Throughout 2024 and into early 2025, a transformation unfolded across decentralized finance that changed how protocols attract and retain users. From Ethereum Layer 2 networks to Solana perpetuals platforms, projects abandoned straightforward token emissions in favor of something more sophisticated: gamified incentive systems built around points, multipliers, and task-based rewards.
Blast's dual Points and Gold model brought in more than $2 billion in deposits before its mainnet launch. LayerZero's cross-chain messaging protocol implemented complex eligibility requirements to filter out over 800,000 suspected sybil wallets from its 1.28 million eligible airdrop recipients.
Kamino Finance on Solana sparked controversy when its transparent points system triggered a 69% surge in total value locked within five days, forcing the protocol to overhaul its reward structure mid-campaign.
These examples represent more than isolated experiments. They signal a fundamental shift in crypto's growth playbook. Gamified incentives have become the dominant user acquisition and retention model across DeFi, Layer 2 rollups, and social applications, replacing the liquidity mining boom that defined 2020's DeFi Summer. The thesis is straightforward: gamified incentives are the new liquidity mining, but smarter, more sustainable, and more behavioral in their design.
This shift matters now because the industry faces compounding pressures. Post-airdrop user retention rates have plummeted across multiple protocols, with Starknet experiencing significant usage declines following its airdrop. Investors increasingly scrutinize on-chain metrics, demanding evidence of authentic activity rather than mercenary capital.
Meanwhile, users report widespread points fatigue as nearly every protocol implements some variation of the same reward mechanism. Understanding how gamified incentives evolved, why they spread so rapidly, and what risks they create has become essential for anyone navigating crypto markets.
The Evolution of On-Chain Incentives
The story begins in summer 2020, when Compound Finance started rewarding lenders and borrowers with COMP tokens, sparking what became known as DeFi Summer. The mechanism was elegant in its simplicity: provide liquidity to Compound's money markets and receive governance tokens as rewards. Within weeks, billions flowed into DeFi protocols as projects including Balancer, bZx, Curve and Synthetix launched similar programs.
Liquidity mining succeeded spectacularly at bootstrapping protocols. Uniswap's monthly volume increased almost 100-fold from $169 million in April 2020 to over $15 billion in September 2020, while total value locked in DeFi grew more than 10 times from $800 million to $10 billion. But the model contained fatal flaws. Capital proved mercenary, flowing wherever yields peaked and departing the moment rewards declined. Protocols discovered they were renting liquidity rather than building communities. When token prices fell, the entire incentive structure collapsed.
The market evolved through trial and error. Airdrops emerged as an alternative distribution method, with protocols like Optimism and Arbitrum rewarding early users retroactively rather than announcing rewards upfront.
Blur's airdrop in February 2023 demonstrated how combining multiple reward seasons with competitive dynamics could sustain engagement longer than simple liquidity mining. Yet even these iterations faced challenges as farmers grew sophisticated, deploying multiple wallets and automated strategies to maximize returns.
Then came Blast, which launched in November 2023 with a novel Points and Gold dual incentive system that combined native yield on Ethereum and stablecoins with gamified accumulation mechanics. The protocol's approach represented a turning point.
Rather than immediately distributing tokens, Blast offered users who bridged assets before mainnet launch a 10x bonus on points earned during early access, with the stipulation that removing any portion of deposited crypto would eliminate the entire bonus. The design created powerful lock-in effects while building anticipation for an eventual token launch.
Blast's model proved influential because it solved several problems simultaneously. By delaying token issuance, the protocol avoided immediate sell pressure while creating sustained speculation about eventual distribution. By tying rewards to specific behaviors - bridging assets, using ecosystem dApps, maintaining balances over time - Blast transformed passive liquidity provision into active engagement. And by introducing multipliers and bonuses based on tenure and activity, the system encouraged users to think strategically about maximizing their position.
The broader adoption of points systems reflects lessons learned from liquidity mining's collapse. Protocols recognized that premature token emissions created misaligned incentives, rewarding capital deployment rather than sustained participation. Points offered a solution: quantifiable metrics for contribution without immediate token inflation. They functioned as IOUs, promising future rewards while protocol teams gathered data, built communities, and prepared for sustainable token launches.
What Are Points, Boosts, and Quests?
