Author: Chen Xiaomeng
STANDX's Points is Points; it's not the first, nor will it be the last.
Foreword: You accumulate more points, but your money doesn't necessarily increase.
Have you noticed that points programs in the cryptocurrency world have become increasingly complex in the past two years?
The situation is completely different now. Many projects are starting to allocate points based on deposit size, loan amount, trading volume, LP liquidity, and holding time. Some projects encourage users to borrow and lend repeatedly, amplifying a principal of 100,000 USDT into a nominal deposit of hundreds of thousands of USDT; some projects offer dozens of times the points exposure through Pendle YT; and some trading platforms require users to continuously contribute tens of millions or even hundreds of millions of USDT in trading volume to have a chance to enter the rewards leaderboard.
These gameplay options do offer more opportunities to earn points, and have provided new sources of income for many users with substantial funds. The problem is that as the entry barrier increases, the financial costs and risks associated with earning points also rise.
So—what is the actual cost of acquiring points, and what is the probability of converting these points into disposable cash income? Therefore, this article aims to systematically organize common point systems in the cryptocurrency world, and establish a framework for preventing fraudulent investment decisions by considering aspects such as point valuation, funding costs, risk exposure, and exit mechanisms.
I. The Economics of Points: Why are project teams increasingly fond of points?
Let's first understand the points system from the perspective of the project team.
For projects that haven't yet issued their own tokens, points are a highly effective user incentive tool. Project teams can use points to attract liquidity, increase trading volume, and boost product activity, while simultaneously deferring the settlement of actual rewards to the future. For early-stage protocols, this reduces the pressure of immediate cash or token payments and helps build a user base before the product matures.
For example, a lending protocol might aim to raise $50 million in TVL (Total Value Added) in the short term. Directly increasing deposit interest rates would incur significant funding costs. However, by using a points-based incentive system, the project can attract funds upfront and then determine the reward size and distribution method based on the token economic model. For the project, the increase in funds is immediately reflected in business data; for users, the final reward amount, payout time, and actual value often remain uncertain.
Project teams hope to acquire more funding and users with the lowest possible incentive costs, while participants hope to obtain more rewards with the lowest possible financial costs.
While both parties may share common interests at certain stages, these interests do not always remain aligned in the long term. Especially when market competition is fierce and projects are constantly increasing their reward multipliers, a large amount of capital may be concentrated on a single protocol for rewards, while the protocol's actual business needs may not grow in tandem.
If the final reward pool remains unchanged, the potential airdrop value you can obtain has actually been significantly diluted. This is also the first principle to understand when investing in points: the key factors determining the final reward are usually the effective share of points, the size of the reward pool, and the redemption price. Simply increasing the number of points does not guarantee a corresponding increase in returns.
II. 10 common points systems in the cryptocurrency world, and their respective traps for exploiting loopholes.
Although there are many different types of points programs on the market, they can be roughly divided into ten categories based on the investment and revenue sources. The cost structures of these different types vary greatly, so it is necessary to discuss them separately.
1. Interactive task type: Transaction fees and time are the main costs.
Interactive points systems were the earliest and most popular way to earn rewards. Users earn points through actions such as swapping, cross-chain transactions, lending, minting NFTs, and voting. Projects then determine rewards based on the number of interactions, active days, cumulative transaction amount, or other behaviors.
The advantage of this type of project is that it usually requires less capital; many tasks can be completed with only a small amount of funds. The disadvantage is that costs are easily fragmented, especially in activities that require sustained activity over a long period.
Assuming a project requires 50 interactions, each consuming an average of 0.5 USDT in Gas, the on-chain transaction fees alone would amount to 25 USDT. If multiple cross-chain transactions, illiquid trading pairs, or additional service fees are involved, the actual cost could increase further. For projects requiring daily check-ins and progress monitoring, the time investment should also be considered.
Another noteworthy risk with interactive points systems is eligibility screening. Many projects screen for suspicious accounts based on transaction patterns, address associations, source of funds, and operational behavior. Therefore, paying transaction fees does not guarantee that you will ultimately receive the reward.
I think these kinds of projects are dead. You might as well get some BN accounts and farm some alpha.
2. TVL (TVL) deposit type: most likely to underestimate the opportunity cost of capital.
TVL (Total Value Limit) incentive programs have become one of the most common incentive methods in DeFi projects. Users deposit stablecoins or other assets into the protocol and earn points based on the deposit size, duration, and acceleration factor. For users with substantial funds, this model is simple to operate and offers stable point accumulation. However, it can also easily cause participants to overlook the returns their funds could otherwise generate.
