Marketing on steroids
Crypto’s ingenuity goes beyond technical and financial engineering. It also allows for new forms of marketing, sourcing and rewarding users. The concept of airdrops was pioneered a few years ago during the previous bull market cycle. Airdrops are free tokens distributed by a crypto protocol to its users.
This distribution usually happens at early or mid stages of a project to rewards its users, quite often retroactively. In 2020 Uniswap, for example, distributed 400 of its tokens to every single user who has used its product at least once. At current prices this free ‘gift’ is worth $16k. Not a bad reward for being one of the first people to click on a few buttons. Those, who were early liquidity providers into the network got an additional distribution. In total, 49mn UNI tokens have been given away to the early users of the Uniswap network.
$2bn worth of value (at current prices) was given to the users. For free.
Such marketing methods are impossible to imagine in the traditional world, but network economics works differently from traditional businesses and allows for different ways of ‘buying’ users.
Free money takes some work
Once the Uniswap airdrop took place (without advance notifications), it created incentives for crypto users to try out as many products as possible in the hope of getting lucky and benefiting from new airdrops by other protocols. The market hasn’t disappointed.
1inc, an exchange aggregator, distributed $600mn worth of its tokens to its users.
Badger, a yield product for Bitcoin, distributed an average of $2.2k per user to its early adopters.
Popsicle, an exchange operating across different networks, gave away $5mn worth of its tokens to those using products of its sister companies.
Within a short period, this behavioural dynamics created a new job - an early product user. Why not sit and play with new crypto products and get paid for it? Open networks have created incentives for early users / testers to volunteer their time to help get products to market. Moreover, because they are paid in projects’ tokens instead of cash, they are incentivised to relay feedback and help the product get better to scale, get more users and have their tokens increase in value.
It is fascinating to see network effects create new types of jobs with a positive economic loop.