Points systems operate as off-chain or on-chain scoring mechanisms representing user contributions, typically redeemable for token airdrops or governance weight. Unlike traditional liquidity mining where users receive tokens immediately, points accumulate over time, with final distribution calculations occurring at designated snapshots or program conclusions. The separation between point accumulation and token distribution grants protocols flexibility in reward design while maintaining user engagement through anticipation of future value.
Blast's implementation exemplifies the core mechanics: wallets earn points automatically every block based on ETH, WETH, or USDB balances, reflected in real-time on dashboard interfaces. Points earnings increase over time as balances grow through native yield, creating compounding effects that reward long-term holders. The system tracks both individual accumulation and relative ranking, introducing competitive elements that drive continued participation.
Boosts function as multipliers for specific behaviors, amplifying point earnings based on desired actions. On Blast, users accessing promoted dApps earned points multipliers, with higher multipliers available for engaging with multiple applications.
This mechanism steered user behavior toward ecosystem growth objectives while creating differentiated reward tiers. Kamino Finance employed similar boost strategies, though its transparent approach proved problematic when users optimized for maximum multipliers, overwhelming certain liquidity pools and forcing mid-campaign adjustments.
The referral component represents another boost variation widely deployed across protocols. Blast's early access phase heavily emphasized invitations, rewarding users when referred friends bridged assets and engaged with the platform. This viral growth mechanism proved highly effective at driving adoption, though it also attracted sophisticated farmers who created elaborate referral networks specifically to harvest additional rewards.
Quests extend the gamification framework through task-based achievements designed to guide user behavior toward specific protocol objectives. While Blast focused primarily on balance-based points accumulation, other platforms implemented more granular quest systems. Drift Protocol on Solana structured its rewards program to recognize multiple activity types beyond trading volume, including market making and liquidity provision.
Aevo exchange avoided explicit points systems entirely, instead implementing what it termed a "farming boost" mechanism that multiplied rewards based on trading volume, fees paid, and platform loyalty measured through recurring usage.
These systems simulate yield without issuing tokens immediately, reducing sell pressure while maintaining user motivation through leaderboards, achievement tracking, and progressive multipliers. The psychological framework borrows heavily from gaming, employing progression systems, streak rewards, and visual feedback loops to encourage daily engagement. Projects discovered that transparent progress tracking and competitive elements sustained participation even when monetary value remained uncertain.
The distinction between approaches reveals strategic choices. Blast allocated 50% of Phase 2 rewards to Points (balance-based) and 50% to Gold (dApp engagement), distributing 10 billion BLAST tokens over what was initially planned as a 12-month period through June 2025, though this timeline later adjusted. LayerZero's system emphasized cross-chain message volume and fees paid across its network of supported blockchains, with eligibility calculations deliberately kept opaque until distribution. Kamino's transparent points dashboard allowed users to model scenarios and optimize strategies, creating engagement but also enabling gaming behavior that undermined broader distribution goals.
The Design Logic: Game Theory Meets On-Chain Growth
Gamified incentive systems operate on fundamentally different principles than liquidity mining. While traditional rewards programs incentivize capital deployment through immediate token emissions, points-based models rely on game theory and psychological reinforcement to shape behavior. The shift from explicit rewards to anticipated future value introduces uncertainty that paradoxically increases engagement by triggering speculative optimism and competitive positioning.
Leaderboards serve as primary engagement mechanisms, transforming individual point accumulation into competitive sport. Platforms display top performers prominently, creating aspirational benchmarks that drive increased activity among users seeking higher rankings.
The social proof effect amplifies as participants share standings on social media, generating organic marketing while reinforcing commitment to maintaining or improving positions. Protocols benefit from measurable engagement metrics: leaderboard-driven competition naturally segments user bases into highly engaged power users, moderate participants, and passive holders.
Streak rewards and progressive multipliers add temporal dimensions that encourage consistent daily engagement. By offering bonus multipliers for consecutive days of activity or tenure-based advantages for long-term participants, systems create habit-forming patterns similar to mobile games. Blast implemented progressive unlocking of multipliers over its program duration, with only 12 multipliers released before the scheduled June 2025 points redemption. This graduated structure maintained ongoing discovery and optimization opportunities throughout the campaign.
