Coin And Airdrop Start-Ups Are Two Ways To Monetize Cryptocurrencies That People Can Use To Get Rich.
It Has Been More Than A Decade Since The Advent Of The First Cryptocurrency, Bitcoin, And Over The Past Ten Years, Other Blockchain Projects Have Entered The Digital World With Different Goals.
Over the past few years, investments in the cryptocurrency market have been on the rise, attracting more and more small and large investors, to the point that today in the public investment portfolio, a portion is allocated to cryptocurrencies and once again reminds of the magical power of blockchain technology.
Leaving aside the statistics, we come to the mechanisms and interpretations used by companies active in this field. Most of these companies are employing different strategies to introduce their projects to minimize Crypto addition to marketing and branding part of your Blockchain startup capital through crowdfunding ( Crowdfunding ) provide.
In this article, we intend to define the two strategies of initial public offering (ICO) and airdrop digital currency and examine the differences between these two methods along with other marginal concepts.
What is the initial public offering of digital currency?
In short, the initial public offering of a digital currency, or Initial Coin Offering, also called an ITO, is equivalent to an IPO in the stock market. In fact, startups use the ICO process to raise new ciphers or applications or provide specific services in the future, raising the capital needed to run the core project
Those interested in the project can receive a new token of tokens provided by the company by participating in the financing.
These tokens may be used to use the company’s future products or services or maybe recognized only as part of the project stock.
Some investors made huge profits in Coin’s initial public offering, But this type of investment is not always a fully guaranteed method. In the last few years, many companies have cheated or failed to carry out their project properly and ultimately wasted people’s capital.
Individuals often need to buy digital currency with their own capital to participate in ICOs and have a basic understanding of how to use digital wallets and exchanges.
The important thing about the initial public offering of digital currency is that there is no general rule about it and each company can design its own rules; Therefore, investors must complete their research very carefully and rigorously to minimize the investment risk
. Usually, the tokens that are provided to investors in the initial public offering of Crypto are functionally divided into two categories: Utility Tokens and Security Tokens.
These tokens are also known as User Tokens and App Coins, which indicate users’ access to a particular product or service in the future. In fact, startups raise the funds they need to develop a blockchain project by providing Utility tokens (application tokens or facility tokens) and ensure that users will be given special access to services in the future.
Utility tokens are not designed to be part of a company’s stock, and startups can make good use of this feature and organize it exempt from federal securities laws.
The functionality of the Utility token can be compared to the pre-sale of video games that have not yet been released and may be delayed for months.
Filecoin, for example, was a utility token that raised $ 257 million and gave users tokens that would allow them to access the company’s decentralized cloud storage services in the future.
Businesses that offer this type of token try not to use the ICO header to describe their tactics, and instead use the terms “token production event” or “token distribution event” to distinguish their programs and reassure users that There are many differences between offering securities.
Tokens that derive their value from foreign and tradable assets or may increase in value are known as Security Tokens and can be subject to federal securities laws.
Therefore, if they do not comply with the law, they will be reprimanded by the legal authorities and will often face heavy fines or may even be shut down altogether.
Once the introduced token is in the legal classification, it is also licensed for use in various applications.
Often the most common use of tokens is as a provider company stock.
For example, online retailer Overstock.com is currently using this method.
Overstock has announced that startup tZERO, a subsidiary of Overstock, will hold an ICO investment event to launch a virtual token trading platform.
TZERO tokens will comply with SEC regulations. Overstock CEO Patrick Byrne also said that holders of the tZERO token receive a portion of the revenue generated by the tZERO platform every three months.
What is Coin’s initial supply mechanism?
When a cryptocurrency startup decides to fund through an ICO, it usually submits a full report called a White Paper, which includes comprehensive information about the project, including a description of what the project is, project goals, project capital requirements, and virtual tokens.
Which the founder of the project keeps to himself, includes the duration of the ICO campaign and the accepted currency for participating in the campaign.
Also, in the White Paper document, project managers will be introduced so that users are familiar with their other activities and the validation of the project is slightly facilitated.
