Can Airdrops Kill A Project?

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steemychicken14.6 K2 years ago2 min read

Yesterday, the team behind OP announced that they will conduct a third round of airdrops for those who participated in the proposal votings and the overall governance of the network. This made me think about the past year when we experienced four major token airdrops from some of the most anticipated projects out there: Aptos, Arbitrum, Sui, and Sei. Out of these four projects, two were profitable for me.

However, the thought that was nagging me was that when they airdrop free tokens, it creates significant selling pressure, especially in a bear market, which can cause the token's price to plummet even further.

Sei Network
#sei

Arbitrum One
#arb

Aptos
#apt

Sui Network
#sui

So, from a business perspective, how wise is this decision?

Pros

Marketing and Hype: Airdrops can generate hype and excitement around the project, attracting attention from the crypto community and media. After the Aptos airdrop all new projects flooded with new users in hope of a new airdrop that could give the free money.
Engagement: It can encourage early engagement with the project, as recipients may explore the project's features, participate in discussions, and provide feedback. And early users have to get some rewards to do so.

Cons

Speculation: Airdrops can attract speculators who are only interested in short-term gains and may not contribute to the project's long-term success.
Costs: Airdropping tokens can be costly, as it involves giving away valuable assets.
Selling pressure: Most of the people that receives the airdrop they instant sell their allocation because it is free money and the experience showed that 99% they will be able to buy back their allocation at a discount and make some nice profits.

The conclusion is that It can be effective in certain situations, especially for projects aiming to build a broad and engaged user base quickly. However, it should be part of a broader marketing and community-building strategy and not relied upon as the sole means of achieving success.
Airdrops alone cannot guarantee the long-term viability or success of a project but if not done correctly they can kill the token price on it's initial listing.