In early 2024, Blast launched with a points program that accumulated over $2.3 billion in deposits before even having a working product. EigenLayer's points system drove billions in TVL growth. Suddenly, every new DeFi protocol wasn't launching with tokens—they were launching with points. The shift happened almost overnight.

So what's a points program? It's a reward system where projects give you points for doing stuff—staking tokens, providing liquidity, trading, referring friends. The promise is that these points will eventually convert into actual tokens you can sell. But here's the catch: there's usually no guarantee about if, when, or how that conversion happens.

Think of it like airline miles, except the airline hasn't told you what flights you can book, when you can book them, or even if your miles will ever be worth anything. And yet, people are "farming" billions of dollars into these systems. Why? Because when it works, early participants can get massive token airdrops. When it doesn't, well, you've just been providing free liquidity to a protocol that may never pay you.

How It Works

At its core, a points program is surprisingly simple. You connect your wallet, perform certain actions the protocol wants, and you accumulate points. The protocol tracks everything on-chain or through their own database.

The actions that earn points vary wildly. Some protocols give points for depositing assets and leaving them there—the longer you stay, the more points you accumulate. Others reward trading volume, where every dollar you trade earns you points. Many combine multiple factors: you might earn base points for deposits, bonus multipliers for holding specific tokens, and extra points for referring new users.

Let's say you deposit $10,000 into a lending protocol with a points program. You might earn 10 points per day per $1,000 deposited. That's 100 points daily. Hold for three months and you've got 9,000 points. Meanwhile, someone who referred five friends might have multipliers that boost their rate to 15 points per day per $1,000. The math gets complex fast.

Here's where it gets interesting: most protocols don't tell you what your points are worth. They'll say something vague like "points will be considered for future token distributions." Some are more explicit—Blur told users that points would convert to tokens at a specific ratio for their airdrop. But many keep the conversion rate secret until launch day.

The technical implementation usually involves smart contracts tracking your on-chain activity, combined with backend systems that calculate your point totals. Some protocols publish leaderboards so you can see where you rank. This gamification is intentional—watching your points grow and comparing yourself to others keeps you engaged.

Many programs also include epochs or seasons. Season 1 might reward liquidity providers, Season 2 might focus on traders, and Season 3 might incentivize governance participation. This keeps users coming back and participating in new ways.

Why It Matters

Points programs emerged as a solution to several problems crypto projects face when launching. First, they help protocols bootstrap liquidity and users without immediately diluting their token supply. Instead of doing a fair launch or token sale upfront, they can build a product, attract users with points, and then distribute tokens once they have real traction.

Second, they potentially improve regulatory positioning. In the US, launching a token and selling it directly can trigger securities laws. Points programs create ambiguity—you're not buying tokens, you're just using a protocol and accumulating points. Whether this actually provides legal protection is debatable and untested, but it's one reason projects use them.

Third, points programs create stickiness. If you've accumulated 50,000 points over three months, you're not walking away before the token launch. Your points represent sunk time and opportunity cost. This locks in users and TVL in ways that traditional liquidity mining can't match.

For users, points programs represent a bet on a project's future success. Early participants in successful programs have made significant returns. Blur's points program rewarded NFT traders with BLUR tokens worth thousands to hundreds of thousands of dollars depending on their activity. EigenLayer's points system similarly directed substantial value to early restakers.

The economic model makes sense: projects need early users and liquidity to succeed. Users who provide that when the protocol is risky and unproven deserve compensation. Points programs formalize this relationship, even if the exact terms remain fuzzy until the end.

But there's a darker side: points programs have become so popular that users now scatter capital across dozens of protocols, farming points everywhere. This creates artificial demand that may evaporate post-airdrop. Protocols end up with mercenary capital—users who'll dump tokens and leave the moment they get paid.

The Risks and Trade-offs

Let's be honest: points programs are often terrible deals that rely on information asymmetry and FOMO. You're providing real value now—capital, liquidity, activity—in exchange for vague promises about future rewards you can't price or verify.

The biggest risk is that your points end up worthless. The protocol might never launch a token. They might launch a token but give point-holders a tiny allocation. They might change the rules mid-program. There's usually no contract, no guarantee, nothing enforceable. You're trusting the project to do right by you.

Second, opportunity cost is real. That capital you've locked in a points program could be earning yield elsewhere, or invested in tokens that are actually tradeable. If you're farming points for three months in a protocol offering no yield, and you could've earned 8% APY in a stablecoin pool, you're down hundreds or thousands of dollars before you even get your airdrop.

Third, many points programs are intentionally opaque. Projects don't reveal the conversion ratio until after the fact, making it impossible to make informed decisions. Some have changed rules midway through, retroactively reducing early participants' rewards. Others have created complex formulas that heavily favor insiders or large capital holders.

There's also the sybil problem: people create multiple wallets to farm more points, which then dilutes everyone else's rewards. Projects try to combat this, but it's an arms race. The result is that organic users often get less than they expected because professional airdrop farmers have gamed the system.

Finally, there's regulatory uncertainty. If regulators decide that points programs are just unregistered securities offerings with extra steps, projects could face enforcement actions and users might find their tokens worthless or frozen. We haven't seen this yet, but it's a real possibility as these programs become more prevalent and valuable.

The honest assessment: points programs can work if you're early, if the project succeeds, and if they treat point-holders fairly. But you're taking multiple layers of risk—protocol risk, market risk, execution risk, and integrity risk—for uncertain rewards. Diversify your farming, don't put in more than you can afford to lose, and manage your expectations. Many points will be worth far less than the opportunity cost of earning them.

References

1. The Block - Blast raises $20M, accumulates $2.3B in deposits through points program - Coverage of one of crypto's largest points programs
2. EigenLayer Documentation - EIGEN Token & Points Program - Official documentation on EigenLayer's points and token distribution
3. Blur Blog - Blur Season 1 Airdrop Mechanics - Details on how Blur's points converted to tokens
4. Dune Analytics - Points Programs Tracker - On-chain data tracking various points programs
5. Messari Research - The Rise of Points Programs in DeFi - Analysis of the points program trend in 2024
6. CoinDesk - Are Crypto Points Programs Securities? - Discussion of regulatory implications
7. DeFi Llama - Protocols with Points Programs - Tracking TVL and activity across point-based protocols
8. Bankless - Points Programs: The Good, Bad, and Ugly - Critical analysis of points mechanics
9. Galaxy Digital Research - Airdrop Farming and Points Systems - Data on user behavior and points program economics
10. Paradigm - Token Distribution Design - Framework for thinking about token launches and point systems