Are Stakedrops a Good Way to Gain Adoption for Your Cryptocurrency?

By: Fahad
November 28, 2020 11:20 PM UTC
Cryptocurrency Staking

 

Many recent and new projects are utilizing stakedrops to widely distribute the native tokens of their platforms among people in the cryptocurrency market. For example, Persistence One, an upcoming project in the DeFi space is utilizing 1% of their total token supply, which is equivalent to 1,000,000 $XPRT tokens, for seven different stakedrop campaigns. Based on their team’s current valuations of their token, the entire Persistence One stakedrop is worth around $250,000 USD.

The team behind Persistence is not the only one that places such a large emphasis on stakedrops. There are many other recent, and new projects that are or have utilized stakedrops as well. A likely reason for so many projects to utilize a stakedrop mechanism to distribute their tokens is to attract new users for their projects. This article aims to take a look at stakedrops, and figure out why so many new projects are utilizing this method to distribute their tokens.

Stakers Defined

Before the article gets into why a stakedrop might be a good idea for your platform, it is important to define certain words that are commonly used jargon in the world of crypto. These words are staker, stakedrop, and staking.

A staker is anyone who takes part in a stakedrop campaign by staking their tokens on certain well known networks. A stakedrop is just the name of the method used to distribute tokens among these stakers. Staking is the process of staking your tokens on any of the well known networks in this industry by using a validator. These well known networks are Cosmos, Kava, Terra, IRIS, Matic, Polkadot, and Tezos.

Stakedrops are inherently unique because they target stakers. The important thing about stakers is that most of them tend to be somewhat experienced and well versed in the cryptocurrency market. This makes stakers an ideal demographic to target with your tokens or any other free trial in the crypto market, because they will not have such a hard time figuring out whether your project is right for them or not.

The Psychology Behind Stakedrops

The truth is that even though stakedrops might be new, the core idea behind the tactic itself has actually been used for decades, maybe even centuries. Stakedrops are really just a way for projects to give people a little sample or free trial of what they have to offer. Companies in the traditional world have been giving out samples or free trials for their products and services for a very long time now.

Cryptocurrency Staking

According to Forbes free trials are a great way to increase customer satisfaction. The reasoning is quite simple really, if a user has already tried the service they will most likely know what they are getting themselves into when they actually end up paying to use it. Increased user satisfaction generally means less negative reviews and more positive reviews. Satisfied users are also more likely to promote a service via word of mouth, or now a days text.

Another extremely important aspect of free trials is that it makes acquiring new users a lot easier. Think of it this way, people are generally averse to trying out new platforms, because they are afraid if they don’t like it they will end up wasting their time. If that person has to pay to use this new platform, they are most likely going to be even more averse to trying it out, because now they are worried that apart from losing out on their time they will also be losing some of their money. Losing money and time are a daunting thought for most people.

A great method to reduce people’s aversion to the risk of losing their time and money on new platforms are free trials. With a free trial the person knows that if they like the service they have nothing to lose. However, if they like the service they stand only to gain.

Why Crypto Companies Do it

Not many cryptocurrency companies have given an adamant reason as to why they utilize stakedrops, but one did. The team at Persistence One give a reasoning as to why they utilized a stakedrop campaign. From what the team at Persistence described there seems to be two primary reasons as to why they chose to hold stakedrop campaigns. The first reason was to get their tokens into the hands of a wider audience, and second to ensure community governance is done properly.

The first reason, which is getting their tokens into a large number of users seems very similar to the age old method of giving out your product or service as a free trial. This is a tried and tested method that generally has shown positive results.

The second method is in regard to community governance. Community governance is a term that is more colloquial to the crypto world. It essentially means that individuals from the community get to decide on the direction of the platform based on how many tokens they stake. In the crypto world we call these community driven platforms, Decentralized Autonomous Organizations, or DAOs for short.

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