From Token to PointFi: Continuous Optimization and Exploration of Web3 User Incentives

Original author: Victoria, Metopia

In the Web3 field, adding financial attributes to various tracks (such as SocialFi, GameFi, NFTFi, ArtFi, etc.) is mainly to leverage the advantages of blockchain technology and decentralized finance, promote assetization, incentive mechanisms, financing, liquidity and autonomy, and give these tracks new economic models and application scenarios.

The разработка of user incentives in Web3 has experienced an evolution from tokens, whitelists, Credentials to task platform points and then to project partys own points. In the first few years, tokens were often used to motivate participants growth or loyalty, obtain value, or provide various types of core product utilities. Common token gameplay focuses on one-time retroactive airdrops to incentivize participation and reward early users (such as Uniswap, ENS); to continuous liquidity mining projects that reward users for performing certain actions (such as LooksRare, Compound). At the end of NFT Summer, in order to screen out family members who are willing to contribute to the community and grow with the community, whitelist became popular. However, the term whitelist eventually became a stable low-cost arbitrage tool and a bargaining chip for over-hyping by the project party. Finally, with the arrival of the bear market, the NFT market was left in a mess. The explosion of task platforms and the explosion of the SBT concept have made Web3s incentives iterate again. Countless on-chain and off-chain behaviors have been transformed into certificates and retained in the virtual space of each wallet. If these certificates cannot be used well, they will eventually become snowflake-like cyber signals.

Points incentive

At the turn of the last bull and bear market, L2 public chain Blast successfully led the trend of project parties using Points for user incentives by introducing a points system and giving it real value. Recently, Linea also seems to be on the road to success in replicating this route. Linea launched the first phase of Linea Surge Volt on May 17, aiming to promote the development of the ecosystem by attracting more users and increasing TVL on the network. Linea Surge is a points-driven plan. Users can obtain LXP-L tokens by holding assets on Linea and deploying them to DeFi protocols on the network. On May 24, Linea TVL exceeded US$1.1 billion, reporting US$1.12 billion, setting a new record high, with a 42.58% increase in 7 days. One of the goals of the Linea Surge plan is to increase the total locked value (TVL) on the network to promote the development of the ecosystem. Data shows that Linea TVL has grown significantly after the launch of the Surge plan, breaking through US$1.1 billion, and has achieved one-third of the plans goal (TVL reaching US$3 billion).

Even around the Point incentive method, the PointFi track has been derived, among which Whales Market has become a leader. Whales Market provides a new peer-to-peer primary market platform that allows users to pre-exchange tokens before the tokens are officially issued. This also includes the P2P points market – Whales Market uses smart contracts to allow buyers and sellers to reach mutually agreed on-chain transactions. After the token is released, Whales Market will automatically convert points into corresponding tokens according to the foundations announcement. Point orders must be set in advance, but the final conversion ratio to tokens will not be announced until TGE. However, some users believe that this mechanism may cause the sellers points to ultimately greatly exceed the value of the tokens they receive. This may mean that sellers face risks in transactions because they cannot determine the value of the tokens in advance, and the number of points may far exceed the value of the tokens.

The popularity of Point as an incentive method reflects the projects urgency to improve user retention and engagement, but as more and more points programs complete token redemption, many different voices have begun to emerge from users and the market.

1. The proliferation of point systems : As more and more projects adopt the point system, some people begin to question whether this incentive model is really effective. They worry that the point system will lead to the toxic TVL phenomenon, attracting a lot of money but not really bringing in users or builders. In addition, some people believe that the point system makes user behavior focus more on obtaining points rather than real project contributions.

2. Speculation and robot operation : Some voices pointed out that the emergence of the points system attracted a large number of speculators and robot operations, leading to bubbles and unhealthy environments in the market. Project parties use the points system to quickly obtain user and transaction data, but these data may not be real or sustainable.

3. Regulatory and compliance challenges : As regulators pay more attention to the crypto market, projects face more compliance challenges. Some people believe that the lack of clear regulatory rules has led to abuse and confusion of the points system, making it difficult for investors to truly understand what they are accepting and the risks.

4. User attention is distracted : As more and more projects adopt the point system, users attention may be distracted, making it difficult for them to focus on a specific project or ecosystem. The point system becomes a means to attract user retention, but it may not necessarily bring long-term value and loyalty.

5. Some users question the input-output ratio : Points simplify the incentive logic of traditional interactive airdrops, but as the data of project parties and user panels gradually grow, users will have expectations for future airdrops due to the increase in points, but may eventually face vague profit calculations or be flexibly judged by the project party. Points do not mean profit commitments often makes the vacuum period from the end of the points activity to the realization of incentives full of various noises inside and outside the community.

Although the points system may bring short-term attention and funding to the project, how to ensure that this incentive model can truly promote the healthy development and long-term sustainability of the ecosystem still requires the joint efforts and thinking of project owners, investors and regulators.

Solution – Long-term incentive mechanism

• Phased rewards : rewards are distributed in multiple phases, and users need to complete tasks in different phases to receive all rewards. For example, many projects including Ether.fi, Renzo, UXLINK, etc. have recently adopted phased airdrops. Such projects generally announce the total number of airdrops in the first phase and future (vague) airdrop plans at the same time as the airdrop qualifications to ensure that they can continue to be followed by community users, while attracting seed users (here they can be regarded as the people covered by the first batch of airdrops) to spread the project and profit expectations for the second time.

Case sharing of phased rewards (taking Renzo project as an example):

Renzo distributes rewards in multiple stages through phased airdrops. Users need to complete tasks in different stages to receive all rewards.

Season one

• How to obtain: Users can obtain points by minting and holding ezETH or providing liquidity.

• Reward mechanism: 1 point per hour for every ezETH held; 4 points per hour for depositing 1 ezETH and 1 ETH in the DEX pool.

• Additional rewards: Early participants can receive additional rewards.

second season

• Start date: April 26

• How to obtain: Continue to hold or increase your ezETH balance and stake REZ to obtain points.

• Reward mechanism: ezETH holders in user wallets and supported ezETH DeFi integrations are rewarded with additional points. Staking 5,000 REZ earns 1 point per hour.

• Additional rewards: Season 1 participants who maintain or increase their ezETH balance in Season 2 will receive 10% additional points, and Season 1 airdrop holders who maintain a daily average REZ staked balance greater than the airdrop amount will receive 50% additional points. All bonuses will take effect at the end of Season 2.

This approach not only encourages users to make long-term contributions, but also increases the exposure of the project by constantly introducing news points.

• “Time-weighted” loyalty program : Different from traditional loyalty programs, a “time-weighted” loyalty program is established. Users’ long-term participation and contribution can not only accumulate points, but also enjoy higher redemption bonuses.

The design of the time-weighted mechanism (taking the SocialFi project as an example):

Due to the high cost of social migration and the strong first-mover advantage of centralized social networks, there are almost no successful projects in this track. Social financial projects need to use other means to attract users and increase activity. For example, Lenster, friend.tech, and Farcaster, we have seen that the impact of financial attributes such as airdrops, incentives, and financing is far greater than the social attributes of the application itself. So how can we more reasonably release the financial attributes of social products? Perhaps we can imagine a solution that records user contributions for start-up SocialFi projects. All on-chain behaviors of users are recorded, including but not limited to the number and time span of participation in the project, as well as the specific contributions of each participation, such as publishing content, participating in discussions, and making suggestions. The number and time span of a users contributions will proportionally affect the number of points they can accumulate. More frequent participation and long-term continuous contributions will receive more points rewards, while less frequent or shorter participation will receive fewer points rewards.

At the same time, a time-weighted ratio needs to be designed to determine the extent to which the time span of a users contribution affects the points reward. For example, the points earned when just participating may be only a small fraction of those after full participation. The time-weighted ratio can be adjusted according to specific circumstances to balance user incentives and project needs.

Example scenario:

• User A has been involved in the project for 1 year, publishing content every month and actively participating in community discussions.

• User B has only participated in the project for 1 month and has only published one content. After learning the airdrop snapshot time, he began to publish content continuously and actively participated in community discussions.

• Lets assume that users A and B both actively interact with the community and produce content in July, August, and September of the year, and the accumulated points in these three months are almost equal. However, since the total contribution time of A is significantly longer than that of B, according to the time-weighted mechanism, the proportion of points obtained by user A when exchanging points will be significantly higher than that of user B, because user A participates more frequently.

Other studies have suggested that the economic model of a project, such as GameFi, can motivate users to participate and contribute through social rules (such as achievement systems, ranking systems) and economic rules (such as point rewards, NFT rewards). Specifically, it can be divided into

1. Task and achievement rewards : By completing specific tasks or achieving achievements, users can receive rewards, motivating them to participate more in the game.

2. Social interaction : Encourage players to earn rewards through social interactions (such as teamwork and competition) to enhance community stickiness.

3. Virtual asset trading : Allow players to trade NFTs and other virtual assets, which will bring points and even token income.

It is certain that the behavior and contribution of players in the game will directly affect the number and value of rewards they can obtain. However, how to allow highly active and highly contributing players to obtain more rewards and thus occupy a more advantageous position in the economic system is a topic that is more worthy of research and experimentation.

In addition, you can also consider introducing a VC-like lock-up mechanism (points can only be exchanged for tokens within a specific time or after certain conditions are met) or designing a gradual unlocking mechanism (users gradually unlock points over a period of time after the project is launched, which is conducive to maintaining the value of points).

Conclusion:

Although the points system faces many challenges in its implementation, such as speculative behavior, regulatory difficulties, and user distraction, Web3 projects are expected to find more efficient and fair incentives through continuous optimization and innovation. We propose new incentive mechanisms such as phased rewards and time-weighted loyalty programs. The good use of these methods can not only motivate users long-term contributions, but also increase the exposure of projects by constantly introducing news points. At the same time, project parties can combine social rules and economic rules to further design an incentive system that can truly promote user participation and contribution. In the future, through the joint efforts of all parties, the Web3 ecosystem will usher in a healthier and more sustainable development, bringing more value and opportunities to users and developers.

This article is sourced from the internet: From Token to PointFi: Continuous Optimization and Exploration of Web3 User Incentives

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