For example, a project offers a base annualized return of 3% while also awarding points. Assuming you have 100,000 USDT, and an alternative strategy with similar risk characteristics offers a 7% annualized return, participating in the points program means forgoing approximately 4,000 USDT in potential returns each year. If the funds are tied up for three months, the opportunity cost approaches 1,000 USDT (see my fair annualized return comparison for reference).
Therefore, when participating in TVL points, it's necessary to compare the base interest rate, potential airdrops, and returns from alternative investments. Furthermore, smart contract security, asset de-anchoring, redemption restrictions, and fund concentration should all be considered in the decision-making process.
3. Loan-based reward systems: These systems amplify points through a cyclical accumulation process, which also amplifies risk.
Loan rewards are typically divided into deposit rewards, loan rewards, and a model that rewards both simultaneously. When the agreement allows users to deposit borrowed assets back into the account, a loop, or revolving lending strategy, is created.
Assuming a user has 100,000 U, they can borrow up to 80% of the collateral value in this round. If each loan is re-deposited, and ignoring limits and fees, theoretically, this could result in approximately 500,000 U of total collateral and 400,000 U of borrowed funds. If the project calculates points based on total deposits, the nominal points exposure could increase to five times the original amount. However, this also means the user incurs interest on 400,000 U of debt and faces greater susceptibility to liquidation.
Both collateral and debt are held in stablecoins, and losses can still occur due to de-pegging, interest rate changes, and oracle anomalies. The lending cycle requires simultaneous calculation of net interest margin, lending rate volatility, the price relationship between collateral and debt, and changes in the health coefficient. For positions nearing liquidation, a small amount of extra credits may be far from sufficient to compensate for the potential risks.
4. LP (Limited Partner) Market Making: Earns transaction fees and points, but may still underperform those holding the token.
Those who have saved Fables understand best.
LP points typically incentivize users to provide liquidity to trading pools. Rewards can come from transaction fees, liquidity incentives, and additional points, so the interface often displays an attractive combined APR.
However, the final return for LPs is affected by changes in asset prices. Taking a typical ETH/USDC liquidity pool as an example, as ETH continues to rise, the pool will gradually reduce the amount of ETH held by users and increase the proportion of USDC. Even if users receive transaction fees and credits, the final asset value may be lower than if they had directly held the initial ETH and USDC.
Therefore, a clear benchmark must be established when evaluating LP points. For strategies using ETH and USDC as underlying assets, directly holding the same initial assets is usually a meaningful reference. Only by combining the differences arising from transaction fees, incentives, points, and asset rebalancing can the actual performance of a market-making strategy be judged.
5. Pendle YT model: Requires precise calculation of points purchase costs.
Pendle YT is a relatively representative points-based strategy tool in recent years.
In Pendle, interest-bearing assets can be divided into PT, representing the principal interest, and YT, representing the yield interest before maturity. After purchasing YT, users can obtain the right to the yield interest for the corresponding period, as well as points and reward benefits that meet relevant rules.
Because the price of YT is usually significantly lower than the nominal value of its underlying assets, users can obtain a large exposure to points with relatively little capital. This is why the market often discusses point efficiency of ten or even dozens of times. However, YT has a very clear time decay characteristic. As the maturity date approaches, the remaining period of earnings becomes shorter and shorter. After maturity, YT no longer has the right to future earnings, and its intrinsic value becomes zero. Earnings and rewards obtained under the previous conditions will be handled according to specific rules.
Therefore, when purchasing YT, the most important factors are calculating the purchase price, expected earnings, credit value, and remaining term. If you invest 2,000 U to purchase YT, but only receive a base yield of 120 U before maturity, then the remaining cost will need to be covered by credit rewards.
For YT, I only do free money and swing trading now. Don't even think about paying for points.
6. PERP (Perpendicular to Per ...
Perp platforms typically award points based on trading volume, holding time, order liquidity, or trading activity. Some platforms also have seasonal leaderboards to encourage users to continuously increase their trading volume.
These types of activities can easily generate huge numbers. An account might have only 10,000 USDT in margin, but through high-frequency trading and leverage, it can accumulate millions of USDT in trading volume. However, trading volume does not directly translate into profit. Each trade may incur transaction fees, slippage, and funding costs, and positions are also subject to market volatility and liquidation risks during the holding period.
To put it simply, the most perp after var can only be used for financial management.
