ICOs vs. Airdrops

[berrymenalo]

ICOs vs. Airdrops

You've been researching cryptocurrencies for a bit now and you think you might be ready to diversify into less established coins, but you're wondering how to choose which coin to pick. Keep reading to learn about the various frameworks that currently exist for the distribution of new coins.

ICOs

Odds are, you've run across a plethora of open "ICOs" ("initial coin offerings"). As an "ICO" sounds similar to an "IPO" ("initial public offering" for the sale of securities of publicly traded companies), you might be inclined to trust the legitimacy of such an offering, but pitfalls are rampant and the unwary might lose their shirt by investing too much in the wrong ICO. That said, ICOs can also be a great investment opportunity. In order to invest in an ICO, you'll need to send some sort of coin (one of the ICO's accepted trading pairs) to a specified wallet address.

ICOs are extremely speculative and should be approached with extreme caution and care. Always read the associated "white paper." You are also heavily encouraged to browse forums like Reddit and Bitcointalk to see if other #cryptoheads can assist you in your analysis. Exploring forums also gives you the opportunity to gauge the strength of the coin's community, which is important if you expect the coin to ever become widely-adopted.

Usually, to participate in an ICO, you'll need to send the coins from the address you intend to use to receive the tokens you are entitled to in exchange for your contribution of ETH/BTC/LTC, etc. The author once made the mistake of sending ETH from a Coinbase account to an ICO address (spoiler: it doesn't work and, to my knowledge, there's no way to reverse the transaction). You'll usually want to use an ERC-20 compatible token wallet (we recommend MyEtherWallet or MetaMask online wallets; make sure you read their instructions and backup your wallet and private key(s) appropriately). Note that an ERC-20 wallet will only work for tokens on the ETHEREUM network. If the coin runs on a different script, ERC-20 tokens will be useless and you will lose your money. ALWAYS READ THE ICO INSTRUCTIONS CAREFULLY!!!!!!!!!

If you want to invest in ICOs but don't know where to find them, check out ICO Alert for an up-to-date calendar of most/all ICO offerings (both ongoing and upcoming).

Often, ICOs offer presale bonuses (I've seen anywhere from 10% bonus to 70% bonus). Keep in mind that, while bonuses do sound nice, they can sometimes harm the cryptocurrency's ability to grow because the early buyers who got the bonus are have incentive to sell the currency at a profit the second it goes live on exchanges, which can sometimes cause the price of a token to swan dive.

Traditional Model of Distribution

You might think an ICO is the only way new cryptocurrency coins are distributed, however, this is not true. In fact, some of the most well-known coins today never had an ICO. Some examples of coins that did not utilize an ICO include: Bitcoin, Ethereum, Litecoin, and Monero. These coins chose instead to rely on stable community growth, miners, and a confluence of other factors to make their coin marketable. While a non-ICO method of coin distribution has worked for the cryptos listed above, there are plenty of coins that have attempted something similar but which have failed miserably and now represent "dead" coins.

Airdrops

In a variation of the traditional distribution model expounded above, it is also possible for a coin to be distributed via airdrop. Airdrops are a really cool way of distributing coins.

Essentially (the following explanation can vary substantially and is only meant to help you conceptualize how an airdrop works), airdrops reward early adopters and have the potential to be extremely anonymous. The specific procedural details of participating in any given airdrop will vary substantially between cryptocurrencies, but you can generally find the rules on the crypto's website. For an example of Airdrop rules, check out the DeepOnion Airdrop Rules (last accessed Jan. 24, 2018; unsure if link will stay live after airdrop period ends in about 11 weeks).

Usually, the first-step in participating in an airdrop (aside from possible registration requirements) is to get some coins. If the coins have been premined, you will probably be able to get the coins on an exchange or through the coin's website. In order to get coins, you'll need a wallet address for the coins to be sent too. Usually, for new coins, you'll want to use the coin's specified QT (desktop) wallet as it will be difficult to find any third-party support for a brand new coin (third-party support comes as the project matures).

