INITIAL COIN OFFERING (ICO)

The year of the ICO was 2017. So many new projects and startups launched with many raising millions of dollars, and in the case of EOS, it raised over $4 billion dollars with Ethereum’s ERC-20 utility token.  This new capital funding model circumvented the traditional venture capital route for seeking seed money from  investors.  It also opened the door for projects to independently self fund their projects by engaging directly with the crypto community.  These interactions also opened the door to a lot of ponzi schemes and scam coins and other shady fly by night projects.  This is why its so important to do your own research  before you commit any time and resources on a project.

The ICO model  has worked well for some EOS projects; however, some projects have not faired so well under this model. One of these EOS projects that comes to mind is iRespo. The iRespo is a great project, the founders and advisors are well respected, and the community had a lot of interests in the white paper and the project goals. iRespo founders hedged their bet on doing an ICO instead of using the airdrop model that the EOS community normally rally’s behind and supports. iRespo went with the traditional ICO model but unfortunately the EOS community did not rally behind them with this decision.  The result was that iRespo failed to reach their funding goals, and now it seems the project appears to be dead, at least for now anyways.

THE AIRDROPS

An airdrop is when a blockchain project distributes free project tokens to the holders. So why is the Airdrop model successful. Airdrops are an incentive to give free tokens, as the wide adoption of the project depends on token holders adoption, participation in the project, the community, and the exchange listings and trade value of the token.  An example of a successful airdrop EOS project is the eosDAC. EosDAC launched their airdrop on April 15, 2018, and was the first successful and valued EOS airdrop project.  EosDAC has had “all time highs” traded price of .24 cents (May 15, 2018), and a recorded coinmarketcap of $141 million dollars (May 22, 2018). The eosDAC airdrop showed that this model can be an effective means and mechanism to obtain seed startup funding, if their is is anticipation, and community support for a project.

THE AIR GRAB

Genereos created the Poormans token as a means to help new projects, which enables the token provider to significantly reduce their airdrop costs (significantly by several megabytes).  As a direct result of the last 2 months of crazy EOS RAM speculation it became very clear early on that it would be extremely costly for a new startup project to complete an airdrop on EOS.  A month after the main net launch, it was costing projects about $200,000 dollars in RAM to complete a Genesis main net airdrop.  For a new start up project thats just way too expensive to do.  The RAM crisis on EOS was a catalyst that let to the creation of new EOS forks like the TELOS foundation.

The EOS RAM also crisis initiated innovation in the EOS community which created the concept of the “air grab,” as a temporary workaround solution for dealing with the RAM crisis on EOS.  The air grab model is a means for lesser and low budget EOS projects to join with the community to share their RAM in order to facilitate the distribution of a token to the community.  The RAM air grab concept is participation only ‘tool” wherein the token holder commits his own ram to obtain the airdrop token.  

The Redditer, grandmoren, aka NS James, the creator of Scatter, recently expressed on Reddit that he chose the air grab model for his Scatter/RIDL project because it was too costly to do an airdrop, at these prices.  He also summed it up best when he said on Reddit that “AirGrabbing is what us non-millionaire folk do to airdrop. You pay for your own RAM in the token contract and then we airdrop tokens to you. This allows each user to pay a very small fee instead of us paying hundreds of thousands of dollars to airdrop.”

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Responses

  1. Chaney Moore

    You fail to mention how the airdrop/airgrab models allow the project developers raise funds. Might want to update it to say they airdrop a fraction of their tokens and then they can trickle the tokens they retain into the market as they need the funds. They can’t dump their tokens or else there won’t be demand and price will crater.

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    1. Chaney Moore

      Also, there are situations where Airdrops may not work out of hand. i.e. The tokens have inherent value and can be traded in for real world items or services. Or if the project needs up front funds, they might not be able to wait for the funds to be raised via the airdrop. Finally, we are starting to see a bit of a blend, where projects consider airdropping tokens, then subsequently performing an ICO. This is tricky if the tokens get traded early under the ICO price. EOSBets is doing something of this nature, but it’s not a true airdrop.

      Cheers.

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  2. Steve Harman

    Nice article. A major topic missing though is the DAICO model proposed by Vitalik (but applicable to any tokenised project). This is a very exciting antidote to the risks for investors of the traditional ICO model.

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