The game theory extends to information asymmetry. Many protocols deliberately maintain opacity around exact point calculation formulas and final conversion ratios to tokens. LayerZero CEO Bryan Pellegrino noted that roughly 1 million of 6 million addresses that interacted with the protocol engaged in sybil farming, representing wallets that would receive zero allocation from the 1.28 million eligible for airdrop distribution. By keeping detection methodologies confidential, LayerZero created uncertainty that discouraged some gaming attempts while rewarding authentic usage.
Protocols track engagement through metrics far more granular than simple total value locked. Daily active users, transaction frequency, wallet diversity within ecosystem dApps, and temporal patterns distinguish genuine participants from mercenary farmers. Dune Analytics dashboards and protocol-specific analytics tools allow teams to monitor these patterns in real-time, adjusting reward weights dynamically to optimize for authentic engagement versus extractive behavior.
Drift Protocol structured its points distribution around pro-rated trading volume, market making, and liquidity provision across perpetual futures markets, with approximately 100 million points issued monthly during its campaign.
The multi-factor approach recognized different contribution types rather than reducing everything to capital deployment. Similarly, Aevo's farming program evaluated trading volume across both historical periods and active campaign phases, balance holdings in its native stablecoin aeUSD, first-trade timing, and overall active usage measured through recurring engagement.
These design choices reflect an understanding that protocols need to transform from yield farms into behavioral ecosystems. Points systems create ongoing engagement loops where users check dashboards regularly, optimize strategies continually, and maintain awareness of relative positioning. The constant interaction builds familiarity and investment - both financial and psychological - that can persist beyond incentive program conclusions, converting mercenary farmers into committed community members.
Engagement Metrics and Speculation Loops
Data from major gamified campaigns reveals complex patterns of participation characterized by large user numbers but concentrated whale activity. Blast attracted over 1.5 million users by mid-2024, participating to earn millions of Gold tokens across ecosystem dApps. Yet analysis of wallet distribution typically shows power law curves where top percentile participants control disproportionate shares of points and eventual token allocations.
The whale concentration reflects both legitimate early adoption by sophisticated users and coordinated farming operations. Capital requirements create natural barriers: maximizing Blast points required bridging significant ETH and stablecoin amounts to benefit from balance-based calculations and native yield compounding. Similar dynamics affected Kamino, where transparent points calculations enabled users to model optimal capital deployment across different liquidity pools and leverage strategies.
Sybil resistance emerged as the defining challenge of gamified distribution campaigns. LayerZero announced an aggressive anti-sybil strategy that included offering users engaged in sybil-like behaviors a self-reporting option where they would retain 15% of their allocation "no questions asked," with severe repercussions for those who failed to comply.
This prisoner's dilemma approach created incentives for coordinated farming operations to voluntarily identify themselves, providing protocol teams with information about attack patterns while reducing adversarial dynamics.
LayerZero CEO Bryan Pellegrino explained that nearly half of addresses linked to LayerZero had only one transaction, and estimated only 400,000 to 800,000 of 6 million addresses truly participated in the network, making approximately 6.67% to 13.33% eligible for distribution.
The aggressive filtering sparked debate across crypto communities, with some praising the commitment to authentic user rewards while others criticized the subjective nature of sybil definitions and potential for false positives.
Verification mechanisms evolved in response to gaming pressures. Gitcoin Passport integration became common, allowing users to collect stamps proving their humanity through social account connections, on-chain history, and other identity signals. Some protocols implemented velocity checks analyzing transaction patterns for bot-like behavior. Others employed KYC-lite gating for premium tiers while maintaining permissionless base participation.
Yet farming loops persist despite these countermeasures. Sophisticated operators deploy browser fingerprint masking, residential proxy networks, and elaborate wallet management systems to maintain multiple identities that pass basic sybil checks. The arms race between protocol defense mechanisms and professional farmers continues escalating, with both sides adapting strategies in real-time throughout active campaigns.
The tension between organic adoption and speculative farming defines the current environment. Genuine users seeking protocol utility find themselves competing against dedicated farming operations for limited reward pools. Kamino Finance experienced this directly when announcing airdrop details sparked a 69% total value locked increase within five days as newcomers piled into incentivized pools, prompting the protocol to reduce multipliers for many products and introduce undefined "OG user" bonuses to reward tenure.