Once you have a wallet address and the coin-creators know where to send future airdrops, you simply need to maintain eligibility for the airdrops to benefit. Usually, the amount you receive from an airdrop will be in proportion to the amount of coins you are currently holding in your QT/desktop wallet (especially if the coins use a PoS system instead of or in addition to a PoW system of verifying transactions). For example, DeepOnion benefits early supporters by providing an added distribution to people with 10,000 tokens or more in their wallet (as a way to secure the system).

One of the neat (likely intended) effects of airdrop-style distributions is the ability to quickly increase the coin's per-coin price. Because airdrops have the potential to increase one's coin holdings exponentially during the duration of the airdrop period, people tend to hold the majority of their coins so that they can acquire even more in the next week's airdrop. This "hodling" incentive is good for helping the coin stabilize so that new investors aren't scared off by unacceptable levels of price volatility.

As with anything in the crypto space, be wary before investing. That said, DeepOnion was my first airdrop style coin and I've been thoroughly impressed with how the system has worked.

So Which Distribution Model Is Best?

While past-performance is NOT an indicator of how the future will shake out, I personally prefer the traditional model of distribution and the airdrop model of distribution over the ICO model. However, the ICO model does provide an extremely interesting model for future crowdfunding endeavors and does allow for the average consumer to have access to investment opportunities that have traditionally been limited to venture capitalists and accredited angel investors.

[1714947347]

1714947347

[1714947347]

1714947347

[1714947347]

1714947347

[kk80586]

Had to read your other posts to believe you wrote that . Very informative and you have good writing skills.

[hamim51]

your post's very informative..
especially for newbeis like me.
thank you so much.

[HabBear]

ICOs vs. Airdrops

So Which Distribution Model Is Best?

I'm confused by this question because ICOs and Airdrops aren't opposing things. All Airdrops are ICOs...so....how could the choice be one or the other?

Airdrops are harder for beginners to be a part of because they require you to own another cryptocurrency first. Most (if not all) airdrops occur by way of a hard fork attempt. In those scenarios you need to to have money to make money because you need to own the cryptocurrency that's being targeted for the hard fork to participate in the airdrop.

Using bounty campaigns, i.e., working as a promoter or advertiser for an ICO that earns you (as income) tokens from the ICO is an easier way for newbies ot get a stash of new tokens.

The most risky way to participate in an ICO is to purchase the ICO tokens with Ether or whatever. You need to be really confident of the business model if you choose to go this route.

[Bolt Brownie]

ICOs vs. Airdrops

So Which Distribution Model Is Best?

Airdrops are harder for beginners to be a part of because they require you to own another cryptocurrency first. Most (if not all) airdrops occur by way of a hard fork attempt. In those scenarios you need to to have money to make money because you need to own the cryptocurrency that's being targeted for the hard fork to participate in the airdrop.

Using bounty campaigns, i.e., working as a promoter or advertiser for an ICO that earns you (as income) tokens from the ICO is an easier way for newbies ot get a stash of new tokens.

The most risky way to participate in an ICO is to purchase the ICO tokens with Ether or whatever. You need to be really confident of the business model if you choose to go this route.

You don't always need to have coins to participate in Airdrops, and I've actually participated in plenty of airdrops that only required you to make a registration in the airdrop, by providing your ether address. Some coins ended up with no value, bu others were quite good, and I still hold some, because they I believe those particular projects have potencial to grow further.

As for ICOs, I usually don't participate in them, because I prefer to see how the project evolves after the ICO finishes. There are to many ICOs out there, and even with research it's hard to pick one, because there are a lot of scams out there. I do participate in bounties for ICOs, since they are an easy way to get involved with the project.

As for the question of the OP, and think both methods are really good. ICOs normally provide more profit to project owners, since they work as crowdfunding. They are very risky, and maybe regulation will help in this matter, but they are very good options to get involved and support project development.

