A project can now leverage the wisdom of the crowd to achieve a common goal through something called “crypto bounties.
Posted June 6,2019 in Science and Technology.
The advent of cryptocurrencies has revolutionized the way we think about money. And as money is the lifeblood of every business, digital tokens have also brought into question business development strategies. Instead of hiring a single freelancer to complete a specific task, for instance, a project can now leverage the wisdom of the crowd to achieve a common goal through something called “crypto bounties.” Similarly, startups can get their token into thousands of hands via “airdrops” and bootstrap a cryptocurrency’s adoption. Like everything in this industry, however, it’s not all roses. Although airdrops and bounty campaigns may seem like surefire ways to attract attention for your idea, they do come with a host of disadvantages.
In the following post, we’ll define both of these marketing approaches, outline the pros and cons, and then provide alternative ways of distinguishing your venture from the many others like it.
Microtasking And Bounty Hunters
Let’s say that you need your sink fixed or you want your house cleaned over the weekend.
In the past, people would typically call a plumber or some kind of cleaning service. The former demands a bit more know-how, while the latter is pretty straightforward. In the first case, you’d likely ask around to figure out a reliable plumbing service and schedule the appointment. In the latter, the barrier is a bit lower, which is also why platforms like TaskRabbit, Helpling, or Handy have been so successful. If you can clean, you can join these platforms. Simple as that.
But, let’s say as a third alternative, you placed an advertisement on Craigslist or Reddit describing the nature of both tasks. You set a price, a date, leave some contact information and wait for messages to flood your inbox. It might make sense for tidying up your house, and maybe even for fixing your sink, but the process is as tedious if not more so than just opening your phone book and scheduling an appointment with a professional.
In the digital world of crypto, this friction has been removed. Startups in the space are frequently posting tasks on different platforms for able and relevant participants to complete. Few of the tasks resemble those from the above example, but the principles are relatively the same: a founder or a small startup team has too many things to do and too little time, so they pass it off to the crowd, their community, for completion.
These tasks can range from auditing source code for errors, generating content for a blog, or reposting announcements on social media. The price for each task, also known as “bounties,” are also often paid out in the startup’s native token.
The most common bounties are those that companies place on finding vulnerabilities in their code. In the case of Block.one, they paid one developer $120,000 to resolve 12 different bugs in the EOS source code. The same person also resolved issues with Tendermint, Monero, Stellar, and Tor.
It quickly becomes clear that crypto bounty hunting is a legitimate business for many.
Platforms like Bounty0x, HackerOne, and Bounties Network are all facilitating this gig economy by serving thousands of active bounty hunters. This practice is also interesting for companies who want to get their native token into the hands of users.
Skip The Bounty, Try Handouts Instead
Airdrops have been just as popular as bounty programs as it implies giving away tokens for free, or for performing a small task like signing up for a newsletter or an equivalent. This free, tokenized money is passed out to generate awareness around the project and observers are enticed to pick up a few in the event that the coin is listed on a major exchange.
Everyone likes free things, of course, so it’s easy to garner a bit of traction on social media and so forth via an airdrop campaign. It’s also a great way to on-boarding users.
The Polymath Network dished out 250 tokens to any user who signed up for their securities token platform and went through the KYC process. In the end, over nine million POLY tokens were distributed to 38,224 addresses. Not only that, but a week after the airdrop, the price of the token shot up to $1.
For merely completing Polymath’s KYC process, POLY holders were handsomely rewarded. And as soon as these mechanisms report huge profits for participants, sites also begin popping up all over the Internet signalling the next airdrop in line. Airdops.io is likely the most well-known, but a handful of news sites like Cointelligence have also incorporated the metric.
It depends on your startup’s idea of success, but these two marketing tactics could be exactly what you are looking for. For a small chunk of change, you can get a ton of social media posts, some original content, and establish a global presence. In many cases, however, this kind of approach is just a flash in the pan.
Initially, Telegram channels, Reddit accounts, Twitter commentary and the like become saturated with content about your project. For the newcomer to the crypto space, this might even be converted into a new user. But for the old heads, you risk coming across as spam. Not only that, but this initial wave of followers on social media are rarely sustainable.
The biggest problem with airdrops is the misconception that you can create an authentic community of fans who support you and your project’s vision. A large social media followership, as well as thousands of inactive Telegram group members, will not lift your project to the next level.
While it might create the appearance of a large, supportive crowd, it may also discourage true fans of your project to get involved with you. In the aftermath of a handful of fraudulent ICO campaigns, many in the space have become far more hesitant to associate with any falsely-advertised crypto idea.
In our opinion, there’s nothing worse than buying fake traffic or fake followers for your project — and the straightforward incentivization behind airdrops can easily fall under this thesis.
Take the DNA and blockchain project Shivom, who in March 2018 lanced a successful airdrop to their community. Quickly, their Telegram channel ballooned to 70,000 users. At the time of writing, however, the group boasts just under 23,000 members with less than 700 users online. What is likely happening in this situation is that eager users come for the airdrop, hold until the price of the token jumps, then quickly flip the token and hunt around for the next airdrop.
Airdrops Can Work, But It’s Complicated
This demographic of crypto user is inevitable, but the real task of marketing your project is to convert these kinds of users into believers. As we’ve writtenin the past, the ideal contributor is one who is as committed to your long-term vision of the project as you are. Your greatest hurdle as a founder is to convince your community that the value of the native token comes secondary to the value of a thriving network.
Consider the most successful airdrop of all time, Bitcoin. In the beginning Bitcoin’s anonymous founder Satoshi Nakamoto offered members Bitcoin for simply setting up a node. These first users quickly saw the power of the technology, as well as the importance of network effects. The more people they could invite to use the first decentralized means of value transfer, the more value Bitcoin would have.
Alongside just getting Bitcoin into the hands of everyday users, a much broader narrative was built around the technology. It was deflationary, meaning it would never succumb to the same fate as economies in South America. No one could control it, not even the first users. This means that it held characteristics of censorship-resistance. Bitcoin was also global; no matter which country someone lived, they too could set up a node and begin participating in the project.
From this perspective, airdrops and bounty programs can indeed work to create awareness for your project. It’s important to remember, however, where these ideas fall short. A genuine community is built on values that cannot often times be tokenized and dished out haphazardly. Organic growth takes time, there are no shortcuts.
As a final point, consider how you can turn the users of your crypto network into owners of it. In a previous post on incentivizing your community, we outlined the holy grail of community member. These are the hodlers willing to follow you and your project all the way from a penny token, to the moon, and back down to a $1. Bitcoin has many such profiles, as well as Ethereum.
The former technically leveraged an airdrop campaign, while the latter didn’t. In the end, however, the distribution scheme for each network seems irrelevant. The vibrant communities of each are the main reason why they both hold the first and second place as top cryptocurrencies in the industry.