Investors and project sponsors who are satisfied with reading the White Paper Startup report can receive the company token offered by paying the desired amount or at least the defined amount.
If the amount of capital raised during the specified period of the campaign is equal to the capital required for the company, the company will be officially launched; But if the required amount is not provided, the startup must return the money to the investors.
It has already been said that the ICO strategy does not have uniform rules; However, the US Securities and Exchange Commission ( SEC ) is allowed to intervene in Coin’s initial public offering.
For example, in 2020, it was able to prevent the initial supply of its coins by accusing the TON project development team of illegal activities.
Telegram CEO Pavel Doroff, in partnership with his company TON project, was able to raise nearly $ 7.1 billion in capital through the ICO in 2018 and 2019; But the US Securities and Exchange Commission, with an urgent lawsuit and a one-month trial, forced the Telegram manager to pay an $ 18.5 million fine in addition to halting the project and returning $ 1.2 billion in assets.
How to participate in the initial public offering of digital currency (ICO)?
Before any serious investment venture, you need to increase your knowledge, especially in the field of digital currencies. Often in Coin initial public offerings, investors will have to buy startup tokens with common cryptocurrencies; Therefore, you will need a Crypto wallet to support transactions such as Bitcoin or ethereum. In addition, you may need another wallet to support purchased tokens and transfer your assets to them.
Where can we find the initial supply of digital currency?
There are no specific guidelines for finding the latest ICOs, and the best thing you can do to find out about Coin’s initial releases is to follow the news of various projects online.
There are also a variety of news websites about ICOs and associations active in the field that can be used to monitor the best opportunities to invest with the right credentials.
Advantages and disadvantages of Coin initial release
It is very easy for companies to set up an initial public offering. In fact, to do this, there are online services that allow you to generate custom tokens in the blink of an eye. Therefore, investors should always keep in mind that the difference between stocks and tokens is that tokens have no intrinsic value or legal guarantee.
Coin start-up organizers will generate and receive their tokens following their own ICO rules and then distribute them to investors according to a specific schedule. The first investors in the ICO process buy tokens at a very low starting price, and if the company’s plan goes ahead as expected, the value of the tokens purchased will increase.
The most important benefit of participating in Coin’s initial public offering is its large capacity for profitability.
The initial introduction of digital currency has made many people rich so far. For example, in 2017, major investors tasted success in 435 ICOs; Because an average of $ 12.7 million was collected per ICO, and in 2017, the total capital raised in the initial public offering of Coin reached $ 6.5 billion. Meanwhile, 25% of the total amount raised was allocated to only 10 major projects in 2017.
Finally, the tokens purchased at successful ICOs in 2017 each returned an average of 12.8 times the original capital to investors.
It should be noted that Kevin’s initial public offerings are often not subject to the law
Every opportunity that comes with it comes with problems and risks, and it is the choices of individuals that lead to the desired or unfavorable outcome of the opportunity.
Participation in the ICO is no exception to this rule, and taking this step requires a great deal of caution and knowledge. In fact, it is a general rule of thumb that you should consider all aspects.
Sometimes, scammers provide a breeding ground for reckless and uninformed investors, and because the hands of legitimate financial institutions are short of them, the lost assets of users will never be repaid.
China’s central bank has banned the use of tokens as currency and ordered banks to suspend any services related to the ICO process.
These measures have reduced the price of bitcoin and ethereum and made the possibility of passing more laws even stronger. China’s central bank rules overshadowed even Kevin’s initial public offerings. In 2018, Facebook, Twitter, and Google also blocked ICO-related ads.
Important points to reduce the probability of loss in investment
1. Make sure developers can describe the short-term and long-term goals of the project quite clearly. Successful ICO processes usually provide a clear, conceptual, and transparent report with specific objectives;
2. Have a brief history of developers. It does not matter how much you invest. Look at the developers through the eyes of those who are going to work for you; Therefore, you need to have a short resume of them;
3. Do not simply agree to the terms and conditions of the ICO without studying and be sure to read it;
4. The presence of an ICO fund in Escrow wallets is a good confirmation of its validity. These types of wallets require several security keys to access, and most importantly, the investor’s money is placed in the hands of a third party, which will minimize the risk of fraud;
5. One source of ICO authentication is the bitcoinTalk.org website. Most reputable projects provide a clear picture of themselves by participating in the discussions on this website and answering all users’ questions.
