• Users of blockchain protocols increasingly receive “points” in the form of score-counts that are tied to vague future airdrops.
  • The speculative frenzy around Ethereum is fuelled by points. Already, billions of dollars have been invested in “retasking”, the juggernaut EigenLayer, and its spin-offs that grant points.
  • Some platforms allow users to directly trade points, and even bet on leverage. Points are not designed to have an intrinsic value, and are tracked outside of blockchains.
  • While points can be used to encourage healthy engagement, they may also set unrealistic expectations in the minds of users.

It was late last year when blockchain projects began giving out ” tokens to early users. This was widely viewed as a placeholder before an airdrop of digital coins. The points didn’t indicate how many tokens a user would receive (issuers never confirmed they were tied to airdrops), but they became a magnet for cryptocurrency investors looking for high-potential investments.

Points are now worth billions of dollars , and with several airdrops on the horizon they could become real money. Crypto analysts sharpen their pencils as they calculate the value of points for traders, along with the risks that investors face if they choose to participate in the game.

The Ethereum blockchain’s DeFi ecosystem has been revitalized by a new trend known as “liquid Restaking”.

In the last five months, 1,5% of all Ethereum (ETH) that is in circulation, or $7 billion, has been poured into EigenLayer. EigenLayer is a “restaking platform” on Ethereum, which allows third-party crypto protocol to borrow Ethereum’s safety. EigenLayer allows its “restakers”, or depositors, to earn additional interest on the ETH that they have staked in the Ethereum network.

The success of EigenLayer has spawned a whole new category in crypto protocols called “liquid restaking platforms” that offer “liquid restaking tokens,” also known as LRTs. Liquid stake platforms such as Puffer, ETher.Fi, and Renzo deposit user funds into EigenLayer while offering their users additional rewards.

In order to promote themselves, liquid staking platforms are focusing on points. They offer multiple types of points for depositors including EigenLayer restaking points as well as native points.

Restaking Points are on the Rise

Puffer ran a recent campaign that offered triple points for users who refunded their EigenLayer deposit through Puffer. Ethereum.Fi runs a similar program with its “deVamp”, which awards extra points to investors who redirect their EigenLayer deposit to Ethereum.Fi.

The tactic has paid off. Ether.Fi launched in March, and last week reached a $1.3 billion milestone in deposits, , according to DefiLlama. The second largest liquid staking protocol Puffer is right behind it with more than $1.3 billion in deposits.

Other platforms are leveraging the speculative aspect of points by offering marketplaces that boost the totals. Pendle has, for instance, attracted over $1 billion of deposits to its platform, which allows users to increase their exposure to point – a risky gamble that can multiply a person’s reward many times.

Visit the project website and you’ll see a promotion: “Catch the LRT Train!” It reads: “Up to 30x Points” for users that meet certain requirements. When a CoinDesk journalist based in the U.S. tried to open the app, the page that appeared said “our app is not available in your country.”

Screenshot from Pendle website. (Pendle/CoinDesk)

Some platforms allow users to trade directly. Kelp DAO , which is a liquid stake platform , introduced this week KEP a token representing EigenLayer and allowing them to be exchanged. Whales Market introduced points trading on the Solana Blockchain, which saw its own points craze.

What exactly are points?

Points are often not tied to concrete things. This is a risk.

Amir Forouzani, CEO of Puffer Finance, told CoinDesk that points would not necessarily be an “airdrop” or any other type of token distribution. Puffer’s point program has led to breathless speculating – both on the project Discord server and elsewhere. – that Puffer would eventually airdrop tokens. Forouzani claims that while these expectations helped fill Puffer’s billion-dollar deposit box, points aren’t just “incentives.”

He continued that points are “just an appreciation for their involvement.” “That’s the reason I think a lot protocols wouldn’t want to say what exactly is being incentivized by this point system.”

This vagueness is problematic. If the airdrops never happen, or the drops are successful but fail to impress the market, then users who have invested in point-based projects may feel duped. Especially if they took additional risks, such as purchasing points or increasing exposure to them by putting money into unvetted project with the vague hope of receiving tokens.

The blockchain is open and transparent, but points are often tracked on servers off-chain. This is against the spirit of openness that aims to keep the game fair and free from tampering.

Since points are not generally tracked on blockchains , there is often no way to know the number of a certain type in circulation. To value a point, traders rely heavily on pseudo-math.

A silver lining?

The early adopters of blockchain projects can have tangible proof of their contributions.

Austin King, CEO at EigenLayer’s interoperability platform Omni told CoinDesk that the tool allows projects to communicate with their early users what they are interested in, and that it provides a minimum way for these users to track their contribution.

Last week’s controversy involving StarkNet, an Ethereum rollup project, and its airdrop of STRK Tokens demonstrated how conventional airdrops can go wrong.

Starknet didn’t reveal the criteria that it would use for its STRK tokens in advance, as did virtually all other protocols which airdrop tokens. Starknet, the popular protocol that airdrops tokens, didn’t announce the criteria it would use to dole out its STRK tokens ahead of time.

StarkWare, project’s original developer, warned that the token mint in 2022 would “resist speculative manipulating and non-value creating gamification”, a direct attack on airdrop farmers.

The long-awaited Starknet Airdrop last week quickly became a PR disaster. Starknet users who were early adopters claimed to have received less tokens than what they deserved, while others qualified for the airdrop even though they had only a tangential connection – like Ethereum investors and Web2 developers.

Traders who were angry with the protocol took to social media and accused them of exploiting their loyalty, then leaving them without anything.

Points provide an additional level of transparency in determining how users’ contributions are measured, even when projects are vague about specifics and timelines.

King said, “In my opinion, this is a big step up from people who airdrop farm and don’t know how to help these teams actually build.”

King stated that “you can make a reasonable criticism that these points are not on-chain, is antithetical crypto”, but that there is a “positive” that points help “align the interests of users to networks to help bootstrap in a secure and safe way.”

Bradley Keoun is the editor.