Crypto Points Farming: Pointless or Worth It?
Crypto Basics

Crypto Points Farming: Pointless or Worth It?

6ในการอ่าน
1 month ago

A new narrative has emerged recently — "points" farming. What exactly is points farming, and how does it differ from airdrop farming? Read on to find out!

Crypto Points Farming: Pointless or Worth It?

สารบัญ

As major airdrops in 2024 continue to catch headlines and boost thousands of crypto wallets (most recently Jupiter’s JUP token), ​​points systems have recently emerged as a popular but controversial innovation for new blockchains and protocols to incentivize usage and activity.
New protocols like Jupiter and Jito have had great success in the last few months utilizing innovative points systems in order to boost their transaction volumes and total value locked (TVL) before delivering major Solana airdrops, while speculative marketplaces like Whales Market are helping you cash in your crypto points and rewards prior to any actual airdrop.
These Web2-like rewards programs provide teams more flexibility and discretion compared to regular cryptocurrency airdrops, and while it’s hard to track, some estimate up to 40 billion points have been issued to date.
Even BitMEX co-founder and investor Arthur Hayes has chimed in on the points meta. In his recent blog post titled ‘Points Guard,’ he opined that “whether you like it or not, every successful project, and by success I mean, token number go up, will enact a points program before their TGE.” After Bitcoin, ICOs, and yield farming, he expects the points program to be the next thing to drive user acquisitions for new projects in the current cycle.
But unlike regular crypto, these “points” are hard to appraise for a number of reasons, potentially amounting to nothing more than a rather pointless IOU without much future value. This has led to a number of crypto experts such as the panel on this insightful The Chopping Block podcast begging the question: who’s really doing the farming, the users for points, or the projects on their users?

Let’s dissect this question and more in this article!

Join us in showcasing the cryptocurrency revolution, one newsletter at a time. Subscribe now to get daily news and market updates right to your inbox, along with our millions of other subscribers (that’s right, millions love us!) — what are you waiting for?

Crypto Points vs Cryptocurrencies

Let’s quickly distinguish between the two digital asset types. Crypto points and cryptocurrencies can be separated by their intrinsic value and operational framework.

  • Cryptocurrencies operate on a decentralized blockchain, offering transparency and security, with their value driven by market dynamics.
  • Crypto points, however, can be viewed as a form of internal currency, whose value and utility are defined solely by the issuing entity.

Crypto Points Farming Explained

Put simply, crypto points farming refers to completing tasks or performing specific actions on a blockchain or Web3 protocol to gain rewards points.

The project may or may not later convert the points into an airdrop of their native token on their token generation event (TGE). Notice the ambiguity, which goes against blockchain technology’s core tenets of immutability and transparency.

In an airdrop, tokens are usually verifiably coded to be distributed to users based on predefined on-chain criteria, while crypto points have no such hardcoded commitments. Teams can simply change the rewards criteria and conversion rates from points to actual tokens later on, essentially keeping users guessing and moving the goalposts as they see fit.

Why Do Projects Use Points Systems?

As Arthur Hayes wrote in his blog post earlier, points programs have become the “pseudo-ICO fundraising and user acquisition tool for projects” in the current market cycle.

Points systems allow new projects to drive users to their platforms, and shape their desired user behavior towards the most valuable activity on their platforms.

Teams keep their points criteria ambiguous by design and teams can always adjust points-to-airdrop conversion rates later.

This centralized control allows projects to adapt and modify the points system based on evolving goals and community feedback, providing a flexible tool for user engagement and reward.

Such flexibility can be useful for teams to "stress test" their protocols with spikes in activity, iterate on incentives design, and reduce counterproductive behavior from farmers. However, the unpredictability also reduces transparency for users and makes gaming the system easier for projects, which can lead to growing distrust and dissatisfaction with new DeFi project launches.

Notable Projects Running Points Programs

There are now numerous new projects launching their own points program to reward early adopters and attract new users. Projects such as Blast, Rainbow and Rabby have pioneered the use of crypto points, each with its unique approach to rewarding users.

