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Professor Kenneth Hsing CHENG
John B. Higdon Eminent Scholar Chair
Chair, Information Systems and Operations Management Department
University of Florida

ABSTRACT

The rapid advancement and adoption of blockchain technology have heralded an explosive growth of Initial Coin Offerings (ICOs) as 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 an airdrop campaign through which they distribute a specific amount of free official tokens or promotion tokens to potential investors on the blockchain with or without their permission. Of paramount concern 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 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 in the potential investors’ ICO investment probability, as well as their investment amount. We further find that the airdrop is more effective in increasing the investment probability for individuals whose personality traits are dissimilar to the blockchain project than those similar to the project and this effect is driven by the information channel mechanism. We also find that the token airdrop can motivate token receivers to stick with the focal project for a longer period. Our study contributes to the literature on ICOs, promotional marketing, and personality similarity, and provides important and useful managerial implications to blockchain companies on whether and how to launch an airdrop campaign.