'Organic growth point' or 'top PUA', what are the advantages and disadvantages of the points incentive model?

In the long history of development in the field of cryptocurrency, the economic model based on decentralized consensus has brought the dawn of the Holy Grail of cryptography to countless users. But as the wheels of the industry are rolling, project parties have also begun to think about how to weigh the relationship between the long-term development of the protocol and user retention rate in the encryption tide. As a relatively "moderate" incentive model between news and tokens, points are being adopted by more and more project parties. And many people believe that the concentration of attention brought by point incentives can form an organic growth point for the protocol indicators and strongly promote project growth.

But recently, the TGE allocation of projects such as Blast has triggered a frenzy of anger, reflected in dissatisfaction with prolonging the incentive cycle while delivering low returns. Some major players are clamoring that similar airdrops have now evolved into "top PUA" for all participants. Therefore, this article discusses the advantages and disadvantages of the points model from a multi-dimensional perspective and tries to find corresponding solutions.

Early Incentive Model

In the earliest days of the wave, when the Ethereum ICO was in full swing, airdrops could be said to be relatively simple and crude. You only need to submit a simple 0x address to get considerable token income. Since the main feature of projects in the ICO era is concept hype, and there is almost no construction of on-chain interactions, the (coin holding) address itself can become an incentive indicator for everyone.

At the beginning of DeFi Summer, both Balancer and Compound adopted liquidity mining for incentives. It is not difficult to see that for the DeFi projects at that time, the scale of on-chain liquidity determined the development of the protocol, and the demand for liquidity was relatively urgent given the market situation at the time, so they all adopted direct token incentives. Although it has contributed a lot to the growth of TVL, it has also given rise to the disadvantages of "poaching, selling and withdrawing".

After that, Uniswap’s airdrop was a stone’s throw, truly bringing the interactive airdrop paradigm into the encryption field, and thus spawning a professional group of airdrop hunters. Subsequently, many DeFi projects followed up, and with the implementation of many L2 and public chain technologies, the construction of ecological governance models was also put on the agenda. Since the governance of many protocols is essentially a subset of their token economy, relevant airdrop expectations are bound to arise for participants. Since then, the incentive model with tokens and interactions as its core has begun to be integrated into the crypto economy.

To sum up, we can summarize the characteristics of the incentive model in the early cryptocurrency field:

• Direct token incentives: For early-stage projects, the growth space brought by the unsaturated competitive environment gives They have enough freedom and allow them to achieve scale growth while benefiting users through token incentives.
• Low interaction threshold: Since the on-chain ecology was not mature at that time, the product model of the protocol was relatively simple, and the interaction process was also very simple for users.
• Instant rewards (synchronicity) : Before Uniswap, many projects used mining to achieve instant token rewards for users’ deposits. What you do is what you get.

The origin of point incentives

Before point incentives, with the vigorous development of the ecosystem, projects faced the dilemma of user retention and incentives. A number of task platforms such as Galxe provide a solution. Specifically, the task platform allows projects to spread the incentive process to specific tasks of user interaction, and uses NFT instead of tokens for incentives (marking) to a certain extent. . Overall, this incentive method has begun to produce incentive asynchrony, that is, the period between the issuance of token incentives and the actual interaction of users has been lengthened. In fact, point incentives, like the task platform, are one of the products of refined interaction in the encryption field.

The earliest project to widely adopt the points model is Blur. Pacman innovatively uses points to calculate incentives for NFT transactions, and related measures have significantly contributed to the growth of Blur's protocol, which is specifically reflected in liquidity and transaction volume. Analyzing the scale development of Blur from the data in Figure 1, we can see that points mainly play the following three roles:

• Improving confidence: Through point incentives, users can have a certain sense of gain in advance and improve follow-up The degree of confidence in the airdrop affects the initial launch of the currency price.
• Extended cycle: Points can evenly share users’ expectations for protocol airdrops and extend the overall incentive cycle. An obvious example is that after Blur implemented the token launch, it still maintained the existence of point incentives, reducing selling pressure while creating a sustainable incentive environment for users, which is reflected in the sustainability of transaction volume and TVL.
• Reality: Compared with NFT after the interactive task is completed, points can give users a certain feeling of token mapping, making users feel that they have obtained tokens instead of just getting symbolic badges, reflecting On the correlation between the transaction volume of early mining and the price of tokens.