The speculation loop feeds on itself: protocols implement points to build sustainable communities, but the promise of valuable token distributions attracts mercenary participants who game systems, forcing protocols to increase complexity and opacity, which in turn creates information advantages for sophisticated operators while confusing genuine users. Breaking this cycle remains an unsolved challenge across the industry.
Regulatory and Economic Context
Points systems navigate regulatory gray zones by delaying token issuance, potentially avoiding securities law concerns that apply when projects sell tokens directly. Teams frame rewards as loyalty or contribution programs rather than investment contracts, emphasizing that points hold no guaranteed value and conversion to tokens remains contingent on future governance decisions and protocol launches.
This framing carries strategic advantages. By maintaining point accumulation as off-chain accounting without immediate tradeable value, protocols argue they operate loyalty programs similar to airline miles or credit card rewards rather than securities offerings. The lack of predetermined conversion rates and explicit value promises theoretically places points outside regulatory definitions of investment contracts under tests like the Howey standard.
Yet regulatory uncertainty persists. The U.S. Securities and Exchange Commission has not provided definitive guidance on points systems specifically, and past enforcement actions against crypto projects demonstrate that substance matters more than form in regulatory analysis. If points function primarily as speculative instruments where participants expect profits from others' efforts, regulators may classify them as securities regardless of labeling.
European markets face similar ambiguity under Markets in Crypto-Assets regulation. MiCA's framework addresses crypto-assets comprehensively but leaves open questions about loyalty programs that later convert to tradeable tokens.
The timing and conditions of conversion become critical: programs maintaining genuine utility and community governance functions may receive different treatment than thinly disguised pre-sales.
The economic sustainability question extends beyond regulation. Points economies require eventual conversion to something valuable - typically governance tokens with utility in protocol ecosystems. But governance token value depends on protocol success, creating circular dependencies. Blast's transition in January 2025 to continuous liquid BLAST incentives, replacing the previous Points and Gold structure, illustrates how systems must evolve from speculation-based accumulation to utility-driven value.
Can points economies exist long-term without token conversion? Evidence suggests not under current models. Users accumulate points expecting eventual monetary value realized through token distributions.
Protocols that indefinitely delay conversion risk community backlash and exodus to competitors offering clearer pathways to value realization. The gamification works because of anticipated payoffs; removing that expectation likely eliminates most engagement.
This creates timing pressures. Protocols must balance extended points accumulation periods that build community and gather usage data against growing user impatience for token generation events. Launch too early and face underdeveloped ecosystems with minimal organic utility. Launch too late and risk losing momentum to competitors or frustrated communities.
Token generation itself brings new challenges. When Blast launched its native token in June 2024, it debuted with a $2 billion fully diluted valuation and initially rallied 40% before declining in subsequent hours.
The pattern repeated across numerous projects: initial enthusiasm from airdrop recipients followed by sell pressure as recipients realized gains and questioned long-term value. Sustainable tokenomics must support utility beyond speculative trading, requiring genuine use cases in protocol operations, governance, or fee sharing.
Comparing the Models: U.S. vs. Asia vs. Europe
Regional patterns emerged in how protocols implement gamified incentives, reflecting differences in regulatory environments, cultural preferences, and market maturity. U.S. and European projects tend toward opacity around airdrop promises, framing points as contribution recognition without explicit value guarantees. This defensive posture responds to aggressive securities enforcement and heightened regulatory scrutiny in Western jurisdictions.
Asian ecosystem protocols, particularly those on networks like Aptos, Sei, and Linea, lean more heavily into overt gamification with explicit quest systems, achievement badges, and transparent reward calculations. The approaches reflect both different regulatory contexts - with some jurisdictions maintaining lighter-touch crypto regulation - and cultural factors where gaming and quest-based progression systems enjoy widespread acceptance.
Friend.tech's launch on Base, Coinbase's Layer 2 network, demonstrated hybrid approaches. The decentralized social platform announced it would distribute 100 million reward points over six months to app testers, with weekly Friday airdrops based on chat activity, trading volume, and earned transaction fees.
The program explicitly avoided typical points systems, instead promising that distributed points would have "special purpose" upon official release without defining conversion mechanisms upfront.
