Why airdrop cryptocurrency tokens?

Highlights * Examines cryptocurrency airdrops as a novel means of distributing rights over a project to a community at no cost. * Analyses a diverse range of 12 high-profile airdrops (from 2014 to 2022) to understand why projects airdrop tokens. * Identifies marketing and decentralisation are the primary rationales for airdrops. * Additional rationales for airdrops include creating liquid markets and taxation implications. Abstract A cryptocurrency token airdrop is a novel means of distributing rights over a blockchain project to a community of users and owners for free. The market value of these airdrop giveaways is often upwards of hundreds of millions of dollars. This paper considers why projects might choose this unusual and costly means of token distribution. It considers a selection of high-profile airdrops as case studies between 2014 and 2022. This is the first comprehensive analysis of the rationales and mechanisms of Web3 token airdrops. We find that two primary rationales for airdrops are marketing (to attract new users and to maintain a community) and decentralisation of ownership and control of a project (building community, providing regulatory protection, and enhancing security). The paper contributes to an understanding of business practice and strategy in the emerging cryptocurrency and blockchain industry. Author Affiliation: RMIT Blockchain Innovation Hub, RMIT University, Melbourne, Australia * Corresponding author. Article History: Received 21 October 2022; Revised 17 March 2023; Accepted 6 April 2023 (footnote)[white star] This research is supported by Australian Research Council Discovery Project DP200101808. The authors would like to declare that they personally received some of these airdrops. Byline: Darcy W.E. Allen, Chris Berg [chris.berg@rmit.edu.au] (*), Aaron M. Lane