Crypto Token Airdrops Are a Marketing Ploy (and That’s OK)

Michael J. Casey is the chairman of CoinDesk’s advisory board and a senior advisor for blockchain research at MIT’s Digital Currency Initiative.

The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday exclusively to our subscribers.


In February 2014, when growing interest in bitcoin spawned the first wave of “altcoins,” the tiny country of Iceland played host to a new idea for achieving mass adoption.

A developer using the pseudonym Baldur Friggjar Odinsson, vowing to help his 330,000 countrymen escape six years of post-crisis capital controls, created auroracoin and promised to distribute 31.8 of them to each person on Iceland’s national registry of citizens.

The idea of the “airdrop” was born.

It was a success. Briefly. Then it was a flop.

The initial buzz drove the price of auroracoin up more than 1000% in the first few weeks after its launch, making it briefly the third-most valuable cryptocurrency. But by mid-spring, after early recipients had quickly cashed out their winnings, the coin’s price collapsed.

Halfway through 2014, it was worthless and the project abandoned. The question lingered: Was auroracoin an earnest but failed effort to provide something of lasting use to the public, or an elaborate pump and dump?

Fast forward to 2018 and airdrops are all the rage. There’s even a site outlining all the offerings out there.

The idea was thrust into attention by last week’s news of a $125 million distribution by wallet provider Blockchain of Stellar lumens (XLM). Predictably, that giant giveaway is stirring heated debate on whether airdrops are constructive ways to promote usage or duplicitous self-enrichment schemes.

It’s a debate that hinges on the unavoidable role that community development plays in any cryptocurrency project, on who pays for that development, and on how much they stand to gain from it.

Network enhancement or pump and dump?

Blockchain CEO Peter Smith, lauding the Stellar network for being “built for scalability” with “an active and growing ecosystem,” said the lumen airdrop would put “users first” so they can “test, try, trade, and transact with new, trusted cryptoassets in a safe and easy way.”

Meanwhile, Stellar Development Foundation co-founder Jed McCaleb touted the instant network effects from expanding Stellar as a tool for communities to issue assets and design new models of value exchange. Leveraging Blockchain’s almost 30 million wallets, he said, “we will increase the network’s utility by many orders of magnitude.”

Critics in the cryptocurrency community weren’t buying it. Many saw this as a scammy way for Blockchain to expand wallet usage and complained that users would have to submit to the company’s know-your-customer (KYC) procedures, creating a big, marketable data pool of personalized information for the company.

Bitcoin Advisory founder Pierre Rochard was particularly brutal:

The branding of currencies

I’m not going to take sides here but I think the debate could be better served by, first, viewing airdrops as a marketing expense in the service of promoting community adoption and, second, recognizing that, one way or another, adoption requires some level of marketing.

A currency is nothing if it is not widely used. And that can’t be achieved unless people make some cost-incurring effort to encourage widespread usage.

All currencies – even fiat currencies, I would posit – have a brand. And the success of that brand hinges on how well those with an interest in its success promote its value as a medium of exchange or store of value.

For fiat currencies, governments carry out an indirect, complex marketing process by promoting the strength and effectiveness of their economies, thus encouraging both citizens and non-citizens to use their currencies to exchange and store value.

We might even think of welfare distributions as airdrops with intent to promote economic activity and therefore widen currency adoption. If these policies succeed, benefits flow to the government, directly, in the form of seigniorage, and indirectly via the satisfaction that their voting constituents derive from saving and spending a widely used, and therefore valuable, currency.

With cryptocurrencies, which eschew a government authority and instead defer monetary policy to open-sourced, decentralized software protocols, the promotional responsibility shifts to members of the community. But that can’t be viewed as an egalitarian process, either. It always entails vested interests and asymmetric costs and outcomes.

In bitcoin, for example, early adopters knew they would benefit from enticing in second-, third- and fourth-round adopters. So they were willing to pay a price in foregone coins, freely distributing them to newcomers via “bitcoin faucets” and tens of thousands of one-off individual donations.