The regional distinctions extend to user expectations and behavior patterns. Western audiences demonstrate higher skepticism toward points programs following numerous failed or disappointing token launches, demanding clearer utility cases before committing capital. Asian markets show stronger tolerance for speculative participation and viral growth mechanics, contributing to different adoption curves and retention patterns.
Regulatory developments continue shaping these dynamics. Increased clarity from U.S. regulators could push protocols toward more explicit disclosures and restricted participation models, potentially bifurcating into compliant versions for regulated markets and permissionless alternatives for other jurisdictions. European MiCA implementation will similarly force adaptations as projects operating in EU markets navigate new compliance requirements.
Lessons from the Frontlines
Several campaigns provide instructive case studies in what succeeds and fails within gamified incentive design. LayerZero's aggressive sybil filtering, including a self-reporting mechanism offering 15% allocation retention and bounty hunter programs to identify farming wallets, represented the most comprehensive anti-fraud effort across major airdrops. The approach sparked significant debate but effectively communicated that protocol teams would actively defend legitimate user interests against professional farmers.
The results proved mixed. LayerZero successfully reduced mercenary participation but faced backlash from users caught in filtering despite believing their activities constituted genuine usage. Critics noted that practices previously beneficial to LayerZero - like using partner applications including Merkly for cross-chain transfers - became disqualifying factors when the protocol labeled such applications "sybil farming" tools.
The controversy highlighted tensions between protocol growth during building phases, where activity metrics matter most, and distribution phases where authentic usage becomes the primary concern.
Blast achieved record-breaking TVL growth by combining native yield with points accumulation and aggressive early-adopter bonuses, surpassing $1 billion locked shortly after announcement. However, the protocol faced persistent speculation and controversy around whether deposits represented genuine ecosystem belief or purely mercenary positioning ahead of expected token value.
The ecosystem developed a robust dApp environment including over 200 live applications contributing to $3 billion in TVL by mid-2024, suggesting some sustainable foundation beneath the incentive-driven growth.
Kamino Finance's experience demonstrated risks of excessive transparency, as its open points calculations enabled users to optimize mathematically, creating unexpected concentrations in specific pools that undermined distribution goals and forced mid-campaign rule changes. The protocol learned that while transparency builds trust, complete formula disclosure enables sophisticated gaming that disadvantages less technical participants.
Drift Protocol structured its approach to reward both current activity and historical contributions through checkpoint snapshots, distributing approximately 100 million points monthly based on trading volume, market making, and liquidity provision. The recognition of historical usage alongside campaign-period activity helped address concerns that late announcements unfairly benefit newcomers while neglecting early supporters who built protocol foundations.
Analytics firms provided critical infrastructure for these campaigns. Dune Analytics dashboards tracking wallet distributions, activity patterns, and comparative metrics became essential resources for both protocol teams and participants. Messari and Delphi Digital reports offered market intelligence on campaign effectiveness and comparative analysis across projects. The transparency enabled by blockchain data created feedback loops where community analysts identified issues and opportunities that informed protocol adjustments.
Expert commentary revealed emerging best practices. Balanced reward design avoids over-indexing on single metrics like total value locked, instead recognizing diverse contribution types including governance participation, ecosystem building, and sustained usage. Transparency about processes and criteria, even when specific formulas remain confidential, builds trust more effectively than complete opacity.
Anti-bot measures must balance fraud prevention against false positive risks that alienate genuine users. Retroactive components addressing historical contributions should complement forward-looking incentives to reward loyalty without enabling purely extractive behavior.
Future Outlook: The Next Meta After Points
Points saturation has become apparent across crypto markets. Nearly every protocol launching in 2024 and early 2025 implemented some variation of points programs, creating fatigue among users exhausted by constant tracking across dozens of dashboards. The diminishing returns suggest the points meta approaches maturity, raising questions about what comes next in incentive design.
On-chain reputation systems represent one evolutionary path. Rather than protocol-specific points that reset with each new campaign, reputation frameworks track contribution history across multiple protocols and timeframes. These persistent identity layers could enable nuanced airdrops where eligibility depends on demonstrated patterns of constructive ecosystem participation rather than simple capital deployment or task completion. Gitcoin Passport and similar solutions provide foundations, though comprehensive reputation systems remain underdeveloped.
