A new fundraising method through so-called points is better suited for popularizing cryptocurrencies compared to ICOs and yield farming, according to former BitMEX CEO Arthur Hayes.
“Points Guard” is an essay on the new pseudo-ICO crypto fundraising and engagement method. If you don’t understand what points are and why they going to be used and abused, read on. https://t.co/fR5ruXX4cT pic.twitter.com/2E2d6yiERh
— Arthur Hayes (@CryptoHayes) February 8, 2024
In his essay Points Guard, Hayes highlighted the issues with ICOs, where participants may face scrutiny from regulatory bodies.
“Some regulators see the sale of assets to retail investors as the issuance of ‘securities’ and require you to do a lot of ‘crap’,” he noted.
In the case of yield farming, aggressive token distribution can significantly increase supply, undermining price stability. Consequently, users may lose incentives to use the protocol, the expert emphasized.
Unlike these methods, “points” can serve as a new element of so-called guerrilla marketing.
According to Hayes, instead of instant asset issuance for using dapps, projects can offer points for participation, which users can convert into tokens at their discretion.
The former BitMEX CEO is convinced that this approach will not be considered an investment contract between the team and the user. It does not involve future rewards or exchanging cryptocurrency for fiat. Such an interpretation could make “points” acceptable to regulators.
With points, a project is not bound by a contract specifying a token issuance schedule. The conversion ratio can be changed at any time, the specialist clarified.
“The ability to ‘surgically’ dynamically calibrate the issuance of points for specific actions across the ecosystem means that the team can achieve the desired effect in creating precisely the type of user interaction they want,” he explained.
The former BitMEX CEO also added that with “points,” a project gains some independence from venture funds and other major players.
Regarding retail investors, he sees points as a fairer way to reward participation, despite the uncertainty of airdrop execution and the points-to-tokens ratio.
Hayes acknowledged that the concept is not without flaws. A points program can only be effective with high trust between the project and its users. The specialist did not rule out the possibility of malicious actors violating this condition.
The expert predicted that successful Web3 startups will adopt his proposed concept, implementing a points program before token issuance.
“This will lead to protocol usage and excitement around a potential airdrop,” he concluded.
Back in January, Hayes explored arbitrage opportunities following the launch of a Bitcoin ETF.
In February, Ripple’s CTO called the idea of issuing “Robinhood” tokens unsuccessful.