Point Campaigns

What is a point system?

A point system is a non-liquid incentive mechanism designed to foster growth within an ecosystem. Points act as a flexible tool to reward participants without the need to immediately issue or distribute liquid tokens, which could affect ecosystem dynamics prematurely. In decentralized finance (DeFi), points can incentivize users to contribute to the ecosystem by providing liquidity, engaging in DeFi, or participating in other valuable activities.

The primary objective of a point system is to define and measure the alignment of participant's actions with the ecosystem's objectives. This involves creating metrics and methodologies that encourage behaviors beneficial to the ecosystem's long-term health. In the early stages of a DeFi ecosystem’s lifecycle, it is crucial to attract and retain liquidity that is "useful". This "useful liquidity" is often defined as the holding and active management of assets and positions that are integral to the ecosystem's operations, such as holding core tokens, stablecoins, or strategic partner assets, and supplying liquidity across DeFi verticals.

Why use points?

Using points as a basis for incentive allocation has become increasingly popular due to several key advantages they offer to ecosystem builders:

Pre-token Incentives

Points allow for the rewarding of early users and contributors without the immediate need to distribute liquid tokens. This helps to manage token supply and demand more effectively and prevents early price volatility.

Responsiveness to User Behavior and Objective Alignment

Points can be distributed in a manner that aligns with the evolving goals of the ecosystem. For example, if increasing TVL across DeFi verticals becomes a priority, point allocations can be adjusted to reward productive LP behavior.

Flexibility in Airdrop Allocations

Points systems offer the flexibility to design token distributions that are based on meaningful participation rather than mere presence in the ecosystem. By rewarding points for specific behaviors, projects can ensure that token distributions are more likely to go to active and engaged users who have contributed to the ecosystem's growth. Further, the ecosystem is not committed at early stages to any particular point-to-token methodology and can adjust their distribution approach based on the measured behavior of participants.