7. Spot trading: Costs are often hidden in spreads and price fluctuations.
Spot points are similar to Perp points, with common rules including cumulative trading volume, trading volume of a specified trading pair, consecutive trading days, and token holding requirements. Spot trading does not have the funding rates of perpetual contracts, but transaction fees, spreads, and slippage still apply. For less liquid trading pairs, the costs of repeated buying and selling can be substantial.
If the event requires holding a new token for an extended period, price fluctuations will also be factored into the final result. Even if a large number of points are earned, the token's own price drop could completely offset the potential airdrop.
For these types of projects, the most efficient approach is usually to combine the planned spot trading with points-based tasks, minimizing additional transactions created solely to increase trading volume.
8. Social and Content-Based: Time and Attention Should Also Be Valued
Social points are awarded for posting, interacting, creating content, contributing to the community, and participating in various leaderboard activities. For users skilled in creation, research, and community management, these types of programs may be relatively cost-effective.
This is what we commonly call oral masturbation.
Of course, content creation can also lead to increased followers, research accumulation, networking opportunities, and business collaborations, all of which have economic value. However, when evaluating content creation, it's important to distinguish between the long-term value generated by the content itself and the direct rewards from project points.
For KOLs, I prefer to prioritize researching projects they already follow, and then use points as an additional incentive. This way, even without airdrops, the research time and content invested may continue to generate value.
9. Invitation and Community-Based Model: Points Bonuses and Real Cash Income Need to be Calculated Separately.
Referral bonuses, community collaborations, and points-based acceleration have become important growth strategies for many projects. These mechanisms can generate additional revenue for participants who can organize users and funds.
For community operators, credit risk also needs to be considered. If they recommend projects with opaque risks to the community in order to obtain higher commissions, the impact of problems with the underlying assets may exceed the short-term cooperative income.
Therefore, such activities should focus on terms of cooperation, reward attribution, payment timing, actual redemption conditions, and disclosure of benefits to users.
10. Pledged and Locked-Up Type: High leverage is often accompanied by liquidity constraints.
Staking, locking up, and node-based points generally encourage users to hold assets for the long term by increasing the weight of time. For example, locking up for 30 days earns basic points, locking up for 90 days earns double points, and locking up for 180 days earns quadruple points.
This mechanism helps project teams stabilize their funding, but for users, it means giving up some liquidity. If the underlying token drops significantly during the lock-up period, or if a significantly better investment opportunity arises in the market, users may not be able to adjust their positions in time. Early withdrawal also incurs penalties, further increasing the actual costs.
Especially with highly volatile tokens, locked-up points need to be assessed simultaneously for token price risk, points value, and time cost. For users with larger principal amounts, liquidity itself is of significant value, and the ability to exit assets should not be ignored simply because of increased reward multipliers.
III. What is the actual value of these points? Establish a unified valuation model.
After understanding the different types of points, the most crucial issue to address is valuation. Many people like to speculate on the value of airdrops based on project funding amounts, investment institutions, and market hype. For example, if a project has raised a large amount of funding, and the market expects the FDV to reach $500 million after TGE, participants may believe that the points have high value.
However, FDV itself cannot directly determine the amount of an individual airdrop. It is also necessary to know how many tokens the project allocates to the points pool, the proportion of an individual's valid points in the entire points pool, and the final price at which the tokens can be redeemed.
For projects that are linearly allocated according to integral shares, the following basic model can be used:
Theoretical Points Value = FDV × Points Pool Token Ratio × Individual Valid Points ÷ Total Network Valid Points
The token percentage in the points pool is a percentage relative to the total token supply. If a project allocates a total of 10% of its tokens for community incentives, but only 2% of that is used for the points pool you participate in, then 2% should be used in the calculation.
Assuming a project's final FDV is $500 million, with 2% of the token supply allocated to a certain points pool, and you own 0.06% of the effective points in that pool, then the theoretical reward value would be:
500,000,000 × 2% × 0.06% = 6,000 USD.
This figure is already a useful reference, but the unlocking arrangements and actual trading prices still need to be considered. If the rewards are locked up, released in installments, or there is market selling pressure, the final amount that can be redeemed may be lower than the theoretical valuation. A comprehensive redemption coefficient can be further established to estimate the realizable value of the rewards under different unlocking and price scenarios. Assuming a comprehensive redemption ratio of 50%, the expected realizable value of these points would decrease from $6,000 to $3,000.