Similarly, the development of a passionate, engaged bitcoin community – which was integral to the cryptocurrency’s success – depended on a variety of marketing exercises, all of which incurred costs in resources, effort or money. These ranged from more organic undertakings, such as the unremunerated creative work of artists who did renderings of the Bitcoin “B” logo, to the corporate-driven, such as when payment processor BitPay bought the rights to label the 2014 St. Petersburg college football playoff the St. Petersburg Bitcoin Bowl.

Individual participation in all this tends to be viewed favorably. What gets up people’s noses is the presence of for-profit corporate interests, which is really why Blockchain is coming in for flak.

But the truth is that vested interests exist whether it’s an individual or a company. Perhaps what matters is the size of that interest.

One can imagine that if people had known the identity of pseudonymous bitcoin founder Satoshi Nakamoto, they might have looked suspiciously upon his or her large early adopter’s financial stake in the promotion of bitcoin.

Consider, also, the constant refrain from crypto’s critics within the traditional economics fraternity that large-holding “whales” stand to gain from pumping bitcoin. They would view early adopter maximalists like Rochard as hypocrites. Do they have a point? Maybe.

Nuance needed

My argument, of course, is not that crypto enthusiasts shouldn’t promote the coins they own. It’s that if you level charges of a scam, it isn’t enough to just point out asymmetric payoffs, which are simply the reality of the adoption curve.

Neither am I saying that we shouldn’t be wary of pump-and-dump schemes by early adopters. What I’m saying is that assessing these things requires nuance.

Unfortunately, crypo utopianism tends to work against nuance. Prioritizing the dispassionate applications of mathematics and the supposedly unbiased, decentralized development of open-source protocols, many hardcore believers view all marketing and promotion with suspicion. What should drive success, they say, is not shilling and blather, but the power of the idea itself, the indisputable usefulness of the product.

It’s an understandably attractive viewpoint, one conveyed in Tuur Demeester’s critique of Blockchain’s lumen airdrop.

The problem with this view is that a currency is quintessentially a network product. More than anything else, its “utility” is a direct function of the size of its network. And while that network will surely fail if the product’s functionality isn’t maintained and reinforced on an ongoing basis, the critical mass that’s needed to achieve real network effects is dependent on mass communication of the idea.

There’s a reason why corporate marketing budgets exist. The expense is incurred in an attempt to achieve mass, favorable awareness of a particular product or service. Those costs can be thought of in terms of the traditional advertising but also in the revenue that’s foregone in free giveaways, as in the “freemium” model with which hugely successful apps like Nintendo’s Pokémon Go get into the hands of hundreds of millions of users.

I’m as wary as the next person of corporate centralization and of the danger that scams could set back the societal progress that cryptocurrencies and blockchain applications offer in fostering low-friction, peer-to-peer economic opportunity.

I would simply caution against quickly jumping to condemn particular community development undertakings, including airdrops. These are not cut-and-dry issues.

Airplane marketing image via Shutterstock

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Singapore Gov’t Develops Blockchain Based Security Token System

An automated Delivery versus Payment (DvP) platform has been jointly developed by the Monetary Authority of Singapore (MAS) and the Singapore Exchange (SGX). Its purpose is to allow the settlement of tokenized securities across various blockchain platforms.

Simplifying Post Trade Processes

In a joint release over the weekend the MAS and SGX stated “This will help simplify post-trade processes and further shorten settlement cycles,” The DvP system operates with payment and product changing hands simultaneously ensuring that securities are delivered only when payment is made according to reports.

The system has been developed along with technology partners Anquan, Deloitte and Nasdaq. Prototypes of the DvP have already shown that settlements can be made in various digital tokens on different blockchain platforms. An industry report detailing payment settlement using smart contracts has already been published by the MAS and SGX.

MAS chief fintech officer Sopnendu Mohanty said;

“This project has demonstrated the value of blockchain technology and the benefits it can bring to the financial industry in the short to medium term. The concept of asset tokenisation, as well as other learnings gleaned from this project, can potentially be applied to a broad spectrum of the economy, creating a whole new world of opportunities.”

