Market manipulation, monopolistic practices by major players, deprivation of eligibility for airdrops, and "haircut" individuals trapped by points.

Author: Xiyou, ChainCatcher

Editor: Marco, ChainCatcher

"The points system is a poisonous means for project parties to manipulate the market. In the future, I will no longer participate in point-based interactive activities," said a veteran OG, excluding point and brushing projects as new criteria for screening interactive projects.

After EigenLayer announced the conditions for the EIGEN token airdrop on April 30, controversies surrounding point airdrops have not ceased. That evening, during a live broadcast with EigenLayer founder on Bankless, user comments were even disabled.

In addition to the airdrop amount being lower than some users' expectations and the airdropped tokens being linearly unlocked in batches, EigenLayer also restricted users' IP addresses when claiming the airdrop. This led to users who had already accumulated a large number of points being disqualified from claiming the airdrop due to their IP addresses being in blocked regions.

The EigenLayer airdrop controversy has pushed the points system model to the forefront, exposing the long-hidden issues of rat warehouses, shrinkage, and issuance that exist under the points system. The sentiment against point activities has reached an unprecedented high, with statements refusing to participate in point activities beginning to spread in the crypto community. Compound's founder stated, "The era of points is over," and the founder of the "airdrop pioneer" suggested that projects "issue tokens instead of points." The once popular points system seems to be declining in reputation.

The Controversial "Points System": Shrinkage, Rat Warehouses, Game of Whales, and Non-transparent Calculation Rules

Prior to the EigenLayer airdrop controversy, several contentious issues had already emerged regarding the points system: rat warehouses, shrinkage blunders, PUA users, the game of whales, and non-transparent rules. The EigenLayer controversy simply brought to light the long-standing issues hidden within the points system.

"Rat warehouses" and the game of whales are the most criticized issues.

Take the EigenLayer airdrop, for example. It was announced on April 30 that the airdrop snapshot date was March 15, but several large addresses seemed to have known insider information and "coincidentally" transferred all deposited tokens the day after the airdrop snapshot.

Legendary trader GSR, for instance, transferred his wBETH worth $7 million the day after the EigenLayer snapshot on March 16; Binance's newly funded wallet also withdrew all wBETH worth $13 million from EigenLayer on March 16.

These strange precise transfer timings have led users to suspect that these individuals had insider information.

Layer2 network Blast, which promoted the points system, was pointed out by community users for secretly issuing a large number of gold points to certain Dapps without any announcement or disclosure.

Due to the popularity of the points system, the decentralized GPU project io.net was questioned by users in April for having a points rat warehouse, where project parties and VC institutions allegedly disguised themselves as ordinary users to collectively mine points.

Furthermore, issues such as points shrinkage, data errors, and PUA users have frequently occurred in points system projects due to non-transparent and unclear calculation rules.

After the official system upgrade of io.net, multiple GPU mining users found errors in their platform points data. The official statement later clarified that the points displayed on the website were only from internal tests based on past snapshots and placeholder values, and did not reflect the real points in users' Ignition reward plans. However, the current confusion in io.net's points data, multi-card calculations being treated as single-card, and other issues remain unresolved.

In February, the re-staking protocol EtherFi faced controversy over "points shrinkage and point theft." Some community members reported that under the same staking amount and duration, EtherFi had about 10% fewer EigenLayer points compared to the Renzo re-staking protocol. The official response stated that the points data displayed on the protocol's homepage was indeed incorrect, and users actually received many more EigenLayer points than the currently displayed data.

In March, the new points gameplay "Word-of-Mouth Car Crash" launched by Blast's mainnet was accused of being PUA. The new rule required users to migrate ETH points to the mainnet to enjoy a 10x inflation, but users had to pay gas fees of around $50 for migration, which was too costly for small retail users. Additionally, users found out after migration that the inflation factor was a random number between 0-10 times.

Although Blast later stated that it was a UI calculation error and the loophole had been fixed, it still left behind criticisms of non-transparent points calculation rules.

For users who did not migrate to the mainnet, it meant that their points no longer had the opportunity to double, and their original points' value would be diluted. If they wanted to cash out, they had to withdraw funds to the mainnet and then wait for more than ten days before being able to operate, causing participating users to be in a dilemma. If they did not continue to invest and interact with Dapps as "slaves," their points would be diluted by others.

Some community members expressed that Blast had put users on an unstoppable ride, not only erasing their previous contributions but also diluting the points they had mined with real money, forcing them to bear the risks of new projects like Rug.

One netizen described Blast's mainnet points gameplay as equivalent to your mother-in-law saying that a dowry of 100,000 is enough for marriage, but on the night before the wedding, she suddenly asks for more money.

