Points Are Here to Stay

Points, points, points! 

Amidst overextended prices and sub-par yields, a new driver for engagement took the market, becoming crypto’s lifeline. With almost every trending project jumping on the points train, the default assumption was that points were just another fad. But they’re still here a year or so later.

So are points just an extended trend that will inevitably come to an end?

Here’s my bull case for points.

Aligning Interest

Points align interest between a project and its users earning points because they represent an undefined future reward.

Points denote an uncertain future payment in token equity, and because of this, points enjoyooors must be convinced, or convince themselves that the project will have significant value at the future TGE. 

Not only this, but they must believe that future token equity will be more valuable than the alternatives on the market. Due to this rivalrous nature of points campaigns, there is some natural selection in aligned interest between the points seekers and the project issuing them.

Points, of course, are a valuable bonus to users that already have a need for the product, and thus help overcome onboarding friction, but they also offer a chance for the project to make a sort of VC pitch to potential future users that do not yet have a need for the product, but can imagine themselves using it some day in the future. 

The key here is product empathy. The easiest way to evaluate a product’s potential is to imagine whether its value proposition is strong enough to capture you as a user. And this leads to some natural selection of potential users amidst the sea of points campaigns.

So even if these points seekers do not have a real need now for the product, they may be likely to in the future as the product grows and matures, or as their familiarity with the product improves.

Contrast this with OG token mining, where the only consideration is APY!

Maximizing Point Value

Since the value of points will be evaluated in the future, projects should do their best to communicate their long-term vision with these users and convert them to believers and evangelists.

The better the project does in communicating a specific vision, the better the potential alignment between points seekers and target users.

In summary, projects might envision their points campaign as:

- Being sufficient, but not excessive, so as to offer a simple onboarding reward to users with existing demand

- Offering an open invitation to potential future demand to buy into a vision they can imagine themselves being a part of

For the second point, the more specific the vision the better, as it acts as a filter that ensures some overlap of interests. For example, points issued by a fixed-rate lending protocol focused on capital efficient lending against a broad range of collateral, are likely most valuable to those that believe fixed-rate lending in DeFi against crypto assets and RWAs will settle trillions of dollars. These points are likely less valuable to someone that believes variable rate lending will dominate the market, or someone that is more excited by perps or on-chain gaming.

Points or No Points

Why not just tell users you’ll airdrop tokens to them someday? Doesn’t this accomplish a similar goal of engaging aligned users?

Broadly it may accomplish a similar goal, but points give tools to projects to incentivize whatever actions are highest priority for them. For example, if a lending product has PMF on the demand side, but not the supply side, points could be used to direct new energy towards gathering usage, and thus feedback, on the supply side, in an effort to iterate and refine PMF.

Why I May Be Wrong

The scenario I can see playing out that invalidates this thesis is one where there are too few protocols issuing points in relation to the supply of points farmers. As an extreme example, if there were just one points program where you could get a points-boosted APY, instead of a thousand, it would likely be quite diluted by unaligned farmers.

Regardless, for at least the mid-term or next few cycles I see value in points as a main incentive for targeted and aligned user participation.