Next, consider points inflation. If the project continues its points program, and the total effective points across the network triple, while your points remain unchanged, your individual share will decrease to one-third of its original value. Even if the final FDV remains the same, your theoretical reward will only be $2,000; with the same 50% cash-out factor, the expected realized value will further decrease to $1,000.
This indicates that points valuation involves at least four core variables: final FDV, reward pool percentage, individual valid points share, and actual redemption conditions.
A significant change in any one of these variables could alter the expected return of the entire strategy.
Why do I recommend creating four scenarios simultaneously?
Given the high uncertainty surrounding future FDV and total credits, a single valuation can easily lead to overly optimistic judgments. In actual assessments, I recommend establishing at least four scenarios: optimistic, neutral, pessimistic, and zero airdrop.
For each scenario, the final airdrop amount is calculated and compared with the actual cost of capital. If a strategy relies on an optimistic scenario to break even, then it requires stricter position control.
IV. The true cost of counter-profiting often lies hidden outside the earnings panel.
One of the most common mistakes when analyzing points programs is to only count explicit costs and ignore other financial costs.
A complete points investment requires consideration of at least five components: direct costs, opportunity costs, strategy gains and losses, liquidity costs, and tail risks.
Direct costs are relatively easy to understand and include gas, cross-chain fees, transaction fees, slippage, and lending interest. Opportunity cost is the alternative gains forgone during the participation period. Strategy profit and loss includes factors such as LP rebalancing, YT price decay, and trading profits and losses. Liquidity costs mainly come from staking, redemption queuing, and early exit discounts, while tail risks involve contract vulnerabilities, asset de-pegging, liquidation, and protocol failures.
The first few categories can usually be quantified through transaction records and market data. Tail risks are relatively difficult to predict, but they still need to be managed through position limits, risk scenarios, and diversified allocation.
To ensure consistent evaluation across different projects, I recommend calculating both metrics simultaneously:
Absolute net income = final net asset value + realized rewards - initial net investment - additional expenses.
Relative excess return = Actual net return of the integration strategy - Net return of comparable risk alternative strategies.
It is important to note that lending strategies must first deduct outstanding liabilities, and profits and losses already included in the final asset value cannot be counted twice. For strategies involving LPs or YTs, the calculation must be based on the final realizable asset value, and the initial principal cannot be used directly.
For a simple example, a points investment might earn 1,000 U in three months, but an alternative strategy with a similar risk level could earn 2,000 U during the same period. In terms of absolute return, the account is still profitable; however, in terms of capital allocation efficiency, this investment misses out on the potential return of 1,000 U.
This is why I have always recommended separating the expected value of points from the realized cash gains in the statistics.
Additionally, APR and APY need to be distinguished. APR usually represents the simple annualized rate of return, while APY reflects the annualized result under specific compounding conditions. Different platforms may display different metrics, and directly adding the base APY, token-incentive APR, and unconfirmed expected points can easily overestimate the actual return.
V. Five real-world case studies: How exactly do points-based systems lead to fraudulent practices?
The preceding discussion focused on the mechanism; the following examples will examine the break-even conditions for different strategies.
Case 1: Deposit 100,000 USDT for three months, then receive an airdrop of 500 USDT.
Suppose a points program offers a base annualized return of 3%, and a user deposits 100,000 USDT and holds it for 90 days. Meanwhile, an alternative strategy with similar risk characteristics and an annualized return of 7% exists in the market.
Based on a simple annualized rate and 365-day interest calculation, the base interest for the points program is approximately 740 U, while the return from the alternative strategy is approximately 1,726 U, a difference of approximately 986 U.
If participating in the points program also incurs a 100 U processing fee, and the final airdrop value is 500 U, then the results of the two options are as follows:
Although the points program ultimately earned 1,140 U, it still earned approximately 586 U less compared to the alternative strategy.
Under these assumptions, an airdrop of approximately U1,086 would be needed to cover the interest difference and operational costs. This is the opportunity cost break-even point for this strategy.
Case 2: If you spend 2,000 USDT to buy YT, how many airdrops do you need to break even?
Suppose a user spends 2,000 USDT to purchase YT with 90 days remaining. Before maturity, they accumulate 120 USDT in underlying returns, paying 30 USDT in transaction fees. If the YT is held until maturity, its residual value is zero. Therefore, the direct guarantee of principal protection for this strategy is:
2,000 − 120 + 30 = 1,910 U.
In other words, the final airdrop needs to reach 1,910 USDT to cover the purchase cost and transaction fees. If the airdrop is only 1,000 USDT, the strategy will incur an actual loss of approximately 910 USDT. If we further consider other investment returns that the 2,000 USDT could generate within 90 days, the break-even point would be even higher.
