Analysis

The Point of Points in Crypto

Just about every rising protocol seems to have a points program. Why?
Arjun Chand Arjun Chand Feb 12, 20244 min read
6
0
The Point of Points in Crypto

Crypto has caught a bug, and it’s not the kind one can shake off easily. It’s the points fever!

It's a phenomenon that’s hard to ignore, with virtually every project doing some form of points program for users. So, if you’ve found yourself asking, "What’s the point of points?" then today’s story will bring you up to speed on the what, where, when, and why of points in crypto.

Let’s dive in! 👇


Making Sense of the Points Meta

Points are everywhere. To date, more than 40 billion points have been awarded to users, and there’s no sign of this trend slowing down.

Points are essentially a score, a numerical tally, that users accumulate from projects based on their activity within an app.

  • Connected your wallet today? Here’s 5 points!
  • Executed a swap? Nicely done, you've earned 10 points!
  • Wanna bridge? We’ll give you 25 more points. Not today? No worries. Come back tomorrow to keep your streak alive, and you’ll find 10 points waiting for you!

Consider points a strategic product marketing tool that projects leverage to increase user loyalty, amplify engagement, and stoke the flames of airdrop speculation. This is achieved by assigning a score to certain user actions within the app that align with the project’s goals.

Each points system is scrupulously designed to boost the project’s north star metrics. Take a lending and borrowing platform, for instance, where the critical measure is the total value locked. 

A common trick to boost TVL on lending platforms is with points.

But how did we get here? 


The Airdrop Connection: Are Points a Prelude to Token?

The dialogue around points often starts with Blur, credited by many as the first to do it at scale. Blur's approach disrupted the NFT market and has enabled it to dethrone Opensea as the market leader in the niche.

In October 2022, Blur initiated ‘Season 1’ of its points program, coinciding with the platform’s launch. This launch established a blueprint for points:

  • Points for using a project in a way that’s desired by the team – Blur rewarded points for listing and trading NFTs on their platform.
  • Points ‘vampire attack' to lure users of competitive platforms – Blur airdropped points to wallets that had used marketplaces like Opensea in the six months before Blur's launch.

Blur distributed 360M points to users in Season 1, and after it ended in February 2023, the BLUR token went live. The Blur episode told airdrop farmers everything they wanted to hear – tokenless projects distributing points could culminate in an airdrop, setting expectations of users and their subsequent use by other projects.

Following Blur, Friend.tech reinforced the points playbook, linking points directly to airdrops. In the Friend.tech app, points were featured in the airdrops section, leading users to equate points with airdrops.

However, it was the Jito airdrop that truly set the points meta on fire. The Jito airdrop was a wealth creation event on Solana, and thousands of dollars were airdropped to users, with even the lowest-ranked tier bagging a 5 figure airdrop. Jito's success story, underpinned by its points program, showcased the lucrative potential of airdrops, especially when associated with points.

These events led to a dual explosion: users began to religiously collect points, and projects rapidly deployed their own points programs.

From platforms like margin.fi, Tensor, and Hyperliquid, to wallets such as Rainbow and Rabby, and even L2s like Blast, Manta, and Mode, points have become ubiquitous across crypto.

While new to crypto, if you take a moment to reflect on the concept of points, it becomes clear this is not an idea novel to the crypto industry. Points have been a staple in traditional business models for decades — think hotel loyalty programs, credit card rewards, and airline miles. These are all iterations of a points system.

The distinction, however, is significant and highlights what differentiates crypto from traditional finance: the potential for tokenization. 

Umm, sorry Garry, but they’re just points…for now.

The possibility and anticipation that these points could someday be converted into tokens infuses crypto points programs with an added layer of excitement and potential.

However, for the users, it’s important to understand that while points could indeed be exchanged for tokens in the future, this is not a guaranteed outcome for every project. Ultimately, the decision to convert points into tokens rests with the projects, not the users.

There’s a saying in the airdrop farming circles: “You will be farmed, and you will be happy.” While this might hold true in an ideal scenario, it’s not necessarily what’s going to happen with every project. As more projects jump on the points bandwagon, the likelihood increases that speculators may find themselves disappointed.

Often, real capital is at stake (like in lending/borrowing platforms or staking/restaking protocols like Eigenlayer) and there’s an opportunity cost involved as there are so many projects and points systems. Thus, with points, it’s important for users to choose wisely which projects to support. As always, DYOR. 


The Final Verdict on Points

In conclusion, points do have their merits

They fulfill projects' needs for user engagement and retention, offering the psychological incentives of token launches without the associated legal and regulatory complexities.

For airdrop farmers, points provide a clear strategy for maximizing their airdrop potential,  complete with real-time feedback and a sense of competition through leaderboards, adding a layer of gamification to the process. 

Yet, for purists, points may dilute the excitement of the unexpected. The joy of receiving an airdrop simply for using a service when needed and being rewarded with tokens at a later time.

Nonetheless, the game’s a game, and for now, it seems that points are the game we're all playing, at least in the foreseeable future. May the odds be in your favor.

6
0
No Responses