The crypto space is an industry in constant evolution. Everything changes from infrastructure to fundraising methods to regulations. New ways to distribute tokens are also being introduced. And one of these is called Lockdrops.
But what exactly are Lockdrops, and how do they differ from Airdrops?
Well, in a nutshell, Airdrops and Lockdrops are marketing strategies used by many startups. They involve sending coins or tokens to wallet addresses in return for a small service, such as retweeting a post sent by the company issuing the currency. It’s a win-win scenario. The startup gets excellent publicity, and anyone who helps gets free tokens.
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Lockdrops: The Basics
Lockdrops are an upgraded version of airdrops that demand a user’s participation in exchange for free tokens. To participate in a Lockdrop, users must stake one token for a certain period of time, and upon release, they will get both the staked token and a second token. For example, if you stake Ethereum, you will get more Ethereum alongside your initial stake after it’s released.
There is some flexibility in how long you can stake. In exchanges, smart contracts are used for the tokens’ security, and the payout is proportional to the amount and duration of time staked. The purpose of Lockdrops is to give users incentives to “put skin in the game,” often known as investing in the platform. The success of network security will be boosted by encouraging users to stake a portion of their tokens to serve as a “bootstrap.”
The difference between Lockdrops and Airdrops
In Lockdrops, before a token is unlocked or released, users will first have to lock away a certain quantity of that token — for example, fifty tokens — in a smart contract. When the PQR token is released, they will get an extra 50 tokens and free PQR tokens. Staking more tokens over longer periods also increases the return users get.
You participate in the project by experimenting with it on the testnet, supplying liquidity, or doing anything else that is integral to the project’s use case. As a reward, you will be given tokens at no cost. What’s more, you might get tokens for free even if you haven’t done anything to contribute to the project.
To participate in a Lockdrop, you need to figure out the best crypto to invest in and then make a significantly more serious commitment. There is less of a financial commitment if you participate in an airdrop as a gesture of appreciation for backing the protocol, depending on other tokens you have, or by utilizing the protocol or testnet.
While airdrops reach a larger audience, Lockdrops are more suited to developing a dedicated fan base.
How to Participate in Lockdrops
Different Lockdrop protocols use somewhat different techniques, but they always involve the following:
The Lockdrop and its parameters are announced in the protocol.
In a smart contract, your collateral is locked up for a certain period. Depending on the protocol’s specifics, this might mean Ethereum (ETH), stablecoins, or some other kind of token.
You will get your collateral and token allocation after the Lockdrop period. The longer you keep your collateral locked up, the more tokens you get.
Main Features of Lockdrop
It determines the target audience, which consists of the most valued individuals who will really make use of the token.
It is a safe system since it is permissionless and decentralized.
No matter what the market situation is doing at any particular moment, the tokens have the widest possible distribution.
No need to worry about Lockdrops getting taken down since it has credible support for regulation.
The Future of Lockdrops
The Edgeware network was the first to implement a Lockdrop in the middle of 2019, but no other significant projects have announced plans to do so. If the effort to build a strong and varied group of stakeholders proves fruitful, the Lockdrop technique might be applied again. The cryptocurrency business is full of pioneers who are pushing the boundaries of innovation. Much of what is occurring is a trial to determine whether it works, so they take chances and try new things. However, if it is effective, many others will copy it.
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