What Is an Initial Coin Airdrop?

The world of cryptocurrency has seen various trends over the years. Faucets used to be a big thing, followed by airdrops, crowdsales, and now ICOs. Even the latter business model is undergoing some changes, as initial coin “airdrops” – or ICAs – are all the rage, by the look of things.

The Purpose of an Initial Coin Airdrop

As the name somewhat suggests, an initial coin airdrop is not the same as an initial coin offering. While the latter concept has grown increasingly popular over the past few months, it is evident the industry is also under a lot of regulatory pressure. Whether issued tokens can be seen as securities or not is a big question. This is part of the reason why the SEC is cracking down on this particular industry as of right now, and in an aggressive fashion as well.

Interestingly, we’ve seen a fair few projects try to create excitement around a similar business model. Known as Initial Coin Airdrops, the currencies themselves are still created out of thin air. This can be done through a hard fork of an existing currency, or simply by developing a new blockchain, snapshotting a different currency’s ledger and wallet balances, and sending tokens from the Genesis block to these addresses automatically. Airdrops are becoming more and more common where hard forks are concerned, which makes them interesting to keep an eye on.

In a way, one could say these initial coin airdrops are designed to make people hold onto their pre-existing coins for longer periods of time. After all, Bitcoin and Ethereum holders have received multiple airdrops over the past 12 months, which is pretty interesting. Unless one has BTC or ETH in their wallet at the time of an airdrop, those coins will not be received. For instance, when the Bitcoin Cash fork happened, all those with BTC in their eligible wallets received an equal amount of BCH. Those who did not own Bitcoin at that time received nothing.

The main reason why the concept of an initial coin airdrop seems to work is because it helps create value in the cryptocurrency ecosystem. Users who receive these “free tokens” are usually looking for ways to get value out of their gift as soon as possible. That is much easier said than done, as not all initial coin airdrops are equal by any means. Just because you receive free tokens doesn’t mean that token will ever amount to anything in the long run.

It is evident that we will see more initial coin airdrops in the future. In terms of mass adoption, this method is a lot better than the normal process of creating a new coin and expecting people to download the associated wallet software. With an initial coin airdrop, tokens can be sent to people’s existing wallets, which brings a lot more convenience to the table in general. While that doesn’t mean all initial coin airdrops will have valuable tokens, it is an interesting approach regardless.

At the same time, one could argue the concept of a cryptocurrency airdrop is getting abused a bit. In the past, an airdrop was something unique to look forward to, but that is no longer the case as of right now. Instead, there are calendars out there keeping tabs on when these initial coin airdrops occur. This lets speculators buy up the associated currencies eligible for free tokens and then crash the market once the airdrop is over. It will be interesting to see how this industry evolves, as not everyone is in favor of this method.