Successful projects have airdropped what is now worth more than $4Bn of free tokens. But there is a very low success rate associated with airdrops - with no functioning use case, the tokens become essentially worthless. However, airdrops can evolve as an alternative fundraising method that are cunningly attempting to circumvent securities laws – but not all is what meets the eye.
The popularity of airdrops has been growing as they serve as an alternative or a supplement to initial coin offerings (ICOs) that have lately been under the regulatory scrutiny. The purpose of airdrops is not to raise funds as is the case with the ICOs but rather to distribute the tokens for free to members, which will actually want to use the token and increase the strength of their community.
With proof-of-work based blockchains, the distribution of new coins is always done by mining. But the blockchains that are not minable must choose an alternative distribution system for the users. All tokens built on top of Ethereum are premined, which is why the majority of the projects raise funds in ICOs where investors buy tokens and a promise of a future utility.
The airdrops allow developers to distribute free tokens to a predetermined group of people. Sometimes, the developers decide to give the tokens to holders of existing cryptocurrencies such as Bitcoin or Ether, sometimes they airdrop the tokens to users that fulfill some preset conditions.
