Points Guard -- Arthur Hayes
Arthur talks extensively about the new points program meta. He first compares the web2 vs web3 user acquisition model, then provides the history and evolution of incentive programs within crypto, and then covers and reframes the points program meta.
Web 2 vs. Web 3
Finding and keeping users is the hardest part to building a tech related business
In web2, a common user acquisition technique was to subsidize the service (e.g. rideshare / food delivery)
The ultimate goal is to “farm” your usage as a boost to their metrics
The IPO was seen as a way for insiders exit
In contrast with web3, users of web2 apps were prohibited from ownership
The reasoning was because “start-up” investing was risky as most go to zero
The other explanation for why this venture bets are gate-kept is because the trad-fi gate keepers get to earn a fuck ton off fees
Now web3 has created a model where participation is the way to ownership
BTC Paradigm Change
Before exchanges were present, the only way to acquire bitcoin was the mine it
Ownership translates to evangelism - Bitcoin is more valuable the more people know about it and own it
The ICO (Initial Coin Offering)
Now that Bitcoin created alternative financial rails - you could do an ICO where you sent an address BTC and they sent you their token
The first major ICO was Ethereum in 2014
Eventually the number of ICO deals skyrocketed - EOS did an ICO that lasted a whole year and raised 4B worth of Ethereum at the prices back then
The investors provided their capital and became highly motivated marketing agents
Yield Farming
Many DeFi projects would reward users with their native token for usage
Traders would borrow / lend / swap on these protocols, “farming” tokens
Projects liked it since the activity boosted revenues, making the protocol seem more valuable
At some point, the emitted tokens grew too big, causing the whole thing to unwind: token price falls, users are less incentivized (death spiral)
Points Programs
Points is the new model for this cycle and arguably it combines the best of both worlds between ICO and yield farming
Points allow the team to reward activity retroactively - this prevents the situation where they are too aggressive or conservative with their emissions
They also circumvent the gray area of an ICO (can’t sell “securities” to the poors)
Points provide teams with flexibility, and aren’t a “guarantee” for a token
At the end of the day, there is a implicit social contract - “there is a high degree of trust between users and the project’s founders. The user trusts that after interacting with the protocol, their points will convert into tokens at a reasonable price in a reasonable time frame”
Another way to frame the points program meta:
The points program is a way for retail to “invest” in the project
It also allows the team to adjust token distribution in a way that is best for the project (retroactively)