Nasdaq senior vice president, Magnus Haglind, added; “In collaborating with SGX and MAS on this unique ecosystem of converging blockchains, we have demonstrated how to create interoperability between multiple networks to secure settlement between different assets – this is a major step in the application of blockchain to the capital markets,”

While SGX head of technology and project chair, Tinku Gupta, commented; “We are delighted to drive this important industry effort to accelerate innovation in the marketplace. Based on the unique methodology SGX developed to enable real-world interoperability of platforms, as well as the simultaneous exchange of digital tokens and securities, we have applied for our first-ever technology patent.”

The project was originally announced in August as a spinoff from another project, ‘Ubin’, a collaborative project with the financial services industry. It comes just days before the Singapore FinTech Festival 2018, which runs from November 12 to 16. It is expected to have over 250 speakers, 450 exhibitors and nearly 40,000 participants at the event. The city state recently held Crypto Expo Asia, an event solely focused on cryptocurrencies.

Singapore is currently playing host to ‘token day’ which is actually a three week period running from October 31 to November 18. It has been implemented to bring crypto to the masses by raising awareness and encouraging use and adoption. Vendors in the city’s Chinatown will be accepting crypto payments and offering various goods in exchange for digital assets.

Ethereum’s Joe Lubin: Blockchain Will Help to Create More Wealth

Ethereum (ETH) co-founder and ConsenSys CEO Joe Lubin has said that with blockchain, society will move “from a scarcity to an abundance mindset,” in a New York Times (NYT) interview published Nov. 12.

Lubin made his remarks at the NYT’s International Luxury Conference at the Intercontinental Hotel in Hong Kong, which runs Nov. 12-13 and brings together speakers that include the CEO of fashion brand Balenciaga, the president of Alibaba Group, and the CEO of luxury coat producer Moncler.

During the conference, Lubin spoke about how the advancements heralded by blockchain tech could potentially give control back to society, allowing for more individual “agency”:

“We are going to to be more in control of our identity and our agency on these different decentralized networks and I think that’s going to create more wealth […] more interest in expressing ourselves, and I think there will be more appetite for luxury than less.”

Lubin’s comments last week on the present development of blockchain ecosystems — which he compared to the growth of the Internet — cast some light on his perspective that the technology’s disintermediation and decentralization can help to spur innovation across all levels of society and the economy by “enabl[ing] a self-determined, sovereign identity.”

This summer, Lubin outlined the processes of wealth generation in the new tokenized economy, noting that he has noticed a “qualitative shift in the nature of money” that has moved society towards a world of “global villages.”

Bitcoin Price Watch: BTC/USD Targets Fresh Weekly Lows

Key Points

  • Bitcoin price declined recently below the $6,300 support before correcting higher against the US Dollar.
  • There was a break above a connecting bearish trend line with resistance at $6,360 on the hourly chart of the BTC/USD pair (data feed from Kraken).
  • The price is struggling to break the $6,380 resistance and the 100 hourly simple moving average.

Bitcoin price is trading in a bearish zone below $6,400 against the US Dollar. BTC/USD could decline further towards the $6,250 or $6,220 level in the near term.

Bitcoin Price Analysis

After trading as high as $6,553, bitcoin price started a major downside correction against the US Dollar. The BTC/USD pair traded below the $6,440 and $6,400 support levels to move into a bearish zone. The price even settled below the $6,400 support and the 100 hourly simple moving average. Sellers managed to push the price towards the $6,250 support before buyers appeared near $6,260.

A low was formed at $6,275 and later the price corrected higher. It moved above the 23.6% Fib retracement level of the last drop from the $6,553 high to $6,257 low. Moreover, there was a break above a connecting bearish trend line with resistance at $6,360 on the hourly chart of the BTC/USD pair. However, the upside move was capped by the $6,380 level and the 100 hourly SMA. It seems like the price may decline once again if there is a break below $6,340 and $6,320. In the mentioned scenario, the price could even trade below the $6,275 low and form a new weekly low.