Real yield gamification offers another direction. Instead of accumulating points toward speculative token distributions, users could earn shares of protocol revenue through actual fee generation.
This model aligns incentives around sustainable value creation rather than farming extraction, though it requires protocols to generate meaningful fee revenue - a challenge for many DeFi projects competing on zero-fee or subsidized offerings. The approach also introduces securities law considerations as profit-sharing arrangements trigger heightened regulatory scrutiny.
Loyalty NFTs and social capital models propose alternative frameworks where contributions earn non-fungible recognition assets with utility in protocol ecosystems. Rather than fungible points summing to token allocations, unique NFTs might unlock governance powers, fee discounts, or priority access to new features.
These models emphasize identity and relationships over pure capital optimization, potentially creating stronger community bonds though at cost of reduced liquidity and tradability.
The convergence of DeFi with GameFi and SocialFi suggests hybrid futures. Friend.tech demonstrated how social dynamics and financial speculation intertwine, with users buying shares of crypto personalities to access private communities while farming points toward eventual token distributions. The model proved unsustainable in its initial form but indicated directions for integration: social reputation systems where engagement value stems from genuine community participation rather than mercenary accumulation.
Growth hacking playbooks from web2 increasingly inform crypto incentive design. Referral mechanics, streak rewards, achievement systems, and progression loops all descend from mobile gaming and social media growth tactics.
The crypto industry's experimentation with these models in decentralized contexts creates unique challenges around sybil resistance and sustainable economics, but also opportunities to align incentives around genuine usage rather than extractive behavior.
Emerging protocols signal potential new approaches. Some experiment with gradual vesting that discourages immediate dumps by distributing tokens over extended periods contingent on continued participation.
Others implement decay mechanisms where inactive points gradually lose value, encouraging consistent engagement rather than one-time optimization. A few explore contribution-based weighting where early adopters and sustained participants receive disproportionate rewards compared to late-arriving capital.
The regulatory environment will significantly shape evolution. Clearer guidance from U.S. and European authorities on points systems, airdrop structures, and governance token distributions could either legitimize current approaches or force substantial adaptations.
Compliance requirements like KYC for distributions above certain thresholds might bifurcate markets into regulated and permissionless tracks.
Technology improvements enable more sophisticated incentive designs. Layer 2 networks reduce transaction costs that previously made fine-grained interaction rewards uneconomical. Cross-chain infrastructure allows unified points accumulation across multiple networks, addressing liquidity fragmentation. Zero-knowledge proof integration could enable privacy-preserving reputation systems where contribution history remains verifiable without revealing specific wallet activities.
Conclusion: Reinvention or Repeat?
Have points and quests finally solved the mercenary user problem, or merely reinvented it with additional steps? The evidence suggests both realities coexist uncomfortably. Gamified incentives represent genuine improvements over crude liquidity mining - they delay token emissions reducing immediate sell pressure, they encourage broader behavioral engagement beyond capital deployment, and they enable protocols to gather meaningful usage data before launching tokens. These advantages are real and explain why virtually every project adopted some variation of the model.
Yet fundamental challenges persist. Users still predominantly participate for speculative gains rather than genuine protocol conviction. Capital remains mobile and mercenary, concentrated in sophisticated operations deploying resources across dozens of simultaneous campaigns.
Sybil attacks adapt faster than defense mechanisms, forcing escalating complexity that disadvantages less technical participants. And the eventual need for token conversion creates the same boom-bust cycles that plagued liquidity mining, just delayed by months rather than eliminated entirely.
The trajectory points toward continued iteration rather than settled solutions. Protocols will keep experimenting with reputation systems, revenue sharing, loyalty mechanisms, and hybrid approaches seeking that elusive balance between growth incentives and sustainable community building. Some experiments will succeed in creating genuine long-term engagement. Most will repeat familiar patterns of initial enthusiasm followed by mercenary exit once rewards diminish.
What seems certain is that the crypto industry has moved irreversibly beyond simple liquidity mining. The sophistication required to attract and retain users in 2025's competitive environment demands more than raw token emissions.
Whether gamified incentives represent a meaningful advance or just a more elaborate version of the same fundamental model depends ultimately on individual protocol execution and the broader market context they navigate.
The quest farms have replaced the yield farms, but the farming continues.