Airdrops are quite interesting as well, and they do have the potencial to provide some profit as well, because people will hold coins or even buy more coins so that they can maximize the amount of coins they will receive from the airdrop. When coins are freely given away, with no need to hold anything in order to receive the airdrop, it's still a good way of promoting the project, and allowing users to try the coin for free. If they see value in it, they will probably buy more and further support the project.

[berrymenalo]

Had to read your other posts to believe you wrote that . Very informative and you have good writing skills.

Thank you! 

[berrymenalo]

your post's very informative..
especially for newbeis like me.
thank you so much.

Happy it helps, keep researching and you'll be okay. There's a lot to learn in this space but you have plenty of time to learn it.

[CryptoDanB]

Thanks for that, really useful.  I am only a week into this and I'm still trying to understand how things work.  Once the ICO completes and the coin/token is minted, I assume it will then go on an exchange, how is the price of the coin set and by who?

[berrymenalo]

Thanks for that, really useful.  I am only a week into this and I'm still trying to understand how things work.  Once the ICO completes and the coin/token is minted, I assume it will then go on an exchange, how is the price of the coin set and by who?

Welcome to crypto! It's a fun place to be. Once a coin is distributed, one of the goals of the development team is to get the coin listed on exchanges. The team's effectiveness in getting the coin listed can vary a lot based on the community support behind the project. Often, to get a coin listed, an exchange requires a certain amount of upvotes before a coin is listed. The coin will generally be listed on small, obscure exchanges at first. As trading volume increases and the project details become more concrete, the coin might get listed on larger and larger exchanges. A coin will not be listed on exchanges that exchange into fiat until the coin has obtained widespread adoption and trust within the community as a legitimate and important project. The reason for this is the fiat exchanges act as the regulatory gatekeepers for crypto and try their best to work within existing legal frameworks. Smaller exchanges often operate in legal gray areas. Notably, when coins are listed on big exchanges for the first time (binance, OKEX, Coinbase, etc.), you'll often see a huge spike in price.

The coin's price can vary between exchanges, especially for new coins. Coin price is a function of how thin/thick the order book is (how many orders are being placed for substantial amounts). A thin order book can drive the price up or down quickly as market orders fail to be met because the price is either too high or low. As order books get thicker (like Bitcoin), the price volatility will steadily decrease as the market becomes more liquid and better able to meet demand.

Because coin prices are based off order book thickness and trading volatility, the price for a crypto asset can fluctuate between exchanges (arbitrage opportunities) because the crypto markets are not nearly as efficient as other currently available capital markets. As a result, pricing a new asset can be difficult. This is where Coinmarketcap.com comes in. Coinmarketcap.com (and other similar services) aggregate trading prices and order volumes among all exchanges which list any given crypto asset. The Coinmarketcap algorithm then does internal calculations and spits out the aggregate price for the token (although the price on coinmarketcap is not necessarily the price on any given exchange).  

[HabBear]

Airdrops are harder for beginners to be a part of because they require you to own another cryptocurrency first. Most (if not all) airdrops occur by way of a hard fork attempt. In those scenarios you need to to have money to make money because you need to own the cryptocurrency that's being targeted for the hard fork to participate in the airdrop.

You don't always need to have coins to participate in Airdrops, and I've actually participated in plenty of airdrops that only required you to make a registration in the airdrop, by providing your ether address. Some coins ended up with no value, bu others were quite good, and I still hold some, because they I believe those particular projects have potencial to grow further.

Sorry, sir, you are wrong.

Officially, "Airdrop" is the term used for the distribution of coins by way of hard fork. Most people misuse the term, particularly cryptocurrency/token developers issuing bounty campaigns and/or giveaways to generate hype about their ICO.

"Airdrop" sounds sexy, which is why it's being misused. And then Newbies like you take the misuse of that term and spread it around as fact. It's not your fault, I guess, it's the fault of the ICO developers that are misusing the term.