This type of calculation helps us determine the market price of YT. Even with a high multiplier, if the purchase price already includes overly optimistic airdrop expectations, it may still be impossible to break even.
Case 3: Can negative interest rate spreads be covered by credits when 100,000 USDT is circulated into 500,000 USDT?
Assuming a user has 100,000 U, they can theoretically create 500,000 U of collateralized assets and 400,000 U of borrowed funds through an 80% revolving lending ratio. The collateralized assets have an annualized interest rate of 4%, and the borrowed funds have an annualized interest rate of 6%, assuming that the interest rates remain constant for 90 days.
Therefore, the interest generated from 500,000 U of collateralized assets would be approximately 4,932 U, and the interest expense corresponding to a 400,000 U loan would be approximately 5,918 U. The final base interest spread return for the revolving position would be -986 U. In reality, there may be limitations such as quotas, interest rate curves, and reverse revolving integral rules, so the theoretical 5x exposure may not necessarily be fully realized.
The key point of this case is that while the nominal size after the cycle is large, the net principal equity is still only 100,000 U. While the efficiency of the points increases, the balance sheet and liquidation risk also change significantly.
Case 4: Perp generated 10 million USDT in transactions. What was the cost?
Suppose a Perp platform awards points based on trading volume. A user completes a total trading volume of 10 million USDT in a season, with an average actual commission rate of 0.04%, an average execution slippage of 0.02%, and a net payment of 10,000 USDT in funding fees.
The transaction fee is 4000 U, the execution cost such as slippage is 2000 U, and with the funding rate, the total cost is 7000 U.
If we temporarily ignore directional trading gains and losses, the final value of the airdrop needs to reach 7000 U to cover these expenses. Assuming the actual airdrop is only 3000 U, the net loss is 4000 U. If directional trading losses also occur during the volume manipulation process, the losses may continue to increase.
Therefore, for volume-based points, I believe it is necessary to establish an independent transaction cost ledger, comparing the cost of every 1 million USDT transaction volume with the expected airdrop value, and continuously updating it based on fee levels, order book ratios, and rebate situations.
Case 5: LP shows an annualized return of 20%, so why is it still underperforming the holding of coins?
Suppose a user initially has 50,000 USDT of ETH and 50,000 USDT of USDC, with a total value of 100,000 USDT, and deposits both into a regular 50:50 constant product liquidity pool.
Over the next 90 days, the price of ETH doubled. If you held the initial assets directly, the portfolio would eventually be worth 150,000 USDT. However, for the constant product LP, ignoring transaction fees and incentives, the final value would be approximately 141,421 USDT due to automatic asset allocation adjustments, about 8,579 USDT less than if you held the assets directly.
Now, assuming the LP receives an additional 20% annualized fee and incentive income, and based on an initial investment of 100,000 USDT, it would amount to approximately 4,932 USDT after 90 days. Including this income, the LP's final value would be approximately 146,353 USDT, still lower than the 150,000 USDT directly held, a difference of approximately 3,647 USDT.
This case illustrates that the annualized return of LPs and the excess return of LPs relative to holding cash need to be calculated separately. For highly volatile assets, price paths and range settings can have a significant impact on the results.
VI. Which points-based systems are more prone to fraudulent practices? Pay close attention to these seven signals.
After analyzing the strategy itself, it's also necessary to determine whether the project has a sound economic foundation. The following signals deserve special attention.
First, the project has long promoted high-multiplier points but failed to clearly define the size of the reward pool. Point multipliers themselves do not indicate dollar value. If the project doesn't disclose reward distribution, valid point rules, and redemption methods, it's difficult to determine the reasonable cost of acquiring those points.
Second, with repeated extensions of the points season, the total points continue to inflate. Faced with ever-increasing funds, the potential value per unit of points in the fixed reward pool may continue to decline. Especially with long delays to the TGE (Time for Victory) event, early participants also incur additional capital costs.
Third, the points rules are frequently modified, leaving users without clear expectations. These changes include sudden shifts in points weighting, increased redemption restrictions, adjustments to snapshot dates, and new lock-up requirements. While these rule changes may have legitimate reasons, participants must assess the impact of this uncertainty on their final rewards.
Fourth, business growth is highly dependent on subsidies. If the agreement primarily attracts funding through high rewards while the underlying actual revenue is low, it's crucial to pay close attention to the subsidy budget, duration, and fund retention after the subsidy ends. After the subsