Why airdrop cryptocurrency tokens?

A cryptocurrency token airdrop is a novel means of distributing rights over a blockchain project to a community of users and owners for free. The market value of these airdrop giveaways is often upwards of hundreds of millions of dollars. This paper considers why projects might choose this unusual and costly means of token distribution. It considers a selection of high-profile airdrops as case studies between 2014 and 2022. This is the first comprehensive analysis of the rationales and mechanisms of Web3 token airdrops. We find that two primary rationales for airdrops are marketing (to attract new users and to maintain a community) and decentralisation of ownership and control of a project (building community, providing regulatory protection, and enhancing security). The paper contributes to an understanding of business practice and strategy in the emerging cryptocurrency and blockchain industry.To answer this question, we analyse 12 high-profile and diverse airdrops as case studies, beginning with the first notable airdrop, Auroracoin in 2014, to the Optimism airdrop in May 2022. Our case studies have been selected based on their capacity to reveal a wide variety of airdrop structures and their rationales. The blockchain projects attached to these airdrops are themselves heterogenous, representing different parts of the Web3 stack including: layer 1 blockchains, layer 2 scaling protocols, as well as applications and organisations built using these infrastructures. Airdrops have been used in layer 1 blockchains at the base of the Web3 stack (e.g., Decred), layer 2 protocols that have emerged on top of layer 1 infrastructure blockchains to solve scaling problems (e.g., Optimism), at the application layer (e.g., Osmosis, Uniswap), as part of decentralised autonomous organisations (e.g., BanklessDAO), and in non-fungible token-based communities (e.g., Bored Ape Yacht Club). Our aim is to identify the scope of rationales and mechanisms of such token airdrops.