The originator of airdrops
Speaking of airdrops, we have to talk about Gavin Andresen, who made significant contributions to the development of Bitcoin. He is Satoshi Nakamoto’s successor and the Bitcoin system’s second chief maintainer. Under his leadership, the Bitcoin community has polished the system, resulting in many ease of use and functionality improvements. Gavin set up a website called Free Bitcoins. Users can receive 5 Bitcoins if they post their Bitcoin payment address on the website. By November 2010, Bitcoin had exceeded $0.5, and airdrop promotion was no longer needed, so the website was shut down in early 2011, during which 19,715 Bitcoins were issued. It can be considered the origin of cryptocurrency airdrops to popularize Bitcoin. This purpose was inherited by subsequent airdroppers and used to promote the project. However, the market and product functions have changed, and airdrops have not kept up with this change.
Project parties have an insufficient understanding of the characteristics of airdrops
Nowadays, project parties mostly understand airdrops as marketing methods to increase project visibility and acquire customers. However, there are no unified methods and evaluation standards. Cryptocurrencies are all in the early stages of the project when they start to issue coins. Although the success rate of early projects is not high, there is a speculative stage of mispricing in the early stage, usually skyrocketing and overvaluation. After the airdrop significantly increases the number of customers, it will further push up valuations and inflate the bubble. In this way, the Rub Hair Party emerged, which specialized in seeking early profits. They specialize in airdrop speculation and leave as soon as possible. After the bubble is over, they are often left with feathers everywhere. In order to deal with the Rub Hair Party, the project side will set up various thresholds. The Rub Hair Party may be counterattacked, and the airdrop will change its flavor. It fundamentally makes the airdrop lose its fairness and affects the promotion effect.
The purpose of the airdrop is to allow those who accept the airdrop to become customers of the project eventually. The conversion rate is currently meager, with a maximum of less than 10%. Those with low conversions have almost no retention; that is, there are no active users. As a result, the cost of acquiring customers for airdrops is very high, reaching several thousand or even tens of thousands of dollars, which is higher than the market’s average valuation of users, diluting the value of original users and causing currency prices to plummet after rising sharply.
The number of airdrops rarely accounts for more than 20% of the total tokens. The reason still needs to be analyzed from Bitcoin. The Bitcoin system is the issuance system of Bitcoin. The miners themselves are users who pay the cost to obtain Bitcoin. However, when changed to the Proof of Stake (POS) method for many platforms or applications projects, they lose the meaning of currency issuance and become the meaning of ledgers. The accounting party and the user party are two parties.
Accounting depends on the use of users. The importance of users is equivalent to the miners of the Bitcoin system. Specifically, the user and bookkeepers are equal to the “miners” in the Bitcoin system. In this way, there are three parties to token distribution: project developers, bookkeepers, and users. Users are the use party, and their status is more important. So, who are our users? Who may become our users? Obviously, people in the coin circle are the most likely to become our users, so airdropping to the coin circle is a natural choice. With the demonstration of Bitcoin airdrop, subsequent projects did not differentiate the difference between them and Bitcoin projects. They airdropped a few percent of the tokens, thinking that even advertising would be worth it. Advertising can increase project visibility but is not necessarily related to customer retention. The effect of airdrop advertisements is very poor. In some projects, more than 50% of the airdrop tokens have not been received by anyone. Which coin circle person does not have a few unknown airdrop tokens in his wallet?
You treat me with an advertising mentality, and I’ll pull your hair in return. It is perfectly normal. I sold the tokens immediately after receiving the airdrop. Three days later, I had completely forgotten the name of the project. The direct purpose of advertising is for consumers to make them spend money, not to give them money. Ads attract one-time and impulse purchases from most users, and a few percent become long-term consumers. Only well-done projects in the coin circle can achieve a conversion rate of a few percent, like the advertising industry.
It is inappropriate to use airdrops to impress consumers
The essence of coin holders is not consumers but participants in the project and “shareholders.” When a project IPOs on the stock market, 25% of the shares are generally issued. Note that IPOs on the stock market are mature projects. The early projects of cryptocurrency are still in their infancy. You still rely on our “shareholders” to build an earlier project. If you give too little, who will play with you? There is actually no relationship between user retention and advertising volume in early projects. User retention is a “shareholder” behavior. Two factors determine shareholder retention: whether the distribution is fair and future growth. There are many articles about future growth, which is not the issue to be discussed in this article.
Token distribution must be fair
The project developer is unwilling to allocate fewer tokens, and the bookkeeper is unhappy if there are fewer tokens. Users have the least power, so they get the least. If no one uses the platform, the platform has no value. That is a conflict of interest. What is distributive fairness for a project? Generally speaking, whoever is important and contributes more should get more. According to common sense, each of the three parties should account for one-third, or each of the two parties should account for half. That will produce the least conflicts. That is also a distribution practice inherited from our ancestors, called fairness. Many smart contract projects do not have an accounting party, but taking a lot themselves is inappropriate.
Bitcoin has two parties, the project party and the mining party (user), and Satoshi Nakamoto, as the project party, also mines the coins, which is very fair on the surface. His trick was that half of the tokens were distributed in the first cycle, and no one explored the irrationality. When few people participated in the early stage, he received many coins. Satoshi Nakamoto established a standard, and he took 5.42%. The rest is taken away by users (miners). For subsequent projects, even if there is no accounting, the market environment has changed, Bitcoin does not need marketing, but today’s new projects will need it. So how much should marketing expenses be? The average number of airdrops is a few percent, which can be considered a marketing expense. The allocation number of the project party plus marketing expenses should not be excessive, accounting for 10% of the total number of coins issued, which is also fair. Why is it so allocated? Because the Bitcoin system is essentially an automated system, all benefits are created by users (miners), and they should get the maximum. Contribute the most and get the most, which aligns with the principle of fairness. Every project is different, the number of participants is also different, and there is no uniform ratio. The decentralized standard currency DW20 follows the example of Bitcoin, and the distribution ratio should be the same as Bitcoin and the least controversial. The chainless token CLY is a platform token, and the distribution ratio refers to the cryptocurrency platform project.
