5 Common Pitfalls in Running a Bounty Program to Promote Your ICO
The popularity of ICOs shows no signs of slowing down. The total amount of funds pumped into them is now exceeding the amount raised through venture capital investments.
However, not all ICOs are launched successfully. Many developers struggle to successfully promote their project and engage their community.
Bounty campaigns, where developers distribute a specific percentage of tokens among investors who are willing to promote the ICO, are a popular marketing strategy. When managed correctly, they have proven to be one of the most efficient methods of marketing an ICO, but it takes a lot of effort to run one properly.
Below, we analyze the five main errors that ICO managers make when organizing a bounty campaign.
1. Too many tokens allocated
It’s common for organizers to allocate a huge amount of tokens towards their bounty program, in order to attract loads of participants and reduce the amount of marketing they have to do themselves.
This can help reduce the overall marketing budget, but it often results in a more centralized system, where a small number of participants receive a huge stake in tokens. Often, these participants have little interest in the project itself and sell their tokens as soon as the cryptocurrency is listed on an exchange, causing its value to plummet.
This trend causes savvy investors to stay away from ICOs with large bounty stakes altogether. As such, it’s typically better not to allocate more than 1% of your tokens towards a bounty program.
2. Unfair token distribution
Many bounty organizers are lazy when it comes deciding how tokens will be distributed during a bounty program, often copying rules from other projects or making them up carelessly.
A common mistake is failing to split the bounty pool fairly among the different tasks. More time-intensive tasks should include rewards that encourage the additional effort. If YouTube bloggers aren’t adequately compensated for the whopping amount of time they spend on video production, compared to those liking and commenting on social media posts, for example, you’ll struggle to attract them to your bounty.
Here is an example of a good bounty distribution among sub-pools:
- 10% for likes and reposts in social networks;
- 30% for posts in blogs and media;
- 25% for translations and community management;
- 25% for Bitcoin avatar and signatures campaign;
- 10% for other activities that don’t fall into specified categories.
3. Setting bounty rewards by number of tokens
Each bounty activity has a reward that is often set in tokens. This is a big mistake as you can never predict how many people will participate.
If the number of participants is larger than expected, you might exceed the amount of tokens allocated to the bounty. In this case, you’ll either have to finish the campaign ahead of schedule or change its rules. Both actions will damage your reputation.
Instead, express your rewards for each activity as a percentage of the bounty sub-pool. Then, once the bounty campaign is finished, all tokens can be distributed among shareholders proportionally.
4. Poor promotion and small number of participants
Without enough bounty participants spreading the word around your ICO, you could end up with a small number of participants holding a large proportion of tokens. This is risky, as the value of the coin will fall fast if too many of these individuals decide to sell their tokens on the exchange. To avoid this scenario, set a total bounty stake size based on the number of participants.
5. Incorrect calculation of campaign results
The process for gaining ICO rewards can often be far from smooth. Most bounty programs have no automatization systems for calculating them, meaning there can sometimes be errors with the calculations. Typically, it can take a long time for rewards to be paid, and even longer for mistakes to be corrected.
Calculation mistakes can also lead to an unhealthy proportion of the total tokens being offered within the bounty program. If too few are offered, it becomes difficult to find people to take part in the program. If too many are offered, it can have a negative effect on the coin’s price after the ICO has been completed.
An early tumble like this can create a snowball effect on the value of a cryptocurrency that is tough to recover from and is best avoided at all costs.
How to solve the pitfalls of bounty programs
Fortunately, technology now exists to help bounty managers improve the way they share information and offer rewards within bounty programs.
For a long time, cryptocurrency companies never thought to create this technology.
However, now there are algorithms which can automatically grant tokens to people taking part in a bounty program. The system automatically detects users’ activity in social networks, calculating and sending a designated amount of tokens based on this activity. The whole process works so smoothly, it can incentivize even more participants for your bounty program. If you’re planning on launching a bounty program, it could be worth investigating what these applications could do for your business.
Alex Phenom is the founder of Phenom.team, where he leads the research and development of ICO platforms and offers solutions through blockchain technology. He is also a Ph.D. candidate, with 8 scientific papers published to date. Alex has a degree from the Department of Mechanics and Mathematics at Moscow State University. He has extensive experience in Software Development, Data Analysis, Computer Modeling and Signal Processing. Before Alex got into blockchain and Bitcoin, he was the head of R&D department at Navigine, where he developed an indoor navigation platform that today operates in more than 100 venues worldwide.