Figure 1 Blur related data (DefiLlama)

Based on the above effects, several major advantages of point incentives can be derived:

• Improve retention rate : In the past, under the background of “poaching, selling and raising”, users were usually not very loyal to the agreement. Through point incentives, project parties can guide users to generate continuous cash flow and on-chain interactions.
• Avoid token costs: Points-based incentives can reduce project parties’ costs in token market making and corresponding operations, and sometimes can also reduce compliance risks.
• Higher flexibility: The organic adjustment of point incentives gives the project side higher flexibility and is not affected by the trend of related tokens, focusing more on product construction.

Confidence created by points

In the operation cycle of crypto projects with points as the main incentive model, we can roughly divide it into three stages. The two important nodes are the use of point incentives and TGE (token generation events). Figure 2 shows the changes in user confidence during the project cycle.

Figure 2 Changes in user confidence throughout the project cycle

Before the point incentive, we can see that the overall confidence shows a linear growth trend, because in the early stages of the project, users usually We remain optimistic about the development of the project, and the corresponding news in the early stages is also relatively good. After the implementation of point incentives, compared to no point incentives, users have a sense of gain due to the points themselves, which leads to a temporary increase in confidence. But then the points incentive cycle began to equalize users’ expectations for project airdrops, and at the same time, project incentives began to be market-based pricing off-site, so the overall confidence fell back to the level of no point incentives. After TGE, the confidence of users who have experienced points incentives will decrease even more, because the overall cycle of point incentives is longer, resulting in users being unable to continue to bear the costs incurred by the cycle when the overall benefits after TGE are clear, and then choose to sell, which is reflected in the following: Greater selling pressure.

To sum up, we can see that the degree of confidence brought by points is mainly reflected in the early stage of points incentive, which essentially provides users with an opportunity to enter the ecosystem. But for user retention, the core part must be the actions of the project party. The points incentive itself provides project parties with diversified room for manipulation.

Space for manipulating points

Today’s points incentive model has basically become a tool for project parties to manage expectations, and because point incentives are a long-term process, users will have corresponding sunk costs. Based on these sunk costs, they will be given The project brings some passive retention, so the project side only needs to lengthen the incentive cycle and maintain the basic incentives within the cycle to maintain the performance of the project's basic indicators. On top of the basic incentives, the allocation space for the project side has also gradually increased.

In terms of issuance, the room for manipulation of points is mainly reflected in not being uploaded to the chain and the clarity of the rules. Compared with token incentives, point incentives are usually not uploaded to the chain, which gives the project side greater room for manipulation. In terms of the clarity of the rules, the project party has the right to allocate incentives to each part of the agreement, and it can be seen from the incentives of Blast that the long cycle of incentives means that the strong flexibility of the rules can be neutralized to the greatest extent within the cycle. Emotional reactions of most users, reducing loss of confidence. However, the distribution of the second phase of Blast actually dilutes the deposit points of large investors before going online and transfers this part of the benefits to on-chain interactors. For large investors, such an equal sharing means that the airdrop may not cover the capital costs incurred in the early stage and increase the interaction costs on the chain in the later stage. However, if they withdraw their deposits, they will face the problem of sunk costs. And when the airdrop is finally distributed, the linear release of the passivity of large investors has proven that the project party chose to transfer the interests of large investors to the hands of retail investors.

In terms of market pricing, over-the-counter points trading platforms such as Whales Market also provide project parties with a measurable data source. Specifically, they have achieved considerable market-based pricing for points OTC transactions in the market, and the project side can make appropriate adjustments to the expected pricing brought by points through market makers, and the low liquidity environment before TGE is reduced The difficulty of market making. Of course, such deals also exacerbate expectations for potential projects.

