If you’ve been following the crypto news lately, you’ve probably seen a lot of hubbub about “airdrops.”
The term originally coined to describe the method by which crypto holders are delivered new crypto assets after a given blockchain undergoes a hard fork has now become one of the most powerful marketing tools in the alt currency space.
The reason for that transition is that, in July 2017, the US Securities and Exchange Commission (SEC) ruled that ICOs – or Initial Coin Offerings – could no longer operate as such.
That is, all ICOs would from then on be regulated like IPOs.
This additional regulation effectively killed the ICO market, though they do still exist.
For a little background, ICOs are a way for new cryptocurrency platforms to get investment from the public.
This is differentiated from “crowdselling” – the model that has now replaced the ICO – by the application of the so-called “Howey Test.”
Per Escape Artist:
“The Howey test asks whether the purchase of the token represents: 1. the investment of money; 2. with an expectation of profits; 3. arising from a common enterprise; 4. depending solely on the efforts of a promoter or third party. …
[The] sale of a token will be an ICO regulated by the SEC if it entitles the buyer to a portion of profit or revenues, a guaranteed annuity, or has other features that make it appear to be an investment in the business in exchange for an electronic form of stock. …
[If] the token is not tied to profits, and is to be used for services within the business, it will be considered a crowdsale not regulated by the SEC.”
With that out of the way, let’s get back to airdrops.
In layman’s terms (and we’re definitely crypto laymen, all things considered), an airdrop is when crypto is delivered to your wallet automatically as the result of various happenings in the wider crypto market.
But to call these airdrops “free” is misleading, and it muddies the…