The emergence of STO and its difference with ICO
According to some unofficial sources, 80% of ICO campaigns were fraudulent and not only did not benefit investors; They have also lost their initial capital. It is here that laws, regulations, and legislatures come to the aid of individuals once again to seize power.
As a result, the entry of legal authorities into the field of ICO led to its reform and the formation of Security Token Offerings.
As the name STO suggests, participation in it brings more security for the investor; Because, as we mentioned earlier in the introduction of Security Token, the value of these tokens is supported by a type of basic assets such as stocks, real estate, bonds, etc., and this is the main difference with the ICO.
The STO process is overseen by the US Securities and Exchange Commission, and only companies that have gone through the legal process are allowed to initialize cryptocurrencies, and reputable individuals will be able to buy and sell security tokens.
Experts predict that STO campaigns will soon eliminate ICO campaigns and attract more people to invest in the initial public offering of securities tokens.
The future of STO
Blockchain startup Polymath, led by Trevor Koverko, is one of the companies behind the ICO idea and is now working on a decentralized protocol so that companies can provide their own Security tokens while maintaining the independence and independence of the blockchain world.
The decentralized protocol proposed by this startup is such that by checking the address of Crypto, it confirms whether the investor has the necessary conditions to invest in the initial offering of security tokens or not.
These restrictions make Crypto’s initial public offering project managers confident that the tokens were purchased by reputable and authorized investors; Therefore, securities transactions are not performed in ordinary exchanges due to the special nature of the processing method.
What is Airdrop?
Airdrop is another term that you must have come across in the world of digital currencies. We will continue the interesting discussion of AirDrop and first examine the meaning of this phrase in the words of the world of Crypto.
Then, we find out how this process works and what the conditions are for people to participate in it.
In short, AirDrop Crypto can be defined as a free token donation to users. Yes, in the world of cryptocurrencies, sometimes money falls from the virtual sky.
AirDrop is completely different from the initial public offering of digital currency (ICO), But it can be used as part of the ICO and with an effective role in the distribution and advertising phase.
Applications of AirDrop Crypto
Now the question comes to mind: “Why should the company pay for free passwords?” The chain of questions may continue and doubts about the mission and goals of the company behind the scenes will become darker.
The answer to this important question has two main parts: the first part is related to marketing strategy and the second part is related to distribution mechanism.
There are currently more than 1,900 active cryptocurrencies, and that number is constantly growing, so new tokens need to introduce themselves to as many digital currency users as possible to achieve their goals, and AirDrop has already introduced a strategy in this area. It has been effective.
This method was designed and used after blocking ICO ads on most online platforms and showed great efficiency.
Contrary to what you may think, holding an AirDrop event is not just about anonymous tokens, and even the most popular tokens use this strategy. For example, in May 2018, the Tron Foundation paid its AirDrop to ethereum User Accounts for $ 1.7 million worth of TRX tokens.
Theron is now the twentieth most valuable cryptocurrency with a market value of $ 22.10 billion. Bitcoin Cash cryptocurrencies also held $ 20 million worth of air therapy the same year.
Holding an airdrop is considered by businesses because it involves a large number of people and is commensurate with the number of donated tokens.
Also, this strategy creates active and user-friendly forums that discuss the new token and automatically increase its credibility.
Creating awareness and active associations in the future can be two important factors in token growth and increase the demand for token investment; Firstly, receiving a token for free to investors who are willing to pay more to buy tokens, will be easier, and secondly, according to the effect of ownership ( Endowment Effect ) people for what their shares are worth more care.
According to this theory, owning a token increases the value of that token compared to when one sees it only in the market.
