Airdrops refer to the transfer of tokens from one digital wallet to another.
While airdrops are new with digital assets, they build on a long-held strategy in marketing of rewarding early and loyal users, or simply other users who have met certain eligibility criteria. Airdrops allow companies to communicate and gift items directly to people on their digital wallets.
The technological capabilities, coupled with the social phenomenon of tokens, can expand the tools that brands have to engage existing and prospective consumers, namely that they can tailor rewards and incentives to them based on observed behavior on the blockchain. There are several types:
Vanilla - eligibility criteria are minor or non-existent and the aim is to reach as many people as possible
Holder - eligibility criteria are based on users who have held a token for a specified time period, often rewarding those who were early supporters
Past value - eligibility criteria are based on users who had contributed value to the community in the past
Future value - eligibility criteria are conditional such that recipients contribute to the future value of the project
To understand the efficacy of airdrops, I undertook research with three collaborators and recently published the results in a leading academic journal, the Journal of Corporate Finance. We gathered data from CoinGecko on all the leading centralized and decentralized exchanges, or CEXs and DEXs for short, and came to an important finding: while CEXs have many more transactions overall, DEXs have exhibited much faster growth even after controlling for confounding factors across exchanges. In short, there has been a surge in DEX activity.
But what can explain the rise of DEXs and might airdrops and the user of governance tokens distributed to community members matter? Using a sample of 51 exchanges over time, we found that airdrops are positively associated with growth in market capitalization and volume, but these benefits are concentrated among DEXs and exchanges that offer governance tokens. In fact, DEXs that conduct an airdrop exhibit a 13.1 percentage point rise in their growth rate of their token's market capitalization. We also find some evidence that DEXs who airdrop governance tokens experience higher volume growth than those who do not.
The benefits are concentrated among airdrops over governance tokens: these exchanges exhibit a 14.9pp higher growth rate in market capitalization and a 25.4pp higher growth rate in volume. We also ruled out concerns that our results are simply driven by short-term social media behavior where airdrop recipients are required to retweet and pump a project - also known as "airdrop bounties."
While our results are not causal, they are robust. Time will tell whether they remain!
See the published and working paper version of the article below!
https://www.sciencedirect.com/science/article/abs/pii/S092911992300007X
https://papers.ssrn.com/abstract=3915140