The following article is reproduced from Coin World:
Chainless
The founder of Chainless, Mr. Zhu Weisha, here is the original text:
The originator of airdrops
When it comes to airdrops, it is necessary to mention Gavin Andresen, who has made important contributions to the development of Bitcoin. He is the successor of Satoshi Nakamoto and the second chief maintainer of the Bitcoin system. Under his leadership, the Bitcoin community has polished the Bitcoin system, making significant improvements in usability and functionality. Gavin set up a website called Free Bitcoins. Users only need to post their Bitcoin receiving address on the website to receive 5 bitcoins. By November 2010, Bitcoin had surpassed $0.5, and it seemed unnecessary to promote it through airdrops. Therefore, the website was closed in early 2011, and a total of 19,715 bitcoins were distributed. This can be considered the origin of cryptocurrency airdrops, with the aim of popularizing and promoting Bitcoin. This principle has been inherited by subsequent airdrops for project promotion. However, the market has changed, the product functions have changed, and airdrops have not kept pace with these changes.
Insufficient understanding of airdrop characteristics by project parties
Now, project parties often understand airdrops as a marketing method to increase project visibility and attract users. However, there is no unified method or evaluation standard. When cryptocurrencies start issuing coins, they are in the early stages of the project. Although the success rate of early projects is not high, there is often a speculative phase of incorrect pricing. Airdrops, when used to significantly increase the number of users, undoubtedly further push up the valuation, leading to a bubble. This has led to the emergence of those who specialize in airdrop speculation. They take advantage of airdrops and then leave, often with nothing left after the bubble bursts. In order to deal with these individuals, project parties may set various thresholds, which means that these individuals may end up being countered, resulting in a change in the nature of airdrops. This fundamentally makes airdrops unfair and affects their promotional effect.
The purpose of airdrops is to convert recipients into customers of the project, but the conversion rate is currently very low, with less than 10% and those with low conversion rates hardly have any active users. This makes the customer acquisition cost through airdrops very high, reaching thousands or even tens of thousands of dollars, higher than the average value of users in the market, diluting the value of existing users, and causing the coin price to rise and then fall sharply.
The percentage of airdropped tokens is rarely more than 20%, and this can be analyzed from the perspective of Bitcoin. The Bitcoin system is the issuance system of Bitcoin, and the miners are users who have paid a cost to obtain Bitcoin. However, for many platform or application projects, after switching to a Proof of Stake (POS) mechanism, the significance of currency issuance is lost, and it becomes a matter of accounting. There are three parties involved in token distribution: project developers, accounting parties, and users. Users are the users, and their importance is equivalent to the miners in the Bitcoin system. Therefore, targeting the cryptocurrency community for airdrops is a natural choice. Following the example of Bitcoin airdrops, subsequent projects have not distinguished their projects from Bitcoin projects, and have allocated a few percent of tokens for airdrops, thinking it is worth advertising. Advertising can increase project visibility, but it does not necessarily lead to customer retention. The effect of airdrop advertising is very poor, and there are even projects where over 50% of airdropped tokens have not been claimed. Who in the cryptocurrency community doesn’t have a few unknown airdropped tokens in their wallet?
If you treat me with the mentality of advertising, I will repay you with speculation. After receiving airdropped tokens, they are immediately sold, and three days later, people have completely forgotten the name of the project. The direct purpose of advertising is to attract consumers to spend money, not to give them money. Advertising is used to attract one-time and impulsive purchases by the majority of users, and ultimately only a few of these become long-term consumers. Only well-performing projects in the cryptocurrency field can achieve a conversion rate of a few percent in the advertising industry.
Airdropping using a method to attract consumers is inappropriate
The nature of token holders is not that of consumers, but rather that of project participants, or “shareholders.” In the initial stages of a project in the cryptocurrency field, you cannot rely solely on “shareholders” to build it, offering them too little in return. The retention of early users and the amount of advertising are actually irrelevant. User retention is a “shareholder” behavior, determined by whether the distribution is fair and the future growth potential. There are many articles on the future growth potential, but that is not the topic of this article.
Token distribution must be fair
Project developers are unhappy if the token distribution is too small, accounting parties are unhappy if they are too small, and users have the least power, so they receive the least. If the platform has no users, it has no value, which creates a conflict of interest. What is fair distribution for a project? In general, the more important and impactful a party is, the more they should receive. According to reason, the distribution should be evenly split between the three parties, or each of the two parties should receive half, so as to minimize conflicts. This is also an established distribution convention left by our ancestors, known as fairness. For many smart contract-based projects, they do not have accounting parties, but they still allocate a large portion to themselves, which is inappropriate.
Bitcoin has two parties, the project side and the mining side (users), and Satoshi Nakamoto, as the project side, also mined coins. This seems fair on the surface. His cleverness was that he distributed half of the total tokens in the first cycle, and nobody has questioned the unfairness of that. When few people participated in the early stages, he received a large number of coins. Satoshi Nakamoto established a standard and took 5.42%. The rest was taken by users (miners), while also keeping the accounts. Even though subsequent projects do not have their own accounting, the market environment has changed. Bitcoin may not need marketing, but today’s new projects definitely do. So how much should the marketing cost be? Airdrop amounts average a few percent and can be seen as a marketing cost. The distribution for the project side to marketing costs should not exceed 10% of the total issuance, which is also considered fair. Why is this distribution? Because the Bitcoin system is essentially an automatic system, and all benefits are created by users (miners), so they should receive the most. The greatest contributions should receive the greatest rewards, in line with the principle of fairness. Each project is different, with varying levels of participants, so there is no unified ratio. Decentralized currency DW20 follows Bitcoin, and the distribution ratio should be minimal. CLY, the chainless token, is a platform token, and the distribution ratio should follow that of cryptocurrency platform projects.