One of the main reasons why the AirDrop process is considered by most startups is the possibility of avoiding legal oversight of the AirDrop distribution mechanism.
As mentioned earlier, the legal authorities did not have a positive attitude towards Coin’s initial public offering process, which led to restrictions on holding an ICO.
These restrictions and the inflamed monitoring environment on the ICO led to a change in the tendency of startups to sell tokens privately.
According to TokenData, in the first two months of 2018 (winter 2017), 84% of the funding for ICO events was collected through private sales.
After the completion of the private sale, the companies continue their distribution mechanism by using AirDrop and giving tokens to the initial sponsors.
Airdrop is also used as a distribution mechanism during the hard fork in the blockchain network. The most famous example is the birth of Bitcoin Cash ciphers. August 2017 (August 2017) With the bitcoin blockchain network hard fork, Crypto Bitcoin Cash was born from the heart of the main network and as a result, all bitcoin holders received BCH currency equal to the number of their bitcoins.
How to participate in AirDrop Crypto?
AirDrops have two general modes:
In the first case, the organizer already publishes a statement about AirDrop and draws the attention of users to participate in it; In the latter case, no ads or announcements will be published and random startup tokens will be distributed between the Bitcoin and ethereum account addresses.
Therefore, in the random case, only users active in the field of digital currencies are lucky enough to receive tokens, and in the second case, participants usually have to have other prerequisites for AirDrop tokens to be credited to their account.
These prerequisites are not general and may take into account specific activities at each AirDrop.
However, the vast majority of airdrops require participants to participate in social media. The purpose of this can be to use word-of-mouth advertising to make the new token more recognizable to more people.
Some basic prerequisites for safer participation in AirDrop proposed include:
Create a dedicated email to subscribe to various websites: You definitely do not want your personal email to be full of ads or subscribe to any website. In addition, the security of personal information is enhanced in this way.
Creating a dedicated Telegram account: Telegram is the most important messaging application in the world of cryptocurrencies. In addition, AirDrops usually use the Telegram robot for the convenience of users to easily follow the steps of user participation in AirDrop. For example, the user must be a member of the Telegram channel and group for the startup and send his username to the robot. Acting indifferent airdrops can make your telegram very busy; Therefore, our recommendation is to create a separate account from the personal account to make it easier to manage Telegram messages between different groups, channels, and bots. Re-emphasis on maintaining security is repetitive.
Creating a Dedicated Twitter Account: Twitter is another favorite media of ICO and AirDrop organizers. Following the organizer account on Twitter and retweeting and liking is one of the necessary activities to participate in AirDap.
Creating a dedicated Facebook account: For the same reasons as other social networks mentioned in the previous paragraphs.
Create an active wallet that is active and compliant with the ERC20 standard for AirDrop: Most AirDrop tokens are based on ERC20; Therefore, to participate in AirDap, your wallet must support this type of cipher. Keeping your wallet active may be important in some airports; Because AirDrop organizers may be scrutinizing wallet activity to prevent misuse of multiple wallet addresses to receive tokens. Trust Wallet is usually a good choice for users. Dedicated wallet privacy also protects users from possible Dusting attacks.
Accounts on other websites such as Medium, Linkedin, Coingecko, Youtube, etc.: These accounts may also be requested from the user in the AirDrop process; Therefore, be prepared to subscribe to various websites.
Needless to say, sometimes AirDrop recipients do not need any special activity and only need to have some passwords in their wallets. For example, TRX cryptocurrencies will always receive BTT cryptocurrencies as AirDrop until February 2025.
Get air news and information
Many websites introduce the latest reputable airdrop. Some of these websites are AirdropAlert, AirdropsMob, Coinairdrops, AirdropAddict, and AirdropsLive.
There are also various Twitter accounts or telegram groups that inform about airdrops. There are also many reputable resources that you will have to pay to join to find out about reputable and trusted air dreams.
Five Basic Rules to Avoid Airdrop Scams
Greedy people are always ready to enter into any field using professional scenarios and destroy the ignorant.
