Airdrops are better ICOs

Zbigniew Lukasiak
May 5, 2018 · 2 min read

I keep repeating that there are numerous problems with ICOs, but there still can be an economic niche for them. Many of the problems can be alleviated by using airdrops instead of ICOs. In crypto parlance airdrop is distributing a coin widely to all holders of a base currency (usually proportionally to their holding). For example OmiseGo tokens were distributed to ETH holders at a certain point in time (or more precisely on the blockchain). The founders retain a part of the whole supply and later exchange it into hard cash to pay their bills. In a way forks are a special case of airdrops — every holder of the base currency gets a free new coin, but their founders usually don’t get any funding from it.

This model is much better at aligning the incentives of founders and investors. The founders don’t get hard cash at the start — cutting off both many scam possibilities and the danger of infights over the control of the money mountains (like in the Tezos case) and also giving the market some control over the whole lifetime of the project. In theory founders could try to sell everything at once — but this would be too visible and obviously running against the very idea of airdrop so nobody would buy their coins. Instead they need to sell it gradually while completing their work. It is the progress of their work that keeps the valuation of the coin high.

And there is one more thing: ICOs are reusing old funding models for the new crypto markets and after repeating old mistakes and then fixing them they probably won’t end much different from IPOs — Airdrops are a radical innovation with no analogue in the old markets.

Update: Also see https://ethresear.ch/t/explanation-of-daicos/465