Furthermore, as most points systems today are calculated based on the volume of deposited funds and time dimensions, the financial strength of whales can unilaterally dominate, making it clearly a "game of whales."

In EigenLayer's airdrop, Sun Yuchen alone received 3.55 million EIGEN tokens, out of a total of 83.5 million tokens in the first season, accounting for a high percentage of 4.26%.

Regarding current points system activities in projects, crypto user @sunlc_crypto stated on social media that they are not planning to participate in any more brushing or points-based projects.

Everyone is desperately increasing trading volume to earn points, but ultimately, the interpretation of the rules lies entirely with the project party. How points are exchanged for tokens, or even whether they are exchanged according to points, is all up to the project party.

Behind the Controversy of the Points System: Input and Output Are Not Proportional

At present, the gameplay of most projects' points systems is similar, mainly focusing on the simple stages of "recruiting, depositing funds, earning points, and competing for airdrops," with the rampant points gameplay causing aesthetic fatigue and even being criticized.

Ken, a crypto project operator, stated in an interview with ChainCatcher that the points system itself is not the issue. Its essence is to encourage users to interact more actively with the project in exchange for points, converting qualitative evaluation standards into quantifiable metrics. When used correctly, points are a good way to collect relevant community information about the project.

"The current controversy behind the Web3 points is the contradiction where user input does not proportionally match the output," explained Ken. The core of points system design lies in achieving a balance between the platform's input-output and the user's input-output.

In the Web2 world, the most important aspects of points system design are where points come from and where they go, that is, points acquisition and consumption.

From the platform's perspective, the core of points system design is to set corresponding point reward tasks for what the platform wants users to do. Once points are issued to user accounts, efforts should be made to guide users to spend points while continuing to generate output, thereby increasing platform revenue.

From the user's perspective, the value perception of points is paramount, meaning whether points can be exchanged for valuable items, whether they are desired, and whether the time and effort costs paid to earn points match the value of the points exchanged.

In the current Web3 world, the points system is mainly used by projects as an incentive tool for customer acquisition and fund attraction through token airdrop expectations. Users need to recruit, interact, deposit funds, earn points, and then vie for a possible airdrop opportunity, which is not 100% guaranteed.

Through the points mechanism, projects harvest real TVL and user data, thereby increasing their valuation. Crypto user 0xminion once stated on social media that project points imply to users, "Come farm with us, we will soon have tokens. If you make our metrics look good and take the risk to try our product, you can accumulate some points; some points do not welcome users who just want to benefit, but are happy for you to deposit and try our product, but will exclude you from token airdrop eligibility."

For instance, the recent Solana ecosystem derivative Drift Protocol, after conducting points trading activities for several months, initiated an airdrop. However, the airdrop reference was not based on points but was distributed to OG users, leaving early users who were attracted by points empty-handed, with potential financial and time costs.

Moreover, the current points system mainly revolves around deposits or trading volume, where points are obtained based on asset quantity, participation duration, fund size, and number of transactions, with a certain withdrawal restriction period. This means that under the points system, the airdrop profits obtained by brushing users may not be higher than before, and the final input-output ratio may even result in a loss, commonly referred to as being "anti-brushed."

Community users have criticized that the points system is a poison for project parties to lure users with airdrop expectations, attracting a batch of users and TVL, continuously increasing the project party's valuation, and gaining more investments. In this process, the project party's cost is zero. Even if there are some airdrops later on, the project party has not incurred any costs for issuing these tokens, while users have invested real money, energy, and time.

The fundamental reason for the criticism of the points system is that the points airdrop profits obtained by users do not match the input-output ratio.

Furthermore, due to the large-scale private placements and high levels of points brought by the current project parties due to the points system, the project parties have...

