Points Meaning

In the current airdrop and yield farming landscape, points are an off-chain reward system used by crypto protocols to track and incentivize user loyalty before a token is launched. A project might give you points for every dollar you deposit or for every referral you bring to the platform. These points are typically stored in a centralized database owned by the project rather than being tokens on the blockchain.The technical purpose of points is to solve the Sybil attack problem.

In the past, people would create thousands of fake wallets to farm airdrops, diluting rewards for real users. By using a points system over several months, a project can filter out bots and reward users who provide genuine liquidity and engagement.

The points act as a placeholder that will eventually be converted into an airdrop of real governance tokens.Points are also a psychological tool for user retention. Because the conversion rate from points to tokens is usually hidden until the last minute, users are gamified into staying active to remain at the top of a leaderboard.

This creates a moat for the project; a user is less likely to move their capital to a competitor if they have already accumulated significant points on the current platform.However, points are highly controversial. Because they are off-chain, the project can change the rules at any time.

They can devalue points, disqualify wallets, or delay the token launch indefinitely. There is no smart contract guaranteeing that your points will have value.

Critics call points digital IOUs. For a user, farming points is a bet on the trustworthiness and future success of the project’s founders.