Former BitMEX CEO and Maelstrom chief investment officer Arthur Hayes has released a blog post advocating for “points” as a superior substitute for initial coin offerings (ICOs) and yield farming in terms of crypto fundraising and engagement.
“Points Guard” is an essay on the new pseudo-ICO crypto fundraising and engagement method. If you don’t understand what points are and why they going to be used and abused, read on. https://t.co/fR5ruXX4cT pic.twitter.com/2E2d6yiERh
— Arthur Hayes (@CryptoHayes) February 8, 2024
BitMEX co-founder Arthur Hayes anticipates that thriving Web3 initiatives will implement a “points” initiative before executing token generation events.
On Feb. 9, Hayes wrote a blog post titled “Points Guard,” asserting that while ICOs and yield farming had their advantages, they’ve also presented various challenges for crypto projects. For instance, although ICOs may enable millions of retail investors to acquire project tokens, affording them an opportunity to invest early in potential innovations, they would also attract regulatory obstacles. “When you sell something to retail, some regulators label that a ‘security’ and mandate you to undertake a lot of activities that you don’t wish to undertake.”
Points & Yield Farming
On the flip side, while yield farming enables users to obtain tokens for utilizing protocols, this could have repercussions if “pursued too assertively.” Hayes clarified that this could rapidly inflate the limited token supply, potentially causing the token’s price to decline, depriving users of further incentives to use the protocol.
Hayes also contended that points programs present a novel approach for projects to execute guerilla marketing. According to Hayes, as opposed to instantly providing users with tokens for utilizing the protocol, leading to “an assertive token emissions schedule,” projects can furnish points for involvement in the protocol that could be exchanged for tokens at the user’s discretion.
Hayes believes that this approach would not be perceived as a contract between the project and the user for a future tangible reward and does not facilitate any form of fiat or crypto exchange between the project and the users. This seemingly implies that regulators may potentially find the utilization of points acceptable.
Web3 projects and its effect on fundraising
While points may hold promise as a methodology for crypto projects, the executive acknowledged its susceptibility to exploitation. Hayes highlighted that a points program might only be effective if there’s a high level of trust between the project and the users. Nevertheless, Hayes noted that there will be malevolent actors who will misuse the trust. The executive believes this might “eliminate points” as a tool for user engagement and fundraising.
The executive forecasted that thriving Web3 projects might ultimately implement a points initiative before initiating token generation. “This will generate usage of the protocol, excitement around the probable token airdrop, and a Pump Up The Jam! public listing,” Hayes wrote.
About Yield Farming
Yield farming is a process that involves earning rewards by depositing your cryptocurrency or digital assets into a decentralized application (dApp). It’s a term used to illustrate a common practice in conventional finance, where individuals earn rewards (interest) on their assets. In contrast to traditional finance, where dominant institutions claim a significant portion of rewards, DeFi projects compete with each other for a smaller share of the rewards.
