company’s name on it then you know that there is a reason for the hand out other than the company is kind-hearted. Brand awareness is essential for growth and when you give something for nothing your awareness shoots sky high.
When it comes to the crypto-world, digital hand outs are even cheaper than a free t-shirt. There are no physical production costs, and with a coin holder’s email list of an existing coin already in hand, no scouting is necessary for potential cliental.
So, the user gets free coins and the new coin gets noticed very quickly. Sounds harmless.
Replace difficult ICO process
Another motivating force behind airdropping is the ability to get funded. Even if the blockchain’s technology is proven innovative, finding investors for ICOs (initial coin offerings) is challenging for new currencies. Many investors limit their risk by buying ICOs from already developed coins like Bitcoin since ICOs get a piece of the coin’s market and access to their platform.
This is bad news for smaller blockchains that have great ideas but can’t afford to implement them. By using airdropping, up-and-coming currencies can increase adoption of their coin without relying on investors to pay for them. There are not many users who refuse a free coin.
On the positive side, this brings new competition to the field, but it also welcomes uncreditable blockchains to get adopted without the collateral backup.
Boost current coin market
An underlying incentive for existing coins, is that developers may introduce a new coin just to drive up the price of the old one. If word gets out, for instance, with Bitcoin Cash, that anyone who owns X amount of Bitcoin will receive free Bitcoin Cash, then the price of Bitcoin will increase as people buy it just for the free coins. This was similar to the fork offering used when Bitcoin split to from Bitcoin Cash and drove up investment for Bitcoin.
This may be a deceiving way to increase profit without offering real opportunity to the user, especially if the new coin is dropped shortly after.
Scam or Opportunity?
Like every aspect of cryptocurrencies, there are frauds and there are innovators. This new marketing technique can be abused by people hoping to make a quick buck without investing in their own coin’s potential. This can lead to coins raining from the sky, creating a quantity of coins with little quality. Investors kept these cheap coins from becoming mainstream, but they also kept out promising blockchains. Existing coins may seem trustworthy, but they can also have ulterior motives for profit.
It seems that the only way to avoid the scam without missing out on the investment is to take the hand out and nothing more. If you own a coin and receive an offer for a free new coin, there is no harm or fail if you accept it. But, when unknown coins start draining into your inbox, you better bring an umbrella.