If it is not a currency issuance project, but rather a project relying on user growth, how should users be organized? Airdropping is the simplest way to aggregate user power. Thus, the problem is how to fairly and reasonably distribute tokens to the “shareholders,” or those who participate in the project. This is essentially “participation is mining.”
Moving from time-based to user-based token distribution
What is a fair way to distribute tokens? The token distribution method of Bitcoin has been recognized by the market, as it distributes tokens based on time. Clearly, due to the randomness of user entry being far greater than the randomness of miners entering the system, user entry cannot be described by a time-based algorithm, and should be designed based on a user-count algorithm, subject to the constraints of the natural growth S-curve hypothesis. The decentralized currency DW20 and the chainless equity token CLY, which we are planning to issue, will be distributed over 30 periods, with the amount distributed in each period varying, decreasing by approximately half every three periods. We have a testing period of about half a year, which is the golden time for airdrops. Once publicly listed, the issuance amount of the tokens will decrease sharply. More details are available in the chainless or DW20 whitepaper, which will not be repeated here. This makes the distribution of tokens relatively fair. In any case, the opportunity for early entry is the greatest. However, early customers are responsible for educating the market, and this also needs to be correctly evaluated; simply being early does not entitle one to hold onto everything. We have no human resources department (HR), and every evaluation follows Satoshi Nakamoto’s logic – game incentives.
How to retain users
Our tokens are designed with linear unlocking, which starts from the listing date and unlocks linearly every day. The unlocking time is different for customers at different levels. Gold customers will have a complete unlock in 30 days, while non-gold users will need 270 days. Gold customers must hold more than 50 bitcoins for over two years; most of them adhere to Satoshi Nakamoto’s hoarding theory and know what to do after understanding the logic. For non-gold users, they need enough learning materials and discussion areas for their 270 days. Our chainless website (chainless.hk) is currently a database, with nearly 90 bilingual articles in Chinese and English, and there will be over 100 articles when it enters the public testing phase. As one of the earliest project resources, the richness of the content should be among the best in the cryptocurrency field. In the future, the chainless website (chainless.hk) will integrate the needs of the chainless community, through blogs and forums, hoping that users who come will not want to leave. The role of the learning area is to turn users who enter with a speculative mentality into investors. We hope the conversion rate will exceed 50%. From a psychological perspective, this is a very low indicator, and users can understand the reasons for this themselves.
Starting from seed users
Airdropping without purpose has a very poor advertising effect. Word-of-mouth is needed in the early stages. We began distributing test coins during the private testing phase as part of a marketing activity called seed promotion. The number of tokens distributed in our first period is far less than Bitcoin, so we will increase the incentives for the seed round during the initial stage of the first period, while also testing the game system in our whitepaper. Because the system is not perfect, we emphasize the “credit of people around us.” In “Six Moves of ‘Satoshi Nakamoto’ Turning Air into Money,” the author said, “The early stage of Bitcoin is destined to be an opportunity for programmers, not for most people. Where is the opportunity for an individual? The opportunity is right around them. This is the advantage of our own position.” Who believes in you during the early stage of entrepreneurship? Your family and friends, almost unconditionally. Naturally, we need to reward this high level of trust – rewards outside of the algorithm, also known as activity rewards.
Token distribution in an airdrop project must adhere to Satoshi Nakamoto’s mining principles, whether in the seed stage or during public testing – competition and gaming. This is fairness. Only by being fair can we accumulate strength, and whoever can quickly gather users will win the future.
The future is the era of the entry of major players
The second question is how to anticipate the future. This is a design issue for the project, and we will introduce it in another article. Detailed information will be made public during the project’s public testing.
Cryptocurrency technology has been developing for 14 years, and all the necessary technological innovations have appeared. It is no longer possible to dominate through technology alone. Product capability is more important than technological capability; product capability competes with comprehensive innovation capability. In addition to product innovation, the chainless platform also has innovative incentives, community innovation, and theoretical summaries of cryptocurrencies, including a thorough analysis of cryptocurrencies, confirming that Satoshi Nakamoto was of Chinese descent – the sole original creator of Bitcoin. These are all firsts in the cryptocurrency field. Cryptocurrencies greatly respect originality, and our ideas are open, welcoming others to catch up and build the Tower of Babel together. We are very confident that even if people study hard, they may not be able to keep up, and if they don’t study, they definitely won’t keep up. To reiterate, cryptocurrency is a very broad field, including politics, law, economics, finance, stocks, currency, products, markets, and technology. Artificial intelligence is deep, while cryptocurrency is broad. For projects with such a broad scope, the difficulty does not lie in technology, but in comprehensive innovation. Satoshi Nakamoto designed Bitcoin as a comprehensive innovation, using mature technology. The chainless system is a highly integrated innovation, and its launch will greatly increase the competitive threshold for cryptocurrencies. Just as China’s reform began in the grassroots era and finally triggered a wave of intellectuals “going down to the countryside” in the late 1980s, after which the “fools” of that time disappeared without a trace. Cryptocurrencies will follow this path as well. The behavior of the top 12 cryptocurrencies indicates that the era of cryptocurrency products has begun. The elimination round has begun; whether you are in danger or in development depends on you.
