Cryptocurrencies only hold value because people believe in them and recognize their worth. The more people who own a cryptocurrency, the more likely it is to become widely adopted and rise in value. Airdrops are effective due to the “endowment effect,” a phenomenon in which people will ascribe value to things merely because they own them.
By executing a bounty airdrop, a startup can create mass awareness about their project, token sale or pre-ICO with minimal cost to them. Social media campaigns allow the project to become visible to people who would otherwise never recognize its existence. Airdrops can also create a vast network of users who are motivated to push a project’s success by doing things together like winning community votings for exchange listings.
By rewarding token owners with free airdrops, projects can also encourage users to hold (HODL) their coin for the long-term. This can effectively lower the selling pressure of the coin. Holder airdrops have been a popular tactic amongst some of the most successful crypto projects, like NXT, WAVES, Bitcore and more.