What is Points Mining?

Points mining refers to a strategy where users complete tasks on a specific protocol to accumulate points or rewards. It aims to bind users closely to the protocol, similar to liquidity mining, but focuses on attracting users through point rewards.

Mechanism of Points Mining

Points mining combines the "bait and hook" strategy. Protocols use "bait," known as airdrops, to attract users to their platforms, while points act as the "hook" to keep users engaged with the protocol. For example, Blur, as a pioneer, rapidly rose in the NFT market through its points program.

The fundamental principle of points mining is similar to that of liquidity mining, but the focus differs. Liquidity mining provides liquidity to the protocol by locking in crypto assets, whereas points mining involves users performing specific actions (such as trading, staking, etc.) on the protocol to earn points. These points might eventually convert into token rewards, although this conversion is not guaranteed.

Advantages of Points Mining

1. Combating Airdrop Mining:** Airdrops typically reward early supporters by directly distributing tokens to participants' wallets. However, airdrop mining can lead to issues. Implementing crypto points in airdrops forces miners to stay active within the ecosystem to derive economic benefits from these points.

1. Increasing User Engagement:** Crypto points reward activities such as using decentralized applications, participating in governance, contributing liquidity, or referring new users. This strategy incentivizes users to interact more with the project, enhancing their engagement and investment in its success.

1. Strengthening Community Bonds:** Crypto points play a crucial role in community development, encouraging users to earn and accumulate points, thereby motivating them to engage more in discussions, events, and other community-driven activities. Such active participation can drive the project's growth and long-term viability.

Representative Projects in Points Mining

1. Blur:As an NFT marketplace, Blur rapidly grew through points mining and further solidified its market position via airdrops.

1. EigenLayer: Users can earn restaking points by depositing their staked ETH into the EigenLayer protocol. The number of restaking points earned is proportional to the amount of ETH restaked and the duration of restaking.

Points mining is an effective user acquisition and incentive mechanism, despite challenges like information asymmetry and uncertain returns. It plays a significant role in attracting user participation and promoting protocols, potentially becoming part of long-term loyalty programs. However, points mining can only reach its full potential if the protocol brings real value to the community and gains users' trust. If the protocol abuses user trust, the long-term benefits of the points program might be compromised.