"Crypto Points" Farming: A Speculative Trend with Big Risks

Points Frenzy in Crypto: High Rewards, High Risks?

Liquid restaking protocols built on EigenLayer are generating buzz with their "point" incentives, but it's crucial to understand the potential risks involved before diving in.

• Users are being offered more and more "point" incentives by blockchain protocols; these are score counts linked to the hazy possibility of future airdrops.
• The Ethereum speculative frenzy fueled by points has already resulted in billions of dollars being invested in the "retasking" of the industry titan EigenLayer and its point-granting spin-offs.
• Even though points are frequently tracked outside of blockchains and aren't intended to have intrinsic value, some platforms allow users to trade points directly and place bets on leverage.
• Points may encourage positive engagement behaviours in projects, but they run the risk of giving users false expectations.

Late last year, blockchain projects began giving "points" to early adopters; these were generally understood to be stand-ins for a future airdrop of digital tokens. Points were a boon for cryptocurrency traders seeking high-yield investment opportunities, even though they did not indicate the quantity of tokens one would receive (issuers rarely confirmed that points were even associated with airdrops).

They're suddenly turning into real money, with points now valued in the billions and multiple significant airdrops possibly in the works. Sharpening pencils, cryptocurrency analysts are calculating the possible value that traders could gain for points, as well as the significant risks that investors who decide to participate in the game face.
Late last year, blockchain projects began giving "points" to early adopters; these were generally understood to be stand-ins for a future airdrop of digital tokens. Points were a boon for cryptocurrency traders seeking high-yield investment opportunities, even though they did not indicate the quantity of tokens one would receive (issuers rarely confirmed that points were even associated with airdrops).

They're suddenly turning into real money, with points now valued in the billions and multiple significant airdrops possibly in the works. Sharpening pencils, cryptocurrency analysts are calculating the possible value that traders could gain for points, as well as the significant risks that investors who decide to participate in the game face.
The liquid staking platforms have fully embraced points as a marketing tool, usually providing depositors with a variety of options, such as EigenLayer "restaking points" in addition to their own native points.

What are points, really?

The fact that points are rarely connected to anything tangible presents an obvious risk.
Amir Forouzani, CEO of Puffer Finance, told CoinDesk, "I don't think, necessarily, points are going to be a representation of a 'airdrop' or anything else." Puffer's points system has sparked fervent rumors that Puffer will eventually airdrop a token, both on the project's Discord channel and elsewhere. Although Puffer's enormous, billion-dollar-plus deposit box may have been filled in part because of these expectations, Forouzani asserts that points aren't just about "rewards. Points are "merely gratitude for their involvement, "He went on. "For this reason, I think many protocols would be reluctant to disclose the precise nature of the incentives within this point system."

The problem with this ambiguity is that users who have piled into point-based projects may feel duped if airdrops never materialize or if they do but the market fails. This is especially true if they took additional risks by buying points directly, increasing their exposure to them, or contributing funds to unapproved projects in the hazy hopes of receiving tokens in the future.

In addition, points are typically tracked off-chain on project computer servers, which goes against the open philosophy of blockchain that aims to maintain an equitable and impervious playing field.