In summary, the disadvantages of points incentives can be derived from the manipulation space of points:

• Large manipulation space: Whether it is in distribution or market pricing, the project side can perform sufficient operations.
• Overdraft expectations: The long cycle of points incentives and excessive speculation in the secondary market have led to the consumption of users’ airdrop expectations.
• Shared revenue: Due to the long release cycle of points, the value generated by early participants and late participants is equally shared, which will harm the interests of participants.

How to maximize strengths and avoid weaknesses

After analyzing the advantages and disadvantages of points incentives, we can explore how to leverage strengths and avoid weaknesses based on the points model to better build an incentive model in the encryption field.

Assignment Design

在积分激励的长周期中，积分分配对协议的发展至关重要。与任务平台上的交互不同，大部分项目没有对交互指标与积分之间的对应关系进行明晰，形成了某种黑匣子，用户在这种情况下没有知情权。但完全明牌的规则也会为工作室的针对性打法提供方便，导致抬高链上的反女巫成本。一个可能的解决方案是通过分散激励流程以控制规则对用户的可见性，例如将积分通过生态内协议进行有机分配，在平摊分配成本的同时可以对用户的链上行为进行进一步的激励细化，且分散的分配权给予特定项目方更大的动态调节空间，也方便用户基于强可组合性进行一鱼多吃。

权衡各方利益

现在很多协议需要面临 TVL 和链上交互数据的权衡，在积分机制上体现为如何分配相对应的权重，对于 Blur 等以交易为主导或 DeFi 以 TVL 为主导的项目而言，二者本质上可以形成互相促进的飞轮效应，所以积分在其中的作用是激励单一指标。但当这套逻辑转移到 Layer 2 上时，参与者便开始分裂，并且项目方的诉求也从单一指标转向多元化增长，继而对积分分配机制提出了更高的要求。而 Blast 的黄金积分尝试解决这样的分裂，但最后由于分配比例问题，整体的效果仍然不尽人意。在其他项目中，目前还没有类似的机制设计，故未来协议的积分机制设计可以考虑对交互和存款激励进行相对应的细化。

需求空间换激励空间

现今，很多项目使用积分激励的初衷只是想在保持激励活动的同时对 TGE 进行延迟，相比于传统的积分激励用例而言缺少了积分本身的用途，而这一部分需求的空白也是导致积分在用户眼中只作为另一种代币存在的根本原因。所以对于这一部分需求可以进行有效的开发，例如对于跨链桥或链上衍生品而言，使用积分进行相关费用的冲抵既可以使用户即时获得积分所产生的效用，吸引用户持续使用协议的同时，还可以释放积分分配的空间，减小通胀压力的同时控制预期。但在这一部分上需要对用户的实际交互和手续费之间进行有效的精确衡量。

另外无论是对于传统领域还是加密领域，需求永远是需要大于激励的，而需求空间很大一部分由协议本身产生。正如很多 MEME 相关项目没有积分激励，因为他们天然占据需求端的优势，并且用户使用这些项目时更多从协议外获取价值。所以对于项目方而言，需要考虑自己的产品模型构建是否拥有对应的 PMF，让用户参与其中的目的不再是为了缥缈的代币才是正道。

共识化激励

对于用户而言，共识化的激励为他们创造了一个规则清晰的环境，并允许他们以独立的个体参与到共识构建中来。例如在社区中，项目方可以构建一些去中心化的环境，让用户参与自由竞争并按照结果进行类似 PoW 的有机分配。这样的竞争一方面可以在共识中消解空投分配周期的影响，另一方面还能提高用户的忠诚度和留存率。但共识本身的变化相对缓慢，灵活性较低，可能不太适合快速增长的生态。

链上积分

把积分放到链上与直接发行代币的做法不同，相比于代币去除了流通性，同时又增加了链上的不可篡改和可组合性。Linea LXP 给我们呈现了一个很好的例子，当所有地址和积分都可以进行链上追溯的时候，操作空间就肉眼可见的减小了，且智能合约提供了基于链上的可组合性，大幅提高了积分在生态内的指标性，使生态内协议可以根据相关指标进行激励调节。

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