So Long ICOs, Hello Airdrops: The Free Token Giveaway Craze Is Here
Imagine getting $1,000 just for joining a newsletter.
Well that’s effectively what happened for those that subscribed to Onchain’s newsletter early on in the project’s lifecycle. The company, which is building the Ontology network designed to connect real-world institutions to each other, gave 1,000 of its “ont” crypto tokens to people who signed up for its newsletter prior to a certain date.
Those crypto tokens were distributed earlier this month and are now trading for a little over one dollar per coin, according to CoinMarketCap.
“Ontology just raised a private round and then didn’t need to do a [public] crowdsale, so they just airdropped to eager NEO hodlers,” Keld van Schreven, a partner at blockchain investment company Kryptonite1, told CoinDesk.
Van Schreven’s comment speaks to a broader trend in the cryptocurrency space of token issuers raising the money they need in private initial coin offerings (ICOs) and then skipping the public sale for what’s being called an airdrop. Effectively these are just token giveaways to broader interested community members
Justin Schmidt of Translunar VC has seen the same trend, telling CoinDesk:
“As a non-accredited investor, it is proving to be very difficult to find public sales to participate in until the tokens are traded on an exchange.”
Whereas the idea around public sales was that the people who buy in are those that understand the platform’s value and will promote the token, airdrops look to accomplish a similar goal, yet expecting that if people hold tokens, they’ll be interested in seeing the network, and the token’s price, grow and promote the platform just the same.
An internet search for “airdrops” or “free tokens” yields lots of websites, subreddits and Telegram channels that people can follow to gather up crypto tokens. And there’s even a Pokémon Go imitator under development that would allow companies to distribute free tokens to people playing an augmented reality game.
But these airdrops might not only be about building a community but likely also have something to do with an uncertain regulatory environment.
For instance, in the U.S., many ICO issuers and investors have become convinced that the Securities and Exchange Commission (SEC) will eventually declare that all crypto tokens are securities and as such, need to be registered under those already established and cumbersome laws.
But even outside the U.S., completing know-your-customer (KYC) and anti-money laundering (AML) compliance for public sales takes a substantial amount of work and time.
Speaking to token issuers stepping away from public sales, Minhui Chen, a partner at Global Blockchain Innovative Capital (GBIC) told CoinDesk, “Raising money from private sales is so easy.”
According to Althea Allen, ecosystem relations at payments startup OmiseGo, said her company pioneered the airdrop concept on ethereum in August last year, after announcing it would airdrop its “omg” tokens to every wallet that held more than 0.1 ETH.
OmiseGo decided to do an airdrop to raise awareness about the project, but Allen spoke to the broader benefits of airdrops, saying, “The real value of ethereum projects doing airdrops to all ETH holders is that it’s a crypto economic mechanism designed to incentivize ethereum project communities to maintain alignment with the entire ethereum community.”
The omg token’s price has since been volatile (many crypto tokens are), but it has trended up overall.
Yet because of the ease to airdrop, many, including van Schreven, think crypto wallets are starting to feel “like spam in email.”
Indeed, in China, many people refer to these offerings as “candy,” Chen said, continuing:
“Low quality projects are taking advantage of airdrops to make a fake community.”
And Schmidt echoed that, saying, “Not having the choice to decline these airdrops can, in my opinion, cause some issues in the future.”
As such, many investors, who nonetheless support the larger phenomenon, also believe the mechanism could be used more effectively.
Brayton Williams of Boost VC, a fund that favors crypto projects with a strong focus on community, thinks issuers could do a better job of targeting with airdrops. For example, he’d like to see issuers focus airdrops on people based on geography, demographics, etc. to cultivate the best market for the future platform.
Williams told CoinDesk:
“Airdrops combine the best of paid referral programs with stock options. Potential users get paid for joining or using the network and have the potential upside if the network increases in value.”
Some crypto companies are taking heed of this advice.
Swarm, a blockchain for tokenizing private equity, just announced a few airdrop promotions, two of which encourage referrals, although by far the largest token sale on the platform is one that just drops tokens to existing cryptocurrency holders.
And Earn.com (formerly 21.co) has offered a standalone product for startups to distribute tokens directly to its members since the end of January. Startups that want access to Earn.com members pay small amounts of bitcoin to get users to sign up. But many are willing to pay a fee since the company validates every member, linking a wallet to one distinct person.
