What are Lockdrops? Are Lockdrops Worth it?

Many people are familiar with the term Airdrop in the cryptocurrency world. But have you ever heard about lockdrops?. This article is all about what are lockdrops and what’s the difference between lockdrops and airdrops. Let’s take a look at it in more detail.

What Are Lockdrops?

A lockdrop is a form of allocating tokens to a big network. This is similar to airdrops but Lockdrops are revised airdrops that demand some allegiance from the user to obtain free tokens. In a lockdrop, users stake one token for a particular time and obtain their staked tokens and another token after clearance. For example, token holders of a specific network such as SOLANA will lock their SOL token by utilizing a smart contract.

The longer their funds are closed in, the more tokens they will get from that new network after it launches. This is just like fixed deposits but the terms and durations are variable. 

The period of the staking is irregular. Tokens are locked in a smart contract, and the return is defined on a pro-rata motivation — the more and the longer users stake, the more they get in return. The purpose of lockdrops is to give users an incentive. If users lock in some of their tokens to some blockchain network’s security then they will be more curious about its success.

Lockdrops are formed via smart contracts, with every token that is sealed or locked in, another token is produced. After the network is pitched; the user can plead their initial funds and the new tokens. Another possibility is provided for users to show their backing for the project by logging their token address and obtaining a lower reward of tokens rather.

Commonwealth Labs first launched the idea of a lockdrop on their Edgeware network and Polkadot blockchain. Edgewares lockdrop proclaimed to have delivered away more than 90% of their tokens via lockdrop in 2019.

Lockdrops vs Airdrops

We have already explained the difference between the two but it is important to understand how both work. Let’s take a look.

Lockdrops: Users lock some number of tokens (for example 50 XYZ tokens of a particular token) in a smart contract before the token is released. They obtain their 50 XYZ tokens and some free PQR tokens when the token PQR launches. The more and the longer users stake XYZ tokens, the more they get in return.

Airdrops: In this, users communicate with the project by testing it on the testnet, supplying liquidity, or other activities that are appropriate to its use case. They get free tokens based on those activities. 

The major distinction is that lockdrops demand a more increased extent of a stake. Users could obtain an airdrop as a motivation for backing the protocol. In the case of a lockdrop, users have to stake their coins with a unique protocol and incur an option price while it’s staked.

Top 3 Most Popular Lockdrops

Edgeware Lockdrop

When we distributed 90%+ of our token in the lockdrop, defining the fair launch model — @binance signaled their users ETH on their behalf. Today, this $EDG (10% of our total supply) is now in the hands of Binance users. Welcome to Edgeware!https://t.co/yZk6NVOReO

According to its official post, Edgeware was the first protocol to launch the lockdrop process in 2019. It circulated 90% of its token via lockdrops and only 10% belonged to the team. Users locked ether in a trustworthy “lockdrop user contract” that discharged the ETH security after three to twelve months. Users were also capable of “signal” rather than locking up their ETH — which essentially implies they signal their purpose to partake in the Edgeware network and effectively obtain an airdrop. Yet, those users obtained fewer dividends and could not function as validators on the network.

Astroport Lockdrop

https://twitter.com/astroport_fi/status/1528859399594209280?s=20&t=UrXDhU2VfrgJnBfPVUX84A

According to its official document, Astroport incorporates the most useful components of six years of evolution on the Ethereum blockchain and delivers it on Terra. It is a money market protocol that distributed 7.5% of its token issuance via a lockdrop.

Mars Lockdrop

https://twitter.com/mars_protocol/status/1491852252201553925?s=20&t=UrXDhU2VfrgJnBfPVUX84A

According to its official post, Mars is an on-chain credit platform created on Terra and controlled by a decentralized community of users and developers. It circulated tokens with a lockdrop process equivalent to Astroport. Users latched UST as security in its Red Bank for 3-18 months. The longer a user locks their UST (in three months to 18 months), the more MARS tokens they will get.

Are lockdrops Beneficial?

As mentioned, the Edgeware network was the first lockdrop. At the time of writing this, no other projects are planning to do lockdrops. Yet, a thriving lockdrop might be utilized again if the community of participants is beneficial and diverse. The crypto world is full of rewards and shocks at the fore of invention.

Many of the trial and error projects they execute are ordeals to witness if it performs. They drive gambles and experiment. But if it flourishes, it will guide us to many more. The lockdrop method is becoming widespread, so only the future will tell us more about its profitability.

Lockdrops have two goals: a more determined user base and bypassing the token dump linked with airdrops. These things are difficult to evaluate. The important thing to remember here is that users should always partake in a lockdrop if the project looks profitable, secured, and robust. Go for the lockdrop if you can commit to it for the long run.