A token is not enough. Several other elements must come together for a cryptocurrency project to be successful. At a bare minimum, vision, community, and leadership are prerequisites for developing product-market fit. Anyone in doubt needs simply to recall the ICO boom and bust mania of 2017 and 2018. Is UBQ still around? What’s the price of WINGS lately?
That said, for the right project, the successful distribution of a token can galvanize a community, fuel excitement, and drive adoption. The Uniswap airdrop is a prime example. The protocol airdropped 400 Uni tokens on users in September 2020, and the event provided a shot in the arm for the then lagging decentralized exchange. Currently, Uniswap sees over $1 billion in daily trading volume, making it one of the most popular exchanges in the space. The token is listed 11th in market capitalization on Coingecko as of writing.
Cardano offers protocol creators and communities a similar path to success. Protocols can mint native tokens to promote their project. These digital assets then enjoy first-class treatment throughout the ecosystem. However, distribution mechanisms like token faucets and airdrops have yet to be implemented on Cardano. If startups seek to emulate the success of Uniswap and others, this tooling is highly needed. A Project Catalyst proposal by infrastructure company Five Binaries aims to accomplish just that.
Distributing Tokens on Cardano
Cardano is a proof-of-stake blockchain that relies on an eUTXO accounting model to prevent double-spending. While fees on the blockchain are cheap, there must be a mechanism to prevent illicit actors from clogging the network with dummy transactions.
Cardano currently limits this type of DDoS attack by requiring transactions to send at least one ADA to recipients. This restriction undermines the viability of token faucets and airdrops as such mechanisms quickly become expensive. Unfortunately, new projects may struggle to gain the initial traction that token distributions help provide.
The development and tooling of the Cardano ecosystem are in full swing under Project Catalyst. As such, Five Binaries is proposing a server-side component to facilitate cost-effective faucets and airdrops to help newly-minted native tokens gain traction.
The proposed service will function as a bridge. Server-side software will link native token issuers and end-users. When an issuer wishes to airdrop or faucet a token they’ve minted, an end-user can send one ADA plus the required minimum transaction fees to the service. The service will then directly return the ADA and the native token to the end-user while paying the transaction fees.This non-custodial solution proposed by Five Binaries will rely on the current scripting capabilities of Cardano. Although smart contracts remain around the corner, small contract scripts can be leveraged to facilitate this exchange without the need for a trusted 3rd party. The end-user needs only to provide an address, and a script will be signed by the server and a swap executed.
Five Binaries
Five Binaries is an infrastructure development company active in the Cardano and Ergo ecosystems. The enterprise consists of developers Vladimir Volek and 1000101. The operator of the StakeNuts stake pool, Marek Mahut, leads the operation. Ada Pulse readers will recognize the startup as the team behind Blockfrost, a development project aimed at creating a fully-functional API and IPFS service for Cardano. Invested in advancing the ecosystem, the project generously provides successful Catalyst proposals a year of its premium service for free while also offering its basic tier for free to the community.
Marek Mahut’s credentials alone speak to the professionalism of Five Binaries and their proposals. As mentioned, Marek is the operator of the StakeNuts stake pool, which boasts a 500,000 ADA deposit. Marek also recently presented Five Binaries’s Ergo-bootstrap tool at the 2021 Ergo Summit, and the developer has pushed forward innovation around oracles and oracle pool integration into Cardano. Finally, he has also recommended recent suggestions for an NFT-related Cardano Improvement Proposal or CIP.
Roadmap, deliverables, and performance
Five Binaries plans to deliver fully working server-side software, documentation, and a containerized solution within two months of receiving funding. The long-term goal of the proposal is to have 50 use cases deployed in 2021.
Moreover, Five Binaries expects the proposal will require 80 engineering hours for completion. Towards this end, they will apply their standard rate of 100 EUR per hour for a total of 9500 USD. Salaries, infrastructure costs, office rent, accounting, and taxes are budgeted for within this amount. Five Binaries employs talented developers, so they pay comparably to deliver the best experience and solution possible. Finally, the deliverables of this proposal will be open-sourced under Apache License 2.0.
If you’d like to know more information or have questions/comments regarding Token faucet proposal, check out the link provided: https://cardano.ideascale.com/a/dtd/Token-faucet/341466-48088
