What the First Token Hostile Takeover Will Look Like
A hostile takeover is possible in a company, and it is possible in a cryptocurrency. It is even possible for a more centralized cryptocurrency to be taken over by another company.
A big reason for doing this would be if the company running a cryptocurrency is doing things that the community doesn’t like, or if the new cryptocurrency would have extra features.
A hypothetical case of a token takeover
For example, let’s say NewCoin, a very new project, is a direct competitor with OldCoin, and has better technology and a newer model. But instead of rising ahead of the competition in the normal way, by rising in value as people switch from OldCoin to NewCoin, NewCoin wants to completely replace OldCoin through a hostile takeover.
Here are the steps NewCoin will need to take:
- Notify the public, create hype
- Launch NewCoin
- Airdrop NewCoins to OldCoin owners
1. Notify the public, create hype
First NewCoin will have to tell the community of OldCoin about the upcoming launch of NewCoin, convincing the community that NewCoin follows the same mission as OldCoin and has better technology, a better way to reach that mission.
This will convince OldCoin owners to support the fork.
2. Launch NewCoin
Now that the community of OldCoin is notified, the NewCoin network will be launched. This network might be very different from OldCoin, but is a better version of OldCoin.
3. Airdrop NewCoins to OldCoin owners
This is the big step that distinguishes a hostile takeover from just creating a better token and hoping for people to move from the old one to the new one.
In this step, everyone who owns 1 OldCoin recieves 1 NewCoin on the new network. This will hopefully transfer the majority of the community and the value from OldCoin to NewCoin. If all goes well, OldCoin will be worth next to nothing, while NewCoin will be instantly much more valuable than OldCoin.
For example, the prices might change like this:
| X | OldCoin Price | NewCoin Price |
|---|---|---|
| Before the airdrop | $13.45 | $0.01 |
| After the airdrop | $0.02 | $12.97 |
This shows a great transfer of value from OldCoin to NewCoin, definitively proving that the community of OldCoin has successfully transferred to NewCoin.
Pros + Cons
There are pros and cons to this method of creating a cryptocurrency. It works best if the coin being taken over is clearly of worse quality than the new coin, and they both are very similar in functionality. This is a very dangerous technique and if it fails, it will hurt the value of your coin massively. But if you succeed, you can take over a large percentage of a coin’s market cap, which is a great way to kickstart any project.