Here's a source to educate all of you: https://steemit.com/bitcoin/@bitcoinflood/icos-are-out-airdrops-are-in

And I'll quote one of the first sentences from my source:

A airdrop you might know better as a hard fork.

[Kunzaii]

Great article! Very informative. For a project it's good to have a mix of both imo.

[mald1to]

ICOs vs. Airdrops

You've been researching cryptocurrencies for a bit now and you think you might be ready to diversify into less established coins, but you're wondering how to choose which coin to pick. Keep reading to learn about the various frameworks that currently exist for the distribution of new coins.

ICOs

Odds are, you've run across a plethora of open "ICOs" ("initial coin offerings"). As an "ICO" sounds similar to an "IPO" ("initial public offering" for the sale of securities of publicly traded companies), you might be inclined to trust the legitimacy of such an offering, but pitfalls are rampant and the unwary might lose their shirt by investing too much in the wrong ICO. That said, ICOs can also be a great investment opportunity. In order to invest in an ICO, you'll need to send some sort of coin (one of the ICO's accepted trading pairs) to a specified wallet address.

ICOs are extremely speculative and should be approached with extreme caution and care. Always read the associated "white paper." You are also heavily encouraged to browse forums like Reddit and Bitcointalk to see if other #cryptoheads can assist you in your analysis. Exploring forums also gives you the opportunity to gauge the strength of the coin's community, which is important if you expect the coin to ever become widely-adopted.

Usually, to participate in an ICO, you'll need to send the coins from the address you intend to use to receive the tokens you are entitled to in exchange for your contribution of ETH/BTC/LTC, etc. The author once made the mistake of sending ETH from a Coinbase account to an ICO address (spoiler: it doesn't work and, to my knowledge, there's no way to reverse the transaction). You'll usually want to use an ERC-20 compatible token wallet (we recommend MyEtherWallet or MetaMask online wallets; make sure you read their instructions and backup your wallet and private key(s) appropriately). Note that an ERC-20 wallet will only work for tokens on the ETHEREUM network. If the coin runs on a different script, ERC-20 tokens will be useless and you will lose your money. ALWAYS READ THE ICO INSTRUCTIONS CAREFULLY!!!!!!!!!

If you want to invest in ICOs but don't know where to find them, check out ICO Alert for an up-to-date calendar of most/all ICO offerings (both ongoing and upcoming).

Often, ICOs offer presale bonuses (I've seen anywhere from 10% bonus to 70% bonus). Keep in mind that, while bonuses do sound nice, they can sometimes harm the cryptocurrency's ability to grow because the early buyers who got the bonus are have incentive to sell the currency at a profit the second it goes live on exchanges, which can sometimes cause the price of a token to swan dive.

Traditional Model of Distribution

You might think an ICO is the only way new cryptocurrency coins are distributed, however, this is not true. In fact, some of the most well-known coins today never had an ICO. Some examples of coins that did not utilize an ICO include: Bitcoin, Ethereum, Litecoin, and Monero. These coins chose instead to rely on stable community growth, miners, and a confluence of other factors to make their coin marketable. While a non-ICO method of coin distribution has worked for the cryptos listed above, there are plenty of coins that have attempted something similar but which have failed miserably and now represent "dead" coins.

Airdrops

In a variation of the traditional distribution model expounded above, it is also possible for a coin to be distributed via airdrop. Airdrops are a really cool way of distributing coins.

Essentially (the following explanation can vary substantially and is only meant to help you conceptualize how an airdrop works), airdrops reward early adopters and have the potential to be extremely anonymous. The specific procedural details of participating in any given airdrop will vary substantially between cryptocurrencies, but you can generally find the rules on the crypto's website. For an example of Airdrop rules, check out the DeepOnion Airdrop Rules (last accessed Jan. 24, 2018; unsure if link will stay live after airdrop period ends in about 11 weeks).

