Author: Nancy, PANews

Previously, the founder of Compound claimed that "the era of points has come to an end," and later the founder of "airdrop pioneer" Uniswap suggested that projects "issue tokens instead of points." The rampant use of points has led to "aesthetic fatigue" and even negative sentiment.

As an important tool for rapidly increasing Total Value Locked (TVL) and user numbers, the introduction of a points system is driving the prosperity of various project ecosystems and achieving a significant increase in valuation. With the rise of the points culture in the crypto field, projects in various sectors including Layer2, LSD, SocialFi, DePIN, blockchain games, exchanges, wallets, and NFTs have all joined the game.

However, the increasingly insular points race is struggling to conceal its decline. Currently, there are several controversies surrounding the points system in the market:

Linear/Batch Release of Rewards Criticized for Harming User Interests

Airdrops have become an emerging tool for projects to incentivize user participation, but based on past cases, they often face risks such as selling pressure and difficulty retaining users. Many projects have begun implementing strategies such as linear release or batch distribution of rewards to address this, but users are not receptive to this approach compared to the traditional mining and withdrawal methods. For example, after the leading EigenLayer in the liquidity mining race adopted a batch and linear airdrop method, it sparked dissatisfaction among users, leading to a large-scale withdrawal request. In response, EigenLayer clarified some community issues and announced the distribution of additional tokens, EIGEN, to all interacting users. The liquidity re-staking protocol Renzo also faced severe disconnection due to the airdrop rules that set the top 5% addresses for linear release, and later adjusted to a one-time release.

Questionable Validity of Witch Hunts

Although witch hunts can to some extent ensure the fairness of reward distribution mechanisms, many projects' witch hunts for points are considered to lack validity. This is because the points system is mainly based on deposits or trading volume, and the acquisition of these points is based on indicators such as asset quantity, participation duration, capital scale, and number of transactions, with a certain withdrawal restriction period. This means that users now require higher time and capital costs compared to traditional airdrop forms. Moreover, many projects introduce various tasks to encourage user engagement, but then conduct witch hunts, significantly increasing the risk of user backlash. In addition, some projects implement anti-witch strategies by setting minimum point standards, which can to some extent filter out the low-cost participation group, but also exclude some genuine users who participate at a low cost.

Continuous Inflation and Dilution of Point Value

Different projects have different durations for their points activities, including single-point activities, as well as multi-period/multi-phase or even permanent points plans. While multiple points activities can bring sustained engagement to projects, the delayed points rewards and the continuous dilution of point value are eroding user enthusiasm. For example, the new points rules introduced by the L2 project Blast after the mainnet launch, as well as subsequent activities such as points bonuses and Blast Jackpot, have repeatedly inflated and diluted the points earnings of early participants.

Unfairness in Reward Distribution Mechanism

As many projects prioritize the size of funds in points earning, this is not friendly to retail investors without a financial advantage, especially when some projects set minimum points, making retail investors "also-rans," despite being the main participant group in the market. For example, the recent deposit of 120,000 EETH by the team of Justin Sun into Swell L2 accounted for 46.6% of the total deposits. In addition, the batch rewards for users at different points stages are also considered unfair, such as the initial airdrop plan of EigenLayer, which included "users staking directly in EigenLayer and LRT holders" in the first stage, while other protocol interacting users were excluded.

Points as a "Traffic" Tool

Unlike DeFi mining projects with clear APRs, the expected purpose of a points-based airdrop is to be the main motivation for user participation, but it is also seen as an effective traffic acquisition strategy by many. For example, the recent points trading activity launched by the Solana ecosystem DEX derivative platform Drift Protocol, which started airdrops after several months, was questioned by the community for not being based on points, but rather distributed to OG users, raising concerns of "insider trading."

In the end, the skepticism surrounding the points model stems from the lack of transparency in distribution, imbalance in reward distribution mechanisms, arbitrary rule changes, and the use of points as a marketing gimmick, all of which are significantly eroding user trust and project brand value.

As most points projects are becoming increasingly similar, users are experiencing "aesthetic fatigue," but many projects are beginning to "put effort" into points marketing. For example, Blast recently introduced the Gold Nugget Grand Prize, allowing users to earn points lottery chances by adding tokens or NFTs to form sets, enriching user points acquisition channels and increasing participation interest; AnimeCoin's Gacha Grab points activity allows users to obtain points through NFTs and draw different levels of gacha rewards, creating interactivity and interest, while avoiding excessive accumulation of points by increasing points consumption channels; UniSat launched a limited-time points multiplier reward activity, effectively increasing user participation and retention; Friend.tech distributes points from investment institutions such as Paradigm to users, this "subsidy" model is also more likely to increase user loyalty and better attract projects.

At the same time, as points-related tools gradually improve, they will have greater room for growth and optimization. For example, Whales Market can provide an off-exchange points trading market, OKX Web3 wallet supports points mining dashboard functionality, and Stack can build on-chain points allocation and tracking frameworks, and so on.

In summary, the high funding and user participation in points projects are driven by market sentiment. Once the market sentiment reverses, it will be difficult to sustain, so when designing points, projects should pay more attention to transparency and fairness, as well as comprehensively capturing community user contributions.

"As Hayden Adams said, 'If you don't think the community deserves it, don't release the token.'"

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