Operation Dumbo Drop: To Airdrop or Not to Airdrop for Initial Coin Offering Success?

Practice Abstract Initial Coin Offerings (ICOs) have become a new and popular fundraising approach for blockchain start-ups. To motivate blockchain individuals to invest in the subsequent ICO, a growing number of blockchain-based project founders employ the airdrop campaign, through which they distribute a specific amount of free official tokens or promotional tokens to potential investors on the blockchain with or without their permission. Of paramount concern to the blockchain founders contemplating whether to launch an airdrop campaign are whether the airdrop campaign has a positive effect on the potential investors’ investment behaviors in their ICOs and how the efficacy of the airdrop may vary with investors. We find that the promotional airdrop significantly increases the potential investors’ ICO investment. We further find that the airdrop is more effective in increasing the investment for individuals with transacted projects dissimilar to the focal project than those with similar ones. By incorporating the insights from our study into their airdrop campaign strategy, blockchain start-ups can effectively target the right segment of potential investors to enhance the success of their ICOs.