Usually, the first-step in participating in an airdrop (aside from possible registration requirements) is to get some coins. If the coins have been premined, you will probably be able to get the coins on an exchange or through the coin's website. In order to get coins, you'll need a wallet address for the coins to be sent too. Usually, for new coins, you'll want to use the coin's specified QT (desktop) wallet as it will be difficult to find any third-party support for a brand new coin (third-party support comes as the project matures).

Once you have a wallet address and the coin-creators know where to send future airdrops, you simply need to maintain eligibility for the airdrops to benefit. Usually, the amount you receive from an airdrop will be in proportion to the amount of coins you are currently holding in your QT/desktop wallet (especially if the coins use a PoS system instead of or in addition to a PoW system of verifying transactions). For example, DeepOnion benefits early supporters by providing an added distribution to people with 10,000 tokens or more in their wallet (as a way to secure the system).

One of the neat (likely intended) effects of airdrop-style distributions is the ability to quickly increase the coin's per-coin price. Because airdrops have the potential to increase one's coin holdings exponentially during the duration of the airdrop period, people tend to hold the majority of their coins so that they can acquire even more in the next week's airdrop. This "hodling" incentive is good for helping the coin stabilize so that new investors aren't scared off by unacceptable levels of price volatility.

As with anything in the crypto space, be wary before investing. That said, DeepOnion was my first airdrop style coin and I've been thoroughly impressed with how the system has worked.

So Which Distribution Model Is Best?

While past-performance is NOT an indicator of how the future will shake out, I personally prefer the traditional model of distribution and the airdrop model of distribution over the ICO model. However, the ICO model does provide an extremely interesting model for future crowdfunding endeavors and does allow for the average consumer to have access to investment opportunities that have traditionally been limited to venture capitalists and accredited angel investors.

From your post, I can say that you are very knowledgeable on crypto world. Looking forward to more learning from a great guru

[CryptoDanB]

Thanks for that, really useful.  I am only a week into this and I'm still trying to understand how things work.  Once the ICO completes and the coin/token is minted, I assume it will then go on an exchange, how is the price of the coin set and by who?

Welcome to crypto! It's a fun place to be. Once a coin is distributed, one of the goals of the development team is to get the coin listed on exchanges. The team's effectiveness in getting the coin listed can vary a lot based on the community support behind the project. Often, to get a coin listed, an exchange requires a certain amount of upvotes before a coin is listed. The coin will generally be listed on small, obscure exchanges at first. As trading volume increases and the project details become more concrete, the coin might get listed on larger and larger exchanges. A coin will not be listed on exchanges that exchange into fiat until the coin has obtained widespread adoption and trust within the community as a legitimate and important project. The reason for this is the fiat exchanges act as the regulatory gatekeepers for crypto and try their best to work within existing legal frameworks. Smaller exchanges often operate in legal gray areas. Notably, when coins are listed on big exchanges for the first time (binance, OKEX, Coinbase, etc.), you'll often see a huge spike in price.

The coin's price can vary between exchanges, especially for new coins. Coin price is a function of how thin/thick the order book is (how many orders are being placed for substantial amounts). A thin order book can drive the price up or down quickly as market orders fail to be met because the price is either too high or low. As order books get thicker (like Bitcoin), the price volatility will steadily decrease as the market becomes more liquid and better able to meet demand.

Because coin prices are based off order book thickness and trading volatility, the price for a crypto asset can fluctuate between exchanges (arbitrage opportunities) because the crypto markets are not nearly as efficient as other currently available capital markets. As a result, pricing a new asset can be difficult. This is where Coinmarketcap.com comes in. Coinmarketcap.com (and other similar services) aggregate trading prices and order volumes among all exchanges which list any given crypto asset. The Coinmarketcap algorithm then does internal calculations and spits out the aggregate price for the token (although the price on coinmarketcap is not necessarily the price on any given exchange).  