The same is true of airdrops, where fraudsters collect user information by impersonating a valid airdrop; Therefore, with vigilance and awareness, the actions of fraudsters can be thwarted.
Never, ever share your wallet’s private key information with anyone. A Reddit user, for example, found out when he lost 22 ethereum`s in the fake OmiseGo AirDrop.
Do not send money to any account. Keep in mind that AirDrop is a free process and, as its name implies, is “windy” and no reputable AirDrop is asking for money or funding to participate.
Always do some research before joining AirDrop. Airdrops usually have a time-consuming process; So do not rush and spend a little more time and research about it and find the official communication channels of the donation token to make sure the airdrop is correct.
Be sure to use a separate wallet to get AirDrop to reduce the risk of Dusting attacks to zero. Dusting attacks are performed in such a way that the attacker sends a very small amount of passwords to the victim wallet address, and when these passwords are received, the attacker can analyze the victim wallet to prepare for further attacks.
Take care of installing the introduced AirDrop application. If in the process of AirDrop you need to install a new and dedicated wallet of AirDrop token on your smartphone, be sure to download it from reputable sources such as Appestor and PlayStor to prevent your device from becoming infected. For example, receiving a Tronlink wallet introduction bonus is one of the overdrafts that requires the installation of an application.
Is AirDrop Crypto to the detriment of the real investor?
To answer this question, you must be familiar with the concept of stock dilution. Diluting stocks is a nightmare for any investment; Because in the process of dilution, the share of people becomes smaller and less valuable.
Suppose Soroush finds two very similar stones and calls them ABC rocks. These stones do not have a similar example in the world and Soroush owns all the market value of those two stones.
His neighbor likes stones and Soroush sells one of them to the neighbor for 100,000 Tomans and gives the other stone to his younger brother.
Now, the total market value of ABC stones is equal to 100,000 Tomans, which in practice makes each stone worth 50,000 Tomans.
The share of the neighboring 100,000 Tomans was diluted to 50,000 Tomans; Because the other stone became a so-called airdrop.
The concept of dilution is a factor that worries investors. When the ICO is set up with 100 million coins and investors pay $ 1 for each of them to buy 90 million and the remaining 10 million coins are sharing among other loyal AirDrop users, the market value of 100 million coins equals $ 90 million and thus the value of each subsequent coin It will cost $ 90 from AirDrop to the detriment of those who are buying one coin for $ 1.
Another factor that should consider by startups in the AirDrop strategy is the “cost of attracting a new customer” ( Customer Acquisition Cost), which is an abbreviation to CAC.
As the name implies, the formula is to calculate the potential cost to attract new customers through which companies make advertising and marketing decisions.
As for AirDrop, yes, it is a tactical strategy that introduces new customers and users to the platform. This index usually starts with a large amount and gradually decreases as the company and its products become better known;
But how much does it cost to attract a new customer?
To estimate the appropriate cost of attracting a new customer, we must consider two other concepts: Customer Lifespan; ۲. Revenue per Customer. Startups need to calculate how many customers will attract to the project by donating AirDrop and are willing to continue to support the project.
For example, Mercedes-Benz customers have a shorter lifespan than Facebook; Because every person creates a Facebook account and uses it for the rest of their lives; But the buyer of the Mercedes-Benz car may change his car after several years.
This is much riskier for airdrops. Often, users who receive AirDrop immediately convert their tokens into common tokens in the market, and this makes the life of AirDrop users very short and will destroy the startup in a short time. T
Therefore, using this strategy requires expert review and may not be suitable for every company.
Both ICO and AirDrop strategies are ultimately implementing to attract capital and users and introduce new startups.
These strategies have drawbacks; But with an AirDrop partnership, the risk of losing money and capital is very low; Therefore, it may attract more people. In an ICO strategy, the investor must pay a sum; But in AirDrop, users only have to spend their time on social media and receive donation tokens in return.
To participate in AirDaps, be sure to take precautions so that personal information or control of your smartphone does not get into the hands of opportunistic people.
Certainly, with the growing number of airstreams, legislators will soon enter the field to create a safe environment for users and startups.