Rainbow is a Ethereum-based wallet that incentivizes in-wallet interactions with Ethereum and other EVM chains such as asset swapping, bridging, referrals and more through its points program. Meanwhile, Rabby is another Ethereum-based wallet that announced a retroactive points program for every EVM wallet that has prior activity. Wallets can also earn more points by migrating from MetaMask to Rabby, essentially conducting a vampire attack on leading hot wallet MetaMask.
Speaking of vampire attacks, Blast, a new layer-2 developed by Blur founder Pacman, launched a point rewards campaign for users who bridged to the new L2 (although mainnet has not yet launched). Blur was particularly innovative in how they use airdrop farming, and used it very successfully in a 2023 “vampire attack” to pull users away from market leader OpenSea. Blur founder Pacman is now running the same playbook to drive the upcoming launch of his new Blast chain.

The Problem With Farming Crypto Points

Some argue points are the best new tool for restoring user activity after the crypto downturn, as the FOMO speculation around free future token rewards captures people's imaginations and fuels engagement across the entire crypto space.

However, there is disagreement on whether points actually benefit protocols and users long-term compared to regular airdrops. Detractors argue they mostly attract fickle "airdrop farmers" who are not loyal protocol users.

However, the flipside is also true: points systems give possibly too much control to the projects.

There’s no guarantee that an airdrop will happen and that the issuing project will deliver on its promise of fairly rewarding user points.

Points farmers never know their potential ROI on their efforts beforehand, and while this dynamic creates excitement, it also gives projects the power to “rug” users by drawing them in with the promise of a big airdrop which ultimately fizzles out into disappointingly small rewards.

This behavior can lead to point farming fatigue over time, where projects’ disappointing lack of fair rewards erode users’ trust and cause them to cease their support. However, evidence suggests teams still feel compelled to satisfy airdrop farmers to avoid community backlash.

Are Points Derivatives Markets the Next Big Thing?

As points systems gained traction, platforms have emerged to allow users to speculate on the value of these points before the TGE date. For instance, Whales Market is an over-the-counter (OTC) DEX for users to trade points, airdrop allocations and tokens pre-TGE. Meanwhile, derivatives platforms like Aevo provide markets for traders to speculate on the prices of pre-launch tokens. For example, the controversial L2 Blast, which launched a bridge-to-earn points program last year, is currently trading at $4.173.

Can Farmers “Game” Points Systems?

Teams can use their discretion over points to discourage abuse. They can invalidate points from specific addresses that engage in undesired behavior such as sybil attack-like multiple account farming, unlike binding token commitments you get with regular airdrops.

However, permissionless trading markets make points nearly impossible to police fully. Teams can ban immediate farmers but can't easily stop speculative trading in dollar-denominated derivatives contracts.

The Future Of Crypto Points

As the web3 ecosystem continues to evolve, crypto points serve as a powerful tool to foster engagement, loyalty, and community growth. Their flexibility, combined with strategic application, give projects a lot of options on how to drive and direct interactions with their users for active participation and sustainable growth.

However, the centralized nature of points systems and the possibilities for projects to exploit the efforts of its users raises a few questions around its ethicality and sustainability.

For DeFi users, understanding the nuances of crypto points is crucial. They should strive to only support projects that offer clear, fair, and meaningful rewards systems that can not only provide immediate benefits but also contribute to the broader success and innovation within the Web3 space. After all, we’re supposed to improve on the imperfections of Web2, not repeat it.

This article contains links to third-party websites or other content for information purposes only (“Third-Party Sites”). The Third-Party Sites are not under the control of CoinMarketCap, and CoinMarketCap is not responsible for the content of any Third-Party Site, including without limitation any link contained in a Third-Party Site, or any changes or updates to a Third-Party Site. CoinMarketCap is providing these links to you only as a convenience, and the inclusion of any link does not imply endorsement, approval or recommendation by CoinMarketCap of the site or any association with its operators. This article is intended to be used and must be used for informational purposes only. It is important to do your own research and analysis before making any material decisions related to any of the products or services described. This article is not intended as, and shall not be construed as, financial advice. The views and opinions expressed in this article are the author’s [company’s] own and do not necessarily reflect those of CoinMarketCap.
7 people liked this article