The FDV airdrop model results in users receiving airdropped tokens with a total value far below expectations, causing the listed tokens to continuously plummet. In the end, the profits can be described as losing both the wife and the soldiers. **Business Insights Derived from the Points System** Because it is a "wolf in sheep's clothing" game, and with successful cases in the past, for project parties, the points system is still a worthwhile method to try. In December, Pacman launched the staking network Blast with a points incentive strategy, achieving a TVL breakthrough of over $100 million within one day of the protocol going live. Within three months, it attracted a massive $2.3 billion in funds, officially kicking off the points system craze. More and more Web3 projects are joining the ranks of using points rewards, introducing their own Points incentive growth strategies. Users can earn points by participating in specific tasks, with higher points leading to increased chances and quantities of airdrops. Projects such as Layer2 networks like Arbitrum, Starknet, as well as unreleased projects like Scroll and Linea; exchanges within the Solana ecosystem like Backpack, derivatives like Drift, AI products like io.net; Bitcoin ecosystem Layer2 networks like B²Network, BounceBit, and the rise of Eigenlayer in the staking concept have pushed the popularity of the points system to new heights. Projects like Renzo, Puffer Finance, Eigenpie, Swell, KelpDao, Ether.Fi, among others, have engaged in a fierce battle of points rewards, centered around mining Eigenlayer points. This has led to projects offering dual mining or multiple rewards. In February this year, The Block reported that there were already over 111.5 billion points issued in the market. Amidst the points hype, some project parties saw entrepreneurial opportunities and developed specialized points trading platforms, third-party points design, and other points financial products like PointFi. In April, crypto KOL @MrBlock warned that the points market could be the next token market, advising users not to miss out. In December last year, the points trading OTC market Whales Market was established, allowing users to trade their earned points in a peer-to-peer manner, solving the issue of how to price points. For example, Blast points are currently priced at $0.00009, Eigenlayer's points were priced at $0.198 before the token launch, and BounceBit's points are priced at $0.012. According to Dune data, as of May 10th, Whales Market has completed trading volumes of around $110 million, with over 30,000 users. Currently, there are points trading platforms like Michi Protocol, PointMarket, and products like Pendle that tokenize future point earnings. There are also third-party products designed for points, such as the on-chain points management tool Stack, which completed a $3 million seed round led by Archetype in March. Web3 reputation platform Trusta Labs is also working on building a fair and auditable third-party points platform, allowing project parties with points needs to release their points on this platform. The emergence of the points trading market allows users to discover the value of the points they receive. Combined with clear points acquisition systems of projects, users can estimate potential returns, enabling them to lock in points profits early on through trading platforms and avoid being "reversed." **How to Design a Reasonable Points System?** Regarding the criticism of opaque rules surrounding points, crypto user Yelo (alias) expressed to ChainCatcher that most points systems in the current Web3 field are designed and issued by project parties themselves. Points are off-chain, meaning that project parties can adjust points systems as they please. Additionally, points supply can be unlimited, and the ways points are used and exchanged can be modified, giving project parties control over the final interpretation and usage of points. Simon, CTO of on-chain reputation platform Trusta Labs, also mentioned in an interview, "Off-chain points are based on centralized project party databases for statistics and storage, which indeed allows malicious project parties to engage in insider trading with false accounts and points. At the same time, the total points issuance, subsequent token exchange ratios, and methods have never been as determined and public as TGE." To address this issue, points can be put on-chain or supervised by third-party monitoring platforms to make the total allocation of points and the historical records of distribution methods transparent. There are already points on-chain products in the market, such as Stack, which can put points on-chain in ERC20 format, supporting tracing of every point allocation data. He also emphasized that when designing points systems, project parties should pay attention to setting different weights for different reward behaviors. For example, in pure staking fund incentive points systems like Blast and Eigenlayer, the top rankings are dominated by large investors with substantial capital, excluding many genuine users willing to participate. This approach may not garner widespread support for the project within the community. Furthermore, in terms of points usage scenarios, crypto user Nancy (alias) mentioned in an interview with ChainCatcher that the actual usage of Web3 points is relatively limited at present. Apart from being used for airdrops and token exchanges, there are no other usable scenarios. In the Web2 world, points have various uses, including exchanging goods, enjoying discounts, or other benefits. "Nancy suggested, 'Can Web3 project points be designed for various types of rewards, from discounts, product benefits, ownership and governance of projects, to directly impacting income?'" Regarding how to design a reasonable points system, researcher Katiewav from crypto institution Archetype VC once stated that the main goal of a project's points system should be to encourage product usage rather than point accumulation. Ensuring that the points plan ultimately brings users back to their product ecosystem is key to successfully launching a points growth-driven flywheel, rather than encouraging potential user loss behaviors like airdropping points. Directly converting points into product advantages, helping with product feedback, improvement, and testing specific features, is the sustainable path. She gave an example of the social platform Farcaster Warps, where points earned on the platform can be used as gifts for other users or for discounts when purchasing NFTs within the platform. This clear usage scenario for points reduces the risk of speculators participating. **Hotspot Event Tracking and Interpretation** This section mainly tracks and interprets the hotspot events in the blockchain industry. **Associated Labels** Related tags: Insider Trading, PUA Users, Points System, Speculation, EigenLayer, Staking Protocol, Points Controversy, Airdrop of Blast Points, Airdrop Speculation **ChainCatcher Reminder** ChainCatcher reminds readers to view blockchain rationally, enhance risk awareness, and be cautious of various virtual token issuances and speculations. All content on the site is market information or the opinions of relevant parties and does not constitute any form of investment advice. 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