How should users be organized if it is not a currency issuance project but relies on user growth? Airdrops are the simplest way to aggregate user power. In this way, the problem becomes how to fairly and reasonably distribute tokens to “shareholders.” That is, “participation is mining.”
From token distribution by time to distribution by number of users
How should tokens be distributed fairly? The market has recognized Bitcoin’s token distribution method based on time. Obviously, the randomness of users is much greater than the randomness of miners entering the system. A time-based algorithm cannot describe the random entry of users but should be designed by an algorithm based on the number of people, and the assumption of the natural growth S-curve constrains the number-based algorithm. Based on this principle, the decentralized standard currency DW20 and the chainless equity coin CLY we intend to issue will be issued in 30 cycles. The number of airdrops in each phase is different and decreases periodically. We have about half a year of testing, which is the prime time for airdrops. Once publicly listed, the number of coins issued will decrease sharply. Please refer to the chainless or DW20 white paper for this principle; I will not repeat it here. It makes the distribution of tokens relatively reasonable. Regardless, your chances of getting in early are the best. However, customers who enter early are responsible for educating the market, which also requires a correct evaluation of their labor. You cannot just occupy the pit and do nothing because you are early. We do not have a human resources department (HR), and all evaluations follow Satoshi Nakamoto’s logic—game incentives.
How to retain users
Our token is designed with linear unlocking, that is, daily unlocking starting from the listing date. For different customer levels, the unlocking time is also different. For gold medal customers, it will be opened in 30 days, and for unlicensed users, it will take 270 days. Gold medal users have to hold 50 Bitcoins for more than two years. Most of them believe in Satoshi Nakamoto’s theory of coin hoarding. They know what to do after understanding the truth. Unlicensed users should have enough learning materials and discussion forums for 270 days. Our chainless website (chainless.hk) is now a database, ranging from a lack of knowledge of a person’s Q&A materials to project principles and theoretical analysis of cryptocurrency. As of today, there are 87 bilingual articles in Chinese and English. When the public beta is released, there will be more than 100 pieces of information. As relevant information for an early project, the richness of the content should rank first in the coin circle. In the future, the chainless website will integrate the needs of the chainless community. Through blogs and forums, it is hoped that users will not want to leave once they come. The function of the learning forum is to turn users who enter with a speculative mentality into investors. Our desired conversion rate is over 50%. From a psychological perspective, this is a very low indicator, and users can figure out the reason for it themselves.
Start as a seed user
Airdrop without a destination, the advertising effect is very poor. In the early days, word of mouth was needed. We started releasing test coins during the private beta period. As a marketing activity, it was called seed stage promotion. Our distribution quantity in the first cycle is far less than that of Bitcoin, so we will increase the incentives for the seed round in the initial stage of the first cycle and test the gaming system of our white paper simultaneously. Because the system is imperfect, we emphasize “the credit of those around us.” The author said in “Six Tricks Satoshi Nakamoto Turned ‘Air’ into Money: The early days of Bitcoin are destined to be opportunities for programmers, not for most people. Where is a person’s opportunity? Opportunities are around him. That is the positional advantage of each of us.” Who believed in you in the early days of starting a business? Your relatives, your friends, are almost unconditional. We naturally need to give this credit a high return—a return outside of the algorithm- a return on activity.
The token distribution of an airdrop project must comply with Satoshi Nakamoto’s mining principles. Whether the seed stage or the public beta stage, the principles are the same – competition and gaming. It is fair. Only through fairness can we gather strength. Whoever can gather users quickly will win the future.
The future is the time for the main force to come in
The second question is, what are the expectations for the future? That is a matter of project design, which we will introduce in another article. We will announce the details during the public beta of the project.
Today’s cryptocurrency technology has developed for 14 years, and all the technical ideas have emerged. Nowadays, technology cannot conquer the world. Product capabilities are more important than technical capabilities. Product capabilities compete with comprehensive innovation capabilities. In addition to product innovation, the chainless platform also has incentive innovation, community innovation, and a theoretical summary of cryptocurrency, including a thorough investigation of cryptocurrency and confirmation that Satoshi Nakamoto is the Chinese-American WEI DAI, the only original creator of Bitcoin. These are launched for the first time in the coin circle. Cryptocurrency respects initiative very much. Our ideas are all public. We welcome friends to catch up and build the Tower of Babel together. We are very confident that even if our friends study hard, they may not be able to catch up, and if they don’t learn, they will definitely not be able to catch up. Cryptocurrency is a wide-ranging field, including politics, law, economics, finance, stocks, currencies, products, markets, and technology. Artificial intelligence is depth; cryptocurrencies are breadth. Nowadays, the difficulty for projects with a broad scope does not lie in the technology. Satoshi Nakamoto’s design of Bitcoin is a comprehensive innovation and technically uses mature technology.
The chainless system is a highly comprehensive innovation, and its launch will significantly raise the competitive threshold of cryptocurrency. Just like China’s reform began in the reckless era, it finally triggered a wave of intellectuals in the late 1980s. After that, that year’s “foolish melon seeds” disappeared without a trace. Cryptocurrencies will follow this same path. See “The Road to Innovation in Cryptocurrency Eleventh, Looking at cryptocurrency from 12 leading projects(chainless.hk). The era of cryptocurrency products is coming step by step. The knockout round has begun. Whether you are on the crisis or development side depends on you.