Crypto start-ups preparing their token sales often run bounty campaigns to promote awareness of their project.
Bounty campaigns work by offering individuals rewards or incentives in the form of ‘stakes’ in exchange for carrying out specific tasks or activities.
These activities include actions on social media platforms, such as likes, retweets, shares, and comments on Facebook, Twitter, etc.
Why crypto start-ups offer stakes
The benefit to a crypto start-up is that bounty campaign helps to promote the token sale on social media platforms, creating a buzz about the project, for stakes, which represent some part of tokens supplied in the future, but not for money paid right now.
Offering bounty stakes instead of fixed rewards allow start-ups to attract as much as possible participants for the predefined number of tokens (bounty pool).
How it works
A bounty hunter earns stakes for completing an action, for example, he/she likes a start-up’s post on Facebook and earns 1 stake, which will be converted into some amount of tokens later. A stake-to-token conversion ratio could be defined only after the end of bounty campaign and depends on the type of bounty campaign and number of participants. In general, a stake-to-token conversion rate can be calculated as follows:
P = Bounty pool (number of start-up's tokens dedicated to bounty campaign)
n = Number of stakes earned by all bounty hunters ( can be counted as the total number of stakes in the spreadsheet)
R = Stake-to-token conversion ratio
R = P/n (tokens)
Where a personal bounty hunter's reward = (personal stakes)*R or P*(personal stakes)/n
For example, if a hunter earned 5 stakes and a stake-to-token conversion ratio was defined (after bounty campaign) as 3 tokens per 1 stake, then a hunter gets 15 tokens (5*3).
The benefit for crypto start-ups (ICO, STO, post-ICT projects) from applying bounty stakes system to its bounty campaign is in getting free advertising that will be paid later by the project's tokens. It is a trust-based system. If e.g. an ICO sucessfull a hunter will earn free tokens. But if an ICO fails than hunters possibly end up with nothing or a very small amount of payment.