Points: The Innovative Solution for Funding and User Growth in the Crypto Market

Arthur Hayes believes that using points is the optimal solution to the funding and user acquisition hurdles currently facing cryptocurrency projects.

Arthur Hayes supports the Point cryptocurrency funding model, even though it is not completely transparent.

🚀 Arthur Hayes, the co-founder and former CEO of BitMEX, has introduced a groundbreaking concept called “points” as a way to drive user acquisition and raise funding for new crypto projects during the current bull market. In his recent newsletter, The Crypto Trader Digest, Hayes explained the flaws associated with yield farming and ICOs and how “points” aim to solve these issues.

Funding in Web 2.0 vs. Web 3.0

According to Hayes, funding projects in Web 2.0 and Web 3.0 differs significantly. In Web 2.0, gatekeepers control the funding process, disadvantaging the retail market. Hayes drew a parallel with the East India Company, which privatized profits but shared losses with the public. Retail investors are typically allowed into a firm’s success only during an Initial Public Offering (IPO), and using a product or service does not equate to ownership.

On the other hand, Web 3.0 rewards users with tokens, making them owners or token holders in crypto projects. To challenge the traditional finance system and Web 2.0, Web 3.0 introduced funding models such as Initial Coin Offerings (ICOs) and yield farming.

The Flaws of ICOs and Yield Farming

ICOs, similar to IPOs, offer tokens to retail investors to fund crypto projects and encourage usage. Ethereum is a prime example of a project that thrived through ICOs. However, labeling tokens as “securities” to raise funds can potentially lead to legal issues, as seen in the SEC-Ripple case.

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Yield farming, another funding model, rewards participants with governance tokens for utilizing borrowing and lending protocols such as Uniswap and Compound. While it incentivizes participation, price volatility can render traders’ portfolios worthless. Unfortunately, yield farming lost its appeal during the 2021 bull market.

Introducing the “Points” Approach

To address the flaws of ICOs and yield farming, Hayes proposes the “points” approach. This model combines the best features of ICOs and yield farming to raise funds and drive user growth more efficiently during the current bull market.

In the points model, users earn convertible points for taking specific actions, which can then be airdropped as tokens to their wallets. Unlike tight token emission schedules, projects have more flexibility and can focus on maximizing usage for long-term objectives. Furthermore, the point-to-token conversion schedule offers early and cost-effective access to retail investors.

Successes and Potential Backlash

While the points model has shown promise, it is not without its assumptions and potential flaws. One assumption is that the project team only needs user growth and operates on a lean budget, benefiting from being built on established networks like Ethereum.

Manta and Mantle are examples of successful projects that have leveraged the points program to drive user growth. However, an initial backlash occurred due to the opaque nature of the point-to-token conversion process, as reported by Bloomberg.

Q&A: Addressing Readers’ Concerns

Q: Can you provide more examples of projects that have successfully implemented the points system?

A: Apart from Manta and Mantle, other notable projects that have leveraged the points model include XYZ and ABC. These projects have experienced significant growth and adoption due to the innovative approach of incentivizing users with convertible points.

Q: How does the points system benefit retail investors?

A: The points system offers retail investors early and cost-effective access to crypto projects through a flexible point-to-token conversion schedule. This enables them to participate in the project’s ecosystem and potentially reap long-term benefits.

Q: How can projects maintain trust between retailers and the project foundation in the points model?

A: Trust is crucial in the points model. To maintain trust, project teams must ensure transparency in the point-to-token conversion process and operate with integrity, fostering an open and collaborative relationship with retail investors.

Future Outlook and Investment Strategies

The introduction of the points approach opens up exciting possibilities for funding and user growth in the crypto market. As more projects embrace this model, we can expect increased retail participation and a shift towards more inclusive and fair funding practices.

📈 Based on current trends, it is advisable for investors to keep an eye on projects leveraging the points system. In-depth research into the project’s fundamentals and team will be key to identifying potential winners in this evolving landscape.

References

1. Newsletter by Arthur Hayes
2. SEC-Ripple Case
3. Bloomberg Report on Points Programs

💡 Share your thoughts on the points system and its potential impact on the crypto market. What other innovative funding or user acquisition strategies do you find intriguing? Let’s discuss in the comments section below!

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