9 months ago
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The points system doesn’t require direct investment from users and rewards them for contributions like liquidity provision and referrals, leveraging airdrops.
The cryptocurrency landscape may be on the brink of welcoming a significant influx of capital through a novel mechanism known as “Initial Points Offering”, according to IntoTheBlock’s On-chain Insights. Historically, the evolution of funding models in the crypto sector, such as Initial Coin Offerings (ICOs) post-Ethereum launch and NFT mints in 2017, has catalyzed bull markets by enabling direct global investment into new projects.
Lucas Outumuro, Head of Research at IntoTheBlock, believes that the points system adopted by protocols over the past six months could act as a trigger just like the ICOs did. Initially popularized by NFT marketplace Blur, these systems represent a more proactive and flexible alternative to traditional airdrops, rewarding users for contributions like liquidity provision and user referrals.
This became a trend for project bootstrapping and liquidity creation, with EigenLayer’s points program standing out as a leading example, amassing over $7.8 billion before its mainnet launch. Following the accumulation of points, protocols like EigenLayer transition to token issuance through Initial Points Offerings, mirroring the dynamics of ICOs but with a novel approach.
Different project bootstrapping methods and its characteristics. Image: IntoTheBlockAlthough points systems are not devoid of flaws, they offer several advantages over previous models by eliminating the need for direct financial investment from users and reducing the risk of tokens being classified as securities.
Thus, the points model is gaining momentum, with projects like Ethena integrating such mechanisms from their inception, although the sustainability of the current enthusiasm for points systems remains uncertain.
Nevertheless, Outumuro states that drawing from historical patterns, this innovative bootstrapping mechanism could potentially usher in a new era of capital flow and formation within the crypto market.
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