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Do Air Drops Violate the Law of Money-Value Creation?

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Some economically savvy crypto enthusiasts might observe that there have been a few examples of “air drops” where project teams gave their cryptocurrencies away for free without appearing to link each currency unit to a corresponding unit of value. This might seem like it violates our Law of Money-Value Creation, but it does not. Air drops only work in unique niche applications where the tokens themselves unlock some form of utility value offered by the network, e.g., storage capacity, computing capacity, or some other valuable service.

Outside of a utility token, the value of cryptocurrency units is zero when they are air dropped until and unless they become useful for some valuable purpose. Once they’re used for a valuable purpose, they can absorb utility value from their networks as they become increasingly used in useful applications. In this case, the linking between initially orphaned token/currency units at the air drop point and their subsequent corresponding service value units is asynchronous, but the linking still occurs and must occur; otherwise, the orphaned units will create inflation that debases the unit supply to the point of being worthless.


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