Bitcoin Price Analysis BTC Chart

Looking at the chart, bitcoin price needs to move past $6,380 and $6,400 to recover further. The next resistance is near $6,440 and the 61.8% Fib retracement level of the last drop from the $6,553 high to $6,257 low.

Looking at the technical indicators:

Hourly MACD – The MACD for BTC/USD is slowly moving back in the bearish zone.

Hourly RSI (Relative Strength Index) – The RSI just moved below the 50 level.

Major Support Level – $6,375

Major Resistance Level – $6,400

Tron (TRX) Price Analysis – November 12

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Tron (TRX) Price Analysis – November 12

tron-trx-price-analysis-november-12

TRX, TRXUSD, Cryptocompare chartTron Chart by TradingView

TRX/USD Medium-term Trend: Bearish

Supply zones: $0.02800, $0.02900, $0.03000
Demand zones: $0.01700, $0.01600, $0.01500

TRX continues in a bearish trend in its medium-term outlook. The bulls attempt for an upward price movement was rejected at the EMAs. The 10-day EMAs serve as resistance, particularly on 11th November. The bears return was signalled by the inverted bearish hammer. With the increased momentum the bears continue the nice journey south with the break at the 61.8 fib level. TRXUSD went down to $0.02261in the demand area same day.

The brief bullish pullback saw the price back up at $0.02292 late yesterday and briefly after today’s opening as TRXUSD went up to $0.02315.in the supply area. The close of the candle as another bearish inverted hammer brought the bears with stronger pressure. The price is currently down to $0.02243 with room for more downward movement.

The price is below the two EMAs and heading towards the 78.2 fib level  The stochastic oscillator is at 27% and its signal point down which suggests downward price movement due to the bears’ pressure in the medium-term.

A break and close below the 78.2 fib level may open the gate for a 100% retracement at $0.02140 in the demand area in the medium-term.

TRX/USD Short-term Trend: Bearish

TRX, TRXUSD, Cryptocompare chartTron Chart by TradingView

The cryptocurrency in a bearish trend in its short-term outlook. The strong bear pressure attained the first target at $0.02240 in the demand area after earlier today. This implies that the bears’ next target low at $0.02200 may be attained shortly in the demand area.

The price is below the two EMAs and the stochastic oscillator in the oversold region at 13%, with its signal pointing down. This suggests a continuation of the downward journey as the bears increase their momentum.

 

 

 

The views and opinions expressed here do not reflect that of CryptoGlobe.com and do not constitute financial advice. Always do your own research.

Stepping Stones for Onboarding Grandmothers: Crypto Bridgeware

A major talking point since the launch of the Bitcoin Core client, the bull run of 2017, and centralized custodial services has been user design. Many native crypto products are clunky and light years behind the sleek, blue-and-white aesthetic of the Twitters and Facebooks of web 2.0. And if grandmothers are the metric for adoption, there are still very few who could comfortably send Christmas bitcoin to their grandchildren.

There are many people, however, who are capable of tweeting and posting from their phones by leveraging current technology rails.  

A Case for Bridgeware

Bridgeware is the collection of Frankenstein products or services that help meld two generations of technology together. They are incredibly important for many reasons, but mostly in their ability to maintain an ecosystem gain exposure. Some end up getting absorbed by fast-growing conglomerates, while others disappear once enough people have crossed the chasm.

They are solid short-term bets that most anyone can conjure up as founders needn’t reinvent the wheel. They add a few extra spokes or new trim. In the words of Peter Thiel, commentators could consider these items as moving from one to two, rather than the coveted Zero to One.

The easiest way to identify such a company is paying attention to the hijacking of turns of phrase, aesthetics, or functions. Quickly examples like “Uber, but on the blockchain” or “think beanie babies, but digital,” and one can begin to get the picture. Bridgeware services are boundless, far-reaching, but often not forward-thinking enough to spark the fuel of revolution. They still serve, however, an incredibly valuable function, especially in the crypto community.

