Combining the advantages of ICO and yield farming
On the 9th, Arthur Hayes, founder and former CEO of cryptocurrency exchange BitMEX, published a blog promoting points programs as an effective new means of raising funds and engaging users for cryptocurrency projects. Posted.
“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
“Point Guard” is an essay on new pseudo-ICO virtual currency fundraising and engagement methods. If you don't know what points are and why they are used and abused, read on.
In a blog called Point Guard, Hayes argues that points programs combine the best aspects of initial coin offerings (ICOs) and yield farming. There is.
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What are the disadvantages of ICO and yield farming?
ICOs are the traditional equivalent of initial public offerings (IPOs), allowing small amounts of early-stage capital participation in emerging projects and companies that were previously closed to individual investors.
Although it attracted attention as an example of the democratization of investment and led to a frenzied ICO boom, there was wide variation in the content and quality of the projects, and there were many fraudulent projects.
Additionally, regulators often consider ICOs to be “sales of securities,” and crypto protocols may face regulatory oversight and enforcement.
On the other hand, yield farming uses a protocol to give users tokens as rewards, but there are concerns that the rapid expansion of the token supply may lead to a loss of user incentives.
Yield farming is a system that earns profits by depositing virtual currency and providing liquidity on DeFi (decentralized finance). An operating model that earns interest and fee income by lending or providing assets to DeFi services such as lending and DEX.
▶️Virtual currency glossary
“Yield farming as a user acquisition tool disappeared with the 2021 crypto bull market,” Hayes said. However, that led to the creation of Points, which has become the project's go-to pseudo-ICO fundraising and user acquisition tool in the current bull cycle.
Use points to develop protocols
A points program is essentially a system where users are rewarded for participating in a protocol. Rather than the tokens themselves being distributed to users, points earned by participating are converted into tokens and airdropped into users' wallets for free.
Hayes explained that the benefits of using points for crypto protocols include:
- Through point allocation, users can be encouraged to take specific actions to increase the long-term value of the protocol.
- Having discretion over setting the point-to-token conversion ratio and timing of airdrops = not bound by rapid token issuance schedules
- Reduced need to rely on signing agreements with VCs and high-net-worth investors before selling tokens
- Unlike ICOs, there is no direct exchange of tokens and money, and no tangible rewards are promised, reducing regulatory concerns.
Mr. Hayes also says that point programs have benefits for individual investors and users. Due to the decline in ICOs, it has not been easy for individual investors to acquire tokens in cryptocurrency projects at an early stage, but using points will make it possible.
However, points programs “only work if there is a high degree of trust between the users and the protocol founders,” Hayes said. He cautioned that as point programs rapidly increase in the future, there is a possibility that this relationship of trust could be misused.
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