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Ripple CTO Explains Why Airdrops Could Do More Harm Than Good
In a recent interview with U.Today, David Schwartz, Ripple’s Chief Technology Officer (CTO), discussed the potential drawbacks of airdrops in the cryptocurrency market. According to Schwartz, airdrops could do more harm than good, particularly when it comes to promoting the adoption and growth of blockchain-based assets.
Airdrops are a popular marketing strategy used by many cryptocurrency projects to distribute their tokens or coins to a wider audience. The idea behind this approach is to create an initial influx of liquidity in the market, which can then be traded for other cryptocurrencies or fiat currencies. However, Schwartz believes that these rewards systems may not be as effective as they seem at first glance.
“Reward-based systems are a way to incentivize people to participate and hold onto assets,” Schwartz explained. “However, if you’re giving away free tokens without any real value proposition behind them, it’s basically just a tax on the existing holders.”
He also emphasized that these reward systems can cause significant problems for individuals who invest in cryptocurrencies through airdrops. They may receive a large amount of new coins or tokens as a reward and have to report this income as taxable.
Schwartz suggested an alternative approach, which he called “appreciation-based” methods.
Source: u.today