Coinbase is likely to be the most significant example of Bridgeware. It rarely differs in its semantic choices from banks and pre-Bitcoin financial institutions. They also employ the same high-quality user-experience as Facebook and the gang. Ultimately, the killer combination has convinced at least 13.3 million users to join the service as of November 2017 according to data from Alistair Milne of the Altana Digital Currency Fund. Herein lies the power of these bridging services and their role in mass adoption.

The Cypherpunk Dream Meets Reality

It’s difficult to convince someone that they should be their bank. Explaining the fact that they could securely store billions of dollars in value on a USB-like drive in the desk drawer takes a clever bit of persuasion. Put otherwise, explaining the means in which a user would need to keep that store of value safe from malicious folks is probably Coinbase’s greatest sales pitch.

Combining Satoshi’s vision with that of someone looking to continue moving around their friction-free financial day is a tough ask. But that doesn’t mean that these people shouldn’t, or can’t, be exposed to the world of cryptocurrencies.

In a series of announcements, Zulu Republic, launched multiple apps that hijack Facebook’s and Telegram’s messenger to send litecoin (LTC) anywhere in the world. If a participant doesn’t have access to the Internet, they can also send LTC around via SMS text messages.

The Zug-based group released LITE.IM to show users what a future of micropayments could look like via common communication rails.

In a blog post, the team writes:

“With Lite.IM, you’ll also be able to send Litecoin to those who don’t already have a Litecoin wallet, or to those whose wallet address you don’t know, even if the recipient has no idea how to use cryptocurrency.”

This app immediately exposes a massive audience to LTC, the merits of uncensored value transfer, and does it all via legacy channels.

In a second example, CoolWallet attempts to lure users by creating a bridge between crypto and the aesthetic of debit cards. Their CoolWallet S has released “the world’s thinnest cold storage wallet” and supports bitcoin (BTC), ether (ETH), litecoin (LTC), ripple (XRP), bitcoin cash (BCH), horizen (ZEN), and an assortment of ERC20 tokens.

Throughout their website, the company lays out how one can combine the security of a cold storage wallet with “on-the-go” capabilities. The device is frequently placed alongside traditional wallets to imply the connection to a debit or credit card with which users are already familiar.

(Source: CoolWallet)

The device comes with an app that helps to manage users’ holdings which are connected via Bluetooth to the CoolWallet S. The device also provides a small screen that displays holdings in any the cryptocurrencies. The corresponding app offers a Changelly function to switch between cryptocurrencies as well as a relatively user-friendly layout which shows all holdings on the card.

To send a transaction, a user would use the app similar to any other crypto wallet application, but the transaction is ultimately verified with hardware wallet. By pressing the button on the card, one can confirm the operation. The app also offers an interesting level of security using Metacert to prevent phishing attacks.

Where to Go from Here

The arrival of Bridgeware is a contentious subject in the crypto space. When products are released that don’t uphold the original tenants of decentralization and autonomy, they are quickly torn to shreds. Unfortunately, there is a reality that needs serious attention. Onboarding more users, merchants, and payments processors likely mean a scaling down of the crypto-anarchist narrative.

Solutions like Trezor and different tip bots do already exist, and they serve different end users. The two services, however, do not run in competition with one another. The former is arguably a crypto-native product, while the latter is just the onboarding service with which Internauts can experiment with the eccentric futures of value transfer. In the end, both are incredibly important.

Arriving at a secure cold storage service for one’s holdings only makes sense if one has already encountered cryptocurrencies in the first place. Thus, the case for Bridgeware is a strong one, but hopefully, the industry doesn’t give up on building out a native world to host digital assets.

Full Disclosure: At the time of press, the author has holdings in litecoin (LTC). CoolWallet sent the author a test product for this review; no other compensation was incurred for the writing of this article.

Cryptocurrency Trading Update: Minimal Momentum on Monday Markets

Monday movement is lacking on markets; Stellar making gains, Bitcoin Cash and BAT getting battered.

There was no further momentum over the weekend and crypto markets have continued to slowly slide back this Monday morning. Total market capitalization is still over $210 billion, but only just, having lost almost $10 billion since Wednesday’s peak last week.