“The unique thing that earn.com offers really is the validation side of things,” Dave Bean, from Earn.com’s sales team, told CoinDesk.
He added that while many platforms that allow token issuers to airdrop might have a lot of email addresses, many individuals could be gaming the system by signing up multiple times with different addresses.
That said, issuers in the U.S. are still skittish about doing airdrops to promote platforms.
Stream, a blockchain-based video streaming platform, dropped a public sale that was on its roadmap for an airdrop (and subsequent airdrops to cement adoption), but currently, the airdrop has been delayed indefinitely, because of concern that airdrops could also be in violation of securities law.
“We can’t be sure,” said Todd Kornfeldt, Of Counsel at the law firm Pepper Hamilton LLP, pointing to SEC actions from 1999 which targeted companies giving away free traditional equity.
“Perhaps the SEC thought there was some kind of quid pro quo in giving those securities away and that resulted in a benefit to the issuer,” Kornfeldt said. “And that fact pattern is similar to the fact pattern of an airdrop.”
This will definitely affect token issuers since the U.S. is the largest market both for investment and technology users.
But until the regulatory environment in the U.S. becomes more clear, token issuers may experience far less hindrance in the rest of the world.
Although some aren’t letting the regulatory environment hold them back. For instance, Onchain isn’t done using airdrops to promote its platform.
“The next community reward opportunity will be for active participation in Ontology after the release of the mainnet in Q2 2018,” Daniel Assab, a spokesperson for the company, said. “It won’t be for anything like a newsletter subscription, but no further details for now.”
Still many advise against airdrops for now.
According to Chen, “We advise [token issuers]: Don’t do airdrops. Please do public sales.”
In his mind, public sales actually engender a more authentic community. In other words, it brings in people who understand the project well enough that they’re likely to actually hold some of the tokens they buy to use in the future, instead of just dumping them on price rises.
Schmidt tends to agree, but hedges saying:
“It’s very early to see how this trend will result, but I do believe you need the actual users to have access to the tokens.”
Written by CoinDesk.com
Three South Korean Crypto Exchanges Raided for Diverting Funds
Embezzled Funds Spent on Cryptos Elsewhere
South Korean law enforcement officials have raided three companies offering cryptocurrency exchange services, local media reported. The searches have been conducted this week after an earlier investigation into suspicious money transfers.
Prosecutors are investigating three cryptocurrency trading platforms on suspicion of buying bitcoin with money they stole from their customers’ accounts, the Chosun Ilbo reported. The Seoul Southern District Prosecutors’ Office raided the exchanges from Monday through Wednesday, a spokesman said, quoted by the daily.
According to South Korean authorities, executives and staff are believed to have diverted funds from customers’ accounts towards their own. They were then used to buy cryptocurrencies on other exchanges. Investigators will also try to find out if the companies have raised money by defrauding potential investors.
“The firms turned up on our radar in January, during our investigation of suspicious money transfers between bitcoin exchanges”, a prosecutor explained. The transactions were detected during an audit by the Financial Services Commission and the Financial Intelligence Unit. Hard disks, transfer receipts, mobile phones, and accounting files have been confiscated during the raids.
Theft and Fraud amid Regulatory Pressures
South Korean authorities have been trying hard to put the local crypto sector under control. A new mechanism to end anonymous trading was implemented earlier this year. Its main purpose is to enforce real name identity verification on traders. The Financial Services Commission and the Korean Financial Intelligence Unit conducted inspections in leading commercial banks, targeting accounts of cryptocurrency traders. Banks had been ordered to stop issuing “virtual accounts” used by crypto exchanges to manage their clients’ money.
Regulating and overseeing crypto activities has proved a tough task, however. Korean officials have complained about their limited powers within the existing legal framework. Nevertheless, Seoul authorities have announced stricter requirements for cryptocurrency exchanges, including measures against crypto-related crimes. The country is home to some of the largest providers of cryptocurrency exchange services in the world.
In January, the chairman of the South Korean Fair Trade Commission admitted it was “impossible in reality” to close cryptocurrency exchanges, as news.Bitcoin.com reported. His comments came during an investigation of 13 major trading platforms, following alleged violations of the e-commerce law. At the same time, the local crypto sector has taken steps towards self-regulation. At least 25 crypto exchanges are participating in the efforts lead by the Korean Blockchain Association.