Sorry only just seen your response.  Thanks for all the detail, it all makes sense and just helps me realise how much I've got to learn.  I've found one ICO I like, I've invested a small portion of my cash (not sure of the correct term, I'm used to calling it a bankroll) into the presale, I'm getting involved with their Telegram channel and making some tokens through their bounty scheme.  I thought the best way to learn was to see one in action and see how it plays out, see whether my instincts for a a good ICO can be trusted.  Thanks again for the help.

[nextcrypto2401]

very creative thinking and constructive post i should give A+ to the creator

Thanks merit me

Thanks

[cryptocurrencybazaar]

Thanks for sharing such an informative post. It will really be helpful to newbies to understand ICO and Airdrop.

Though, I feel that the title could be little misleading as ICO and Airdrops aren't opposing entities. Both have their own significance and offerings.

[fairytale]

Thanks for that, really useful.  I am only a week into this and I'm still trying to understand how things work.  Once the ICO completes and the coin/token is minted, I assume it will then go on an exchange, how is the price of the coin set and by who?

Welcome to crypto! It's a fun place to be. Once a coin is distributed, one of the goals of the development team is to get the coin listed on exchanges. The team's effectiveness in getting the coin listed can vary a lot based on the community support behind the project. Often, to get a coin listed, an exchange requires a certain amount of upvotes before a coin is listed. The coin will generally be listed on small, obscure exchanges at first. As trading volume increases and the project details become more concrete, the coin might get listed on larger and larger exchanges. A coin will not be listed on exchanges that exchange into fiat until the coin has obtained widespread adoption and trust within the community as a legitimate and important project. The reason for this is the fiat exchanges act as the regulatory gatekeepers for crypto and try their best to work within existing legal frameworks. Smaller exchanges often operate in legal gray areas. Notably, when coins are listed on big exchanges for the first time (binance, OKEX, Coinbase, etc.), you'll often see a huge spike in price.

The coin's price can vary between exchanges, especially for new coins. Coin price is a function of how thin/thick the order book is (how many orders are being placed for substantial amounts). A thin order book can drive the price up or down quickly as market orders fail to be met because the price is either too high or low. As order books get thicker (like Bitcoin), the price volatility will steadily decrease as the market becomes more liquid and better able to meet demand.

Because coin prices are based off order book thickness and trading volatility, the price for a crypto asset can fluctuate between exchanges (arbitrage opportunities) because the crypto markets are not nearly as efficient as other currently available capital markets. As a result, pricing a new asset can be difficult. This is where Coinmarketcap.com comes in. Coinmarketcap.com (and other similar services) aggregate trading prices and order volumes among all exchanges which list any given crypto asset. The Coinmarketcap algorithm then does internal calculations and spits out the aggregate price for the token (although the price on coinmarketcap is not necessarily the price on any given exchange).  

Sorry only just seen your response.  Thanks for all the detail, it all makes sense and just helps me realise how much I've got to learn.  I've found one ICO I like, I've invested a small portion of my cash (not sure of the correct term, I'm used to calling it a bankroll) into the presale, I'm getting involved with their Telegram channel and making some tokens through their bounty scheme.  I thought the best way to learn was to see one in action and see how it plays out, see whether my instincts for a a good ICO can be trusted.  Thanks again for the help.

how can i participate with ICO? thanks!

[cryptocurrencybazaar]

how can i participate with ICO? thanks!

You can participate by making payment as per the requirement of ICO. Most of the ICOs accept ETH or BTC. You will need to send it from the wallet for which you have the private keys. Don't transfer it from the exchanges like bittrex, poloniex, etc. You won't receive the coins after your purchase.

[naciklon]

Thanks for helpful information 

[jhoselle22]

Thanks for this!

[khelan]

ICO are good for high returns but all ICO are not good. some of the investor invest high price but due to market crash they loose there money. Many of airdrop gives very small amount of token which not worth even transaction price. so join the airdrop but don't expect too much profit from airdrop. also beware of scam. because too many peoples are trying steal your info or money.