The Good, the Bad, and the Ugly of Points

Rooter
4 min readFeb 29, 2024

We’ve all seen those airdrop farming threads by now.

https://x.com/Auri_0x/status/1629033501508136961
https://x.com/0xGumshoe/status/1729923400452223093

Airdrop farming threads are great engagement farms for influencers, and for good reason — they’re wildly and widely popular, from retail to degen VCs. Who doesn’t want free money?

Points tap into something primal in our reptilian brains — the dopaminergic system. It’s a hardcoded desire for gambling, which helped Old Humans take risks that brought us to today. And without high-risk-high-reward actions, we wouldn’t be in this golden era of technology (which we use to flip memecoins at 1000 TPS).

Stories of regular Joes earning life-changing money prompt an internal monologue of “what if?” When “everyone is getting hilariously rich and you’re not” [1], we fomo.

Airdrops have been rewarding for many. But projects have caught onto the growth-hacking potential of points, which is now being abused. They know what they’re doing, we know what they’re doing, they know we know what they’re doing. Points today are predatory, lazy, and are really just gambling.

History

To understand points, it’s important to understand how they came to be.

Liquidity mining was pioneered by Compound, a move which kicked off DeFi summer of 2020. Lending and borrowing on Compound was incentivized via COMP tokens. Soon, a dozen projects offered similar incentives with their own twist. One of them, Sushiswap, incentivized LP positions with SUSHI to vampire attack Uniswap. This pressured Uniswap to launch UNI, which they did with a retroactive airdrop for early users. (Some joked it was the “stimulus for Ethereum” since it was bigger than a COVID stimulus check.) The widespread reach of the UNI airdrop was a huge catalyst for DeFi, attracting hordes of new users.

Then came Blur in 2022, the pioneer of points. By keeping earning criteria opaque, farming could be resisted in favor of real usage. With the incredible success of Blur, it wasn’t long before every project had a points program.

A common misconception is that points in DeFi are an evolution of loyalty points that airlines, hotels, and cafés offer. Just because DeFi projects and cafés both call them “points,” doesn’t mean they’re the same thing. They have major differences in history and usage, making them separate taxonomies. One is a low-stakes loyalty program, the other intentionally preys on hype to pump metrics and farm fees.

Points today

The current points meta is predatory. There’s no known reward, no timeframe, and changes can be made arbitrarily. Rewards could be valueless or never be distributed. Goalposts can continuously be moved back. All at the expense of users who pay real fees and opportunity cost.

Projects are running wild with false advertising, promoting black boxes in a world where transparency should be paramount. And they’re pushing things beyond what the pioneers did. Blur launched their token within 5 months, but there are projects now that have been milking their users for over a year now.

https://x.com/haydenzadams/status/1751321452995862592

How points should be designed

The issue with points is not points themselves, but how they’re being used to prey on users. However, it’s possible to design a points program that is beneficial to both the project and users.

The main changes that need to be made are disclosing rewards upfront, communicating a timeframe, and committing.

Solend did this with Points Season 1, where a minimum rewards pool (which could only be increased) was disclosed, and a timeframe was communicated. The rewards pool started with 100K SLND, and was later increased to include 100K PYTH and 10 Tensorians.

Conclusion

The path forward for points requires a commitment to transparency, and fairness. By being upfront, projects can deliver the dream of transparent, decentralized finance rather than building the systems we took issue with in the first place. By prioritizing ethics, we can transform points from a speculative gamble into a useful tool for engagement, retention, and rewards. As it should be.

Yours truly,
Rooter

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