Exploring the Trend of ‘Points’ Farming in Crypto Raises Concerns of Uncertain Rewards

As blockchain protocols increasingly turn to incentivizing users with “points,” the crypto community finds itself caught in a speculative frenzy, primarily fueled by the ambiguous prospect of future airdrops. These points, initially considered mere placeholders for eventual token distributions, have evolved into a significant factor in cryptocurrency trading strategies.

The surge in the issuance of points is particularly evident on the Ethereum blockchain, with billions of dollars flowing into EigenLayer and its associated liquid staking platforms. EigenLayer, a decentralized finance (DeFi) platform on Ethereum, allows third-party crypto protocols to borrow Ethereum’s security, offering depositors, known as “restakers,” additional interest on their staked ETH.

Liquid staking platforms, such as Puffer, Ether.Fi, and Renzo, have capitalized on EigenLayer’s success by introducing their own tokens, referred to as “liquid restaking tokens” (LRTs), which include EigenLayer “restaking points” and native points specific to each platform. The use of these points has sparked a trading frenzy, with users actively participating in campaigns that offer additional points for specific actions, such as redirecting deposits.

Puffer Finance, through its points program, has garnered substantial attention and deposits, contributing to its impressive billion-dollar-plus total. Similarly, Ether.Fi, the largest liquid restaking protocol, has reached a milestone of $1.3 billion in deposits within weeks.

The speculative nature of points has led to the introduction of marketplaces dedicated to boosting point tallies. Pendle, for instance, has attracted over $1 billion in deposits by allowing users to leverage their exposure to points, a high-risk strategy that can significantly increase potential point rewards.

Despite the allure of points, their inherent vagueness poses risks to investors. Points are often detached from concrete assets or benefits, making it challenging to determine their intrinsic value. While some projects utilize points as a form of appreciation for user participation, the lack of clear guidelines on their utility can set unrealistic expectations.

Moreover, points are typically tracked off-chain, outside the transparent and decentralized nature of blockchains, adding another layer of speculation. Traders must rely on pseudo-mathematics or promotional hype to assess the value of a given point, further intensifying the speculative nature of this trend.

One redeeming aspect of the points system is its potential to provide early users with tangible evidence of their contributions to blockchain projects. It serves as a tool for projects to communicate their values to early users, fostering a sense of community engagement. However, the challenge lies in striking a balance between incentivizing user engagement and managing expectations.

In conclusion, while points have become a significant aspect of the crypto landscape, their speculative nature and lack of clarity around their utility underscore the need for caution among investors. As the trend of issuing points continues, it remains essential for projects to establish transparent communication and realistic expectations to maintain the trust of their user base.