Bitcoin’s failure to make any progress above $6,400 has kept the rest of the crypto markets flat. BTC is currently trading at $6,395 but analysts predict bullish upsides leading up to its rival, Bitcoin Cash’s hard fork on the 15th. Ethereum has remained immobile and stuck around the same level, $210.

The top ten is predominantly red at the moment as traders in Asia have been selling all day. Bitcoin Cash is taking the biggest dive with 7% down to $510. Despite the looming hard fork, BCH has dumped 20% in less than five days. Other losses in the top ten are tiny, with Litecoin down almost 2%. Stellar is actually making a gain at the moment with 3% to $0.275, and Monero is also up 2% taking XMR to $105.

In the top twenty things are similar with only a percent or two movement in either direction. Zcash is the worst performer in that section at the moment with a 4% slide to $125, Tron is also down over 2% to $0.022.

The day’s big pump is coming from MOAC which has surged 23% at the time of writing. Insight Chain has also entered the top one hundred and is up 9% at the moment. Very few other altcoins are making any significant gains today.

Getting dumped along with BCH is Eternal Token and Veritaseum both down over 7% on the day. BAT and Siacoin are also having a bad day with over 6% losses since the same time yesterday.

Total crypto market capitalization has declined almost one percent since Sunday and is currently at $211 billion. A $3 billion pump a few hours ago looked promising but all gains since then have been lost once again. Trade volume remains at around $12 billion on the day and the sideways consolidation continues.

FOMO Moments is a section that takes a daily look at the top 20 altcoins during the current trading session and analyses the best performing ones, looking for trends and possible fundamentals.

Swiss Crypto Firm Gets Islamic Finance Certification for Sharia-Compliant Stablecoin

Switzerland-based fintech firm X8 AG has received a certification from the Shariyah Review Bureau (SRB) for its Ethereum-based stablecoin, Reuters U.K. reports Nov. 12.

SRB is a leading Sharia consultancy and audit firm licensed by the central bank of Bahrain. It reportedly has a presence in twelve countries, and holds the market share of over 13 percent of Saudi Investment Companies licensed by the country’s Capital Markets Authority (CMA), and over 21 percent of the Cooperative Insurance Firms Listed on the Saudi stock-exchange market.

The debate over whether or not cryptocurrencies are Sharia-compliant has centered on their compatibility with the Islamic prohibition on sheer monetary speculation. Reuters notes that some Islamic scholars have deemed crypto trading to be analogous with the “transfer of rights,” which is legitimate under Sharia law.

According to X8 director and co-founder, Francesca Greco, X8’s ETH-based crypto asset is a “stablecoin,” whose backing by a basket of seven fiat currencies and gold is considered to assuage Islamic advisors’ concerns over excessive volatility and speculation.

As part of its plans to expand its business to the Middle East, X8 reportedly plans to launch a crypto exchange that would include a Sharia-compliant trading platform. To this end, Greco told Reuters that the company has met with local exchanges in Abu Dhabi, Dubai, and Bahrain. “The Gulf region is a really good place for financial technology companies, because they all want to become hubs for fintech,” she added.

As reported this July, altcoin Stellar (XLM) received a Sharia compliance certification in the money transfer and asset tokenization field, claiming to be the first blockchain protocol to have done so. Other crypto companies claiming “firsts” in the sector include crypto utility token NOORCOIN, which was certified with a Sharia Certificate from the World Sharia Advisory Committee in March.

Bitcoin (BTC) was was recognized as “generally permissible” under Sharia law this April by an internal Sharia advisor to fintech startup Blossom Finance. Sharia advisor Muhammad Abu Bakar included a warning that while he considers digital currencies to be halal (permissible), in most cases traders should not purchase them for investment purposes.

Blossom Finance CEO and Founder Matthew J. Martin told Cointelegraph this February that as a payment network, Bitcoin may be even more halal than fiat currencies due to it being based on Proof-of-Work (PoW), rather than on debt.