During the ICO boom in 2017, the craze for airdrops also took off. It seemed like almost every project would give away tokens in exchange for a follow on Twitter or an upvote on Reddit. Even though the craze has died down, airdrops are still regularly used as a marketing tactic. Tron is one of the most recent examples, and perhaps one of the most exuberant. All Tron token holders will receive a monthly airdrop of BitTorrent tokens (BTT) for the next six years.
Airdrops are a win-win, so the story goes. The project drums up support among a community of users who’ll be invested from an early stage. Naturally, these early adopters will recommend the product to their friends.
So, the token value just keeps going up due to demand from this hypothetical growing crowd of eager users. The original group of users who got their tokens for free can now sell them at a grand profit. Everyone’s a winner, right?
Where Airdrops Fail:
The method of a straightforward token airdrop to inspire a loyal user base doesn’t really work. A report from Harvard Business Review found that companies that give away short-term rewards to their customers don’t inspire loyalty. The airdrop is nothing if not a short-term reward.
So how does it play out? The airdrop recipient will either sell or HODL the token. If they sell, the token value goes down. If they HODL, it’s not going to change the token price either way. The token price doesn’t necessarily attract users of the project.
Furthermore, unconditional free token giveaways, especially on a grand scale, only serve to devalue the token. Perhaps this isn’t immediately evident in the token price but consider this. Would you hand over money today for something that you saw someone gets for free yesterday?
Over the last few years, the crypto markets have evolved. The ICO boom died down, and now, security token offerings (STOs) and initial exchange offerings (IEOs) are gaining traction. The airdrop, itself a product of the ICO hype, is long overdue an update too. Like any company, projects want to find a way to inspire and maintain loyal users and using the native token to do that makes sense. Enter the AirHODL.
To Have and to AirHODL:
The AirHODL is a much-needed refresh of the traditional airdrop model that aims to overcome the challenges outlined above. The AirHODL has been developed by LiquidApps, and it incorporates a vesting period into the airdrop concept.
LiquidApps operates solutions to help EOS become more accessible and scalable, so the AirHODL mechanism is linked to EOS. When the EOS blockchain reaches a specified block number, all accounts holding EOS will be identified as “pioneer holders.” This group will receive airdropped LiquidApps DAPP tokens, matching up to a maximum of 3 million EOS per account. Fifty percent of these tokens will be locked for two years, after which they will vest and become freely traceable.
During the two year period, those with unvested tokens will have the opportunity to stake them in LiquidApps DAPP network without penalty. However, if they choose to sell their DAPP tokens, they won’t be eligible to receive the 50% match offered as part of the vesting arrangement. Those unvested tokens will be redistributed to the remaining pioneer holders.
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Why the AirHODL Provides a Better Incentive?
The AirHODL has some similarities with the way that companies operate employee share plans. The vesting period provides an incentive for the individual to hold onto their unvested tokens, as they’ll double in value in the end.
LiquidApps has also been canny in allowing those with unvested tokens to contribute value to the LiquidApps network. It ensures that if the tokens are used during the vesting period, it’s only to provide value to the network as a whole, not to one individual. It also sends a powerful message to token holders that the company is sustainable and has a long-term vision.
It’s also worth mentioning that the AirHODL works for LiquidApps because the company already has an operational product up and running. The company launched the DAPP Network and DAPP token earlier this year. It now has several EOS stakeholders operating on the DAPP Network as DAPP Service Providers (DSPs).
This means that DAPP token holders can realize the utility of the token, as well as benefit from any potential uptick in the token value. The AirHODL would have been impossible for many of the companies that were airdropping their tokens during the 2017/2018 ICO boom as token utility is an integral part of the model, not just a marketing spiel.
The tech world is full of innovators. As with the evolution of the ICO into the STO and IEO, it was inevitable that founders would find a way to build on the foundations of the airdrop. Now that LiquidApps has started, perhaps others will follow with their own ideas on how to better align the incentives of the airdrop.