- Arthur Hayes argues that point systems may be better than ICOs and yield farming for crypto projects to raise funds and engage users, as they allow guerilla marketing without aggressive token emissions or regulatory issues.
- Hayes says ICOs attracted regulatory scrutiny as selling tokens to retail can be seen as selling securities, while yield farming can quickly inflate token supplies, reducing incentives to use the protocol.
- Potential issues with points programs are that they require trust between projects and users, which bad actors could abuse. But successful projects may use them first to create hype before generating tokens.
Arthur Hayes, former CEO of crypto exchange BitMEX, argues that point systems may be better than ICOs and yield farming for crypto projects to raise funds and engage users.
The Downsides of ICOs and Yield Farming
Initial coin offerings (ICOs) allowed projects to raise funds from retail investors early on. However, they attracted regulatory scrutiny as selling tokens to retail can be seen as selling securities.
Yield farming rewards users with tokens for using protocols. But this can quickly inflate token supplies, reducing incentives to use the protocol.
Why Points Programs Could Work Better
Points programs allow projects to do guerilla marketing. Users earn points, not tokens, for using the protocol. Points can later be converted to tokens. This avoids aggressive token emissions schedules. If there is no crypto or fiat exchange, it may also avoid regulatory issues.
Potential Issues with Points Programs
Points programs need trust between projects and users to work. Bad actors could abuse this trust. Successful Web3 projects may adopt points programs first to create hype and usage before generating tokens and listing publicly.
