Many people probably never heard of the term ICO before the blockchain and cryptocurrency boom. They became popular in usage between 2017 and early 2018. The many unanswered questions that surround the need for ICOs and regulations from government agencies like the SEC have gradually led to their death.
ICO (Initial Coin Offering) originally means a fundraising process whereby new projects sell their underlying crypto tokens in exchange for Bitcoin, Ether, or sometimes Fiat. These funds are expected to be used for project development. Unlike an IPO which makes you have an ownership stake in the company, ICOs gives you tokens which you can sell for a profit when the market price increases.
Conversely, an Airdrop refers to the free distribution of small amounts of certain virtual currency tokens to its community members either for free or for performing small tasks. It is seen as the easiest way to raise awareness for the project while harnessing the best minds for the growth of the project and its presence.
In 2018 Facebook, Google and Twitter placed a ban on crypto advertisements to protect investors from ICO scams before the ban was later lifted. Statistics show that 1 in 2 ICOs conducted in 2018 failed despite raising Billions of dollars. If as seen from studies that 86% of ICOs conducted were a scam or died almost immediately, then it’s necessary to consider if they are worth investing in. The popular reasons that many have spotted as the cause of high failure rate of these projects include poor understanding of the scope of the project by founding team, insincerity, and greed.
This has made many others argue that conducting an airdrop to develop your project is much more beneficial than ICOs. It shows fairness, sincerity, and confidence that with little contribution the idea will develop and fund itself.
A few founders with startup funds have rather taken the route of conducting an airdrop to raise awareness for the project before selling from their reserve to sustain the project ones it is accepted in the market with increased valuation.
Something very important already associated with the evolving crypto niche is the close connection between team transparency and project acceptability (price, and growth of the ecosystem). This transparency can be quickly traced to the way tokens are distributed from the very beginning. Let's consider the hydro airdrop that took place in February 2018.
Project Hydro took the part of conducting a developer airdrop rather than an ICO. It still remains a wonder why the team chose to go that path knowing fully well it would have helped them raise huge amount conducting an ICO since they had a well-written whitepaper.
Being a non-minable token, it has a finite supply of 11,111,111,111 Hydro tokens with clear cut allocation plan as seen in the chart below.
Fig.1.0: Hydro Token distribution
After the contract creation and distribution on 16th February 2018, a mouthwatering 24% of the total token supply (2,632,330,741.57) was allocated to developers who met the strict qualification conditions. Every developer that met the Hydrogen compliant standard was entitled to 222,222 Hydro tokens. It was more in cases where they referred other developers who qualified for the airdrop. In that case, the referrer received extra 111,111 tokens for every two referrals. The huge percentage of total token reserved for airdrop in a way shows the believe the team had in decentralization to realizing a financial system that serves billions of people.
After the Feb.16th distribution, there was a reissue of the token as a result of improvements made on the initial project plan. This happened through a snapshot in the Ethereum blockchain network. Worthy of note is the way the team worked using active GitHub accounts in determining which developer got the tokens at the end of the day.
The current team got 26% (2,923,222,222.19) of the token unlocked and reserved for them. I guess this is to help compensate them for putting up the idea while making sure things go well. It was strongly noted by the team that they would only sell from this tokens only when necessary with a controlled supply of not more than 300 million tokens from their wallet monthly for the entire lifetime of the project. So far checking the wallet on etherscan not much has left that address.
There’s a separate 5% (555,558,147.2) of the tokens reserved to finance the future team that will work on the project. Thoughtful I guess?
The bulk of the tokens in circulation in the market now come from here and the ones that were airdropped. 10% of the tokens (1,111,111,111.10) was reserved for community project development. A look at the HCDP wallet address and the GitHub address shows a lot of ongoing activities. This has contributed to the development of the key phases of the project (Authentication, snowflake phases) with others fast taking shape. This tokens are reserved for both current developers in the community or freelance developers who want to build on the hydro protocol. The approach so far takes the form of bidding for tasks whenever there is one to be done.
The largest single fraction of tokens is in the repository wallet i.e. 35% (3,888,888,888.85). They are meant to generally contribute to the development of the ecosystem although with no specific plans on how it will be utilized for now.
The project hydro founders never conducted an ICO to raise funds for its massive project yet have only 26% of tokens apportioned to them. Out of the thousands of tokens listed in the market with many lofty promises, only a few have been able to attain this feat and are still relevant in the market.
Why would a founder reserve as much as 40% or even 30% of the total tokens to themselves despite raising funds from tokens sale in ICO? It leads to centralization in my opinion.
The founder of a project was caught recently saying blockchain is unconvincing after successfully raising over $100million via ICO. That looks like a scam in disguise.
Can we say the project hydro step has paid off?
I'll say from my view studying the progress of the project that it has recorded massive success with a product already in the market serving its purpose. It shows how decentralized projects should be run.