Written by Bitcoin.com
Abra Mobile App Adds 20 New Cryptocurrencies and ‘Stablecoin’ Technology
The Exponential Growth of Cryptocurrencies
Abra is a mobile platform that allows users to fund their accounts with BTC, bank wires, ACH transfers, and Amex cards. The company says in the next few weeks it will be adding litecoin and ether deposits as well. Today the company added 13 out of 20 new digital assets and the ability to swap between 50 different fiat currencies worldwide. The list of new currencies added includes litecoin, ripple, bitcoin cash, ethereum classic, dash, zcash, dogecoin, vertcoin, and more.
“With the exponential growth of cryptocurrencies and their increasing importance in today’s culture, the Abra app offers a timely mobile experience that provides more access and exposure to these new digital currencies in an easy, quick and safe way,” explains Bill Barhydt, founder and CEO of Abra during the announcement.
Our goal is to empower customers around the world, using their local currencies to freely invest in a wide variety of cryptocurrencies at any time, from anywhere without the restrictions of banks and fees.
Abra notes that the platform’s users don’t have to be verified with extensive KYC background checks as all that’s required is a users phone number. The cryptocurrencies are “held directly on the user’s phone, allowing them access to their coins at any time,” says Abra. In addition to the crypto-based assets, Abra users who might want to avoid volatility can swap into 50 fiat currencies utilizing a technology developed by the firm called “stablecoin.” The stablecoin protocol allows the creation of synthetic digital assets based on LTC and BTC by utilizing a multi-sig smart contract.
The Extension of More Cryptocurrencies and Possibly Stocks, Bonds, and Other Commodities
The General Partner at Multicoin, and the co-founder of Civic, Vinny Lingham, is pleased with the Abra development team’s efforts.
“By bringing 20 cryptocurrencies onto one platform, Abra has repaired a fractured system that has frustrated users who want to expand their crypto portfolios,” Lingham emphasized.
Abra also says that in the future it plans to add more types of investment vehicles and a slew of other cryptocurrencies. “Consumers in any country can now invest in any asset class regardless of where the asset originated — This model can be extended to stocks, bonds, commodities and more with no changes to the existing Abra app,” the company adds.
Written by Bitcoin.com
Crypto Influencers Is a Who’s Who of Crypto Twitter
If Coinmarketcap Did Twitter
Crypto Influencers promises “an algorithmically generated list of crypto’s most influential people on Twitter” and is as good as its word. Despite some notable omissions, it does a reasonable job of ranking major figures on crypto Twitter. It’s an exercise which is bound to provoke debate, especially in regards to who’s placed in the top 10, though there are contentious entries throughout.
There are two categories on the Crypto Influencers website: people and brands. Both can be sorted by name, website, location, followers, following, and bio. There are a few possible use cases for the service. Firstly, Crypto Influencers makes a handy guide for anyone who’s relatively new to cryptocurrency. A journalist seeking a source to quote might want to start here, or an ICO seeking project advisers or media platforms to target. The other reason why Crypto Influencers has appeal comes down to the age-old human curse of curiosity.
Curiosity Killed the Crypto
When the short-lived ethereum game Crypto All Stars launched, the value of each influencer card turned into a matter of personal pride for the traders featured on them. It’s the same with Crypto Influencers. Did you make the top 300, and if not why not? Why’s Tuur Demeester outside the top 10 and zcash developer Zooko inside it? These questions, and many more, can all be pondered while you peruse the site.
Like Forbes’ Crypto Rich List, there’s something crass about sizing up humans based on words they type into a micro-blogging network, but that’s the way the world works. It’s as much a game of spot the absentees on Crypto Influencers as spot the big shots; there’s no John McAfee, for instance, or Bitcoin News, but there is space for an abandoned Twitter account with 900 followers for a project called Streamium.
Explaining the algorithm behind the system, the site states: “Both Justin Bieber (105M followers) and Vitalik Buterin (600k followers) are influencers. There are people who pay attention to them and are ready to act based on what they say. While Bieber has more followers, the people who follow Buterin have significantly more capitals at their disposal. Therefore, Buterin is more influential under this definition.”
No one expected Justin Bieber to make the list, though they may be wondering where Bitcoin.org’s Cobra is. Or why Chris Burniske is only 58th. Or why Jacob Appelbaum, who’s been AFK for almost a year, is on the list. Crypto Influencers’ algorithm could use some work, but as guilty pleasures go, it’s hard to shake.
Written by Bitcoin.com