Title: Innovating Web3 Incentive Mechanisms: Moving Beyond Points
Introduction:
In the Web3 space, the addition of financial attributes to various sectors (such as SocialFi, GameFi, NFTFi, ArtFi, etc.) is primarily aimed at leveraging the advantages of blockchain technology and decentralized finance. These attributes facilitate assetization, incentive mechanisms, financing, liquidity, and autonomy, giving these sectors new economic models and application scenarios.
Evolution of User Incentives in Web3:
The development of user incentives in Web3 has undergone a transformation from tokens, whitelists, and credentials to project-specific points. Initially, tokens were commonly used to incentivize participant growth or loyalty, provide value, or offer various types of core product utility. Token mechanics ranged from one-time airdrops to reward early users (e.g., Uniswap, ENS) to ongoing liquidity mining projects that rewarded users for specific actions (e.g., LooksRare, Compound). However, the concept of “whitelists” eventually became a stable low-cost arbitrage tool and a chip for excessive speculation by project teams, leading to chaos in the NFT market during the bear market. The explosion of task platforms and the popularity of the SBT concept led to another iteration of Web3 incentives, transforming countless on-chain and off-chain actions into credentials stored in virtual spaces within each wallet. If these credentials are not utilized effectively, they will eventually become meaningless cyber signals.
The Rise of Points as Incentives:
During the transition from the bull to bear market, the L2 blockchain Blast successfully led the trend of using points (Point) as a valuable incentive for user engagement. Recently, Linea has followed a similar path with the launch of Linea Surge, a point-driven program that aims to attract more users and increase the Total Value Locked (TVL) on the network. Linea Surge has achieved significant growth in TVL, surpassing $1.1 billion within seven days, demonstrating its success in driving ecosystem development. However, the proliferation of points as an incentive mechanism has raised several concerns and challenges.
Challenges and Solutions:
1. Proliferation of Points: With an increasing number of projects adopting point systems, some question the effectiveness of this incentive model. They worry that the point system may attract “toxic TVL,” drawing in funds without truly engaging users or builders. Additionally, some argue that the point system shifts user behavior towards accumulating points rather than making genuine project contributions.
2. Speculation and Bot Manipulation: The emergence of point systems has attracted speculators and bot manipulators, leading to market bubbles and an unhealthy environment. While project teams gain quick access to user and transaction data through point systems, these data may not be reliable or sustainable.
3. Regulatory and Compliance Challenges: As regulatory scrutiny of the crypto market increases, project teams face more compliance challenges. The lack of clear regulatory rules has resulted in the misuse and confusion of point systems, leaving investors unaware of the content and risks they are exposed to.
4. User Attention Fragmentation: With an increasing number of projects adopting point systems, user attention may become fragmented, making it challenging for them to focus on specific projects or ecosystems. While point systems serve as a means to attract user retention, they may not necessarily bring long-term value and loyalty.
5. Questioning the Cost-Benefit Ratio: Points simplify the incentive logic of traditional airdrops, but as project data and user panel data grow, users may have unclear expectations of future airdrops due to an increase in points. The phrase “points do not guarantee promised returns” often leads to a vacuum period between the end of point activities and the realization of incentives, causing confusion both within and outside the community.
Long-Term Incentive Mechanisms:
To address these challenges, projects can explore innovative incentive mechanisms that promote long-term contributions from users. Two potential solutions are phased rewards and time-weighted loyalty programs.
Phased Rewards: Rewards can be divided into multiple stages, requiring users to complete tasks at different stages to receive the full reward. Many projects, such as Ether.fi, Renzo, and UXLINK, have adopted phased airdrops to sustain community engagement and attract seed users.
Time-Weighted Loyalty Program: By implementing a time-weighted loyalty program, users’ long-term participation and contributions can accumulate not only points but also higher redemption bonuses. This encourages sustained engagement and rewards users who contribute over extended periods.
Conclusion:
Although point systems face various challenges during implementation, Web3 project teams can overcome them through continuous optimization and innovation. The suggested solutions include phased rewards and time-weighted loyalty programs. By combining social and economic rules, project teams can design incentive systems that genuinely promote user participation and contribution. With collective effort from all stakeholders, the Web3 ecosystem will experience healthier and more sustainable development, bringing greater value and opportunities to users and developers.
