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

The rapid advancement and adoption of blockchain technology has heralded an explosive growth of Initial Coin Offerings (ICOs) as a new and popular fundraising approach for blockchain start-ups. To advertise their project before the ICO and to motivate blockchain individuals to invest in the subsequent ICO, a growing number of blockchain-based project founders employ an airdrop campaign through which they distribute a specific amount of free official tokens or promotion tokens to potential investors on blockchain with or without their permissions. Of paramount concerns to the blockchain companies 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 their individual characteristics. To address these critical questions, we implement a regression discontinuity design by leveraging the quasi-randomization of a blockchain project’s promotional airdrop campaign on the Ethereum platform. We find that the promotional airdrop leads to a 2.3 times increase of the potential investors’ ICO investment probability. We further find that the airdrop is more effective in increasing the investment probability for individuals whose personality traits are dissimilar to the block-chain project than those similar to the project. Our study contributes to the literature of ICOs, personality similarity, and direct-to-consumer marketing, and provides important and useful managerial implications to blockchain companies on whether and how to launch an airdrop campaign