Unlocking Crypto Adoption: Arthur Hayes Advocates ‘Points’ Over ICOs & Yield Farming

Ex-BitMEX CEO and Maelstrom chief investment officer Arthur Hayes wrote a blog saying “points” are better than initial coin offerings (ICOs) and yield farming for crypto fundraising and engagement.

On Feb 9, Hayes shared in a blog called “Points Guard” that ICOs and yield farming, despite their advantages, pose various challenges for crypto projects. Although ICOs enable many regular investors to buy project tokens and invest in promising innovations early on, they also invite regulatory obstacles. Selling to retail investors may trigger regulators to label it as a ‘security,’ leading to unwanted and burdensome requirements.

However, when you engage in yield farming to earn tokens from using protocols, there’s a catch. If you go at it too hard, it can cause some problems. Hayes pointed out that doing it too aggressively might rapidly increase the limited token supply. Consequently, the token’s value might drop, and users would lose the motivation to keep using the protocol.

The executive said that projects can do guerilla marketing using points programs. Hayes suggested a different approach: instead of giving tokens right away when users use the protocol, which creates an “aggressive token emissions schedule,” projects can give points for participating in the protocol. Users can then change these points into tokens whenever they want.

Crypto Project Challenges: Trust & Points

Moreover, Hayes suggests that adopting this strategy would not establish a contractual agreement between the project and users for a future tangible reward, lacking any fiat or crypto exchange mechanism between the project and its users. This implies a potential acceptance of the use of points by regulators.

Although points show promise as a deployment method for crypto projects, Hayes acknowledges the risk of their potential “abuse.” He emphasizes that a points program’s effectiveness relies heavily on high trust between the project and its users. Despite this, Hayes anticipates that malicious actors will exploit this trust, potentially jeopardizing the viability of points as a tool for user engagement and fundraising.

Hayes predicts successful Web3 projects may eventually introduce a points program before token generation. According to him, this sequence could stimulate protocol usage, generate excitement about the anticipated token airdrop, and lead to a dynamic public listing – a “Pump Up The Jam!” scenario.

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The author’s views are for reference only and shall not constitute any investment advice. Please ensure you fully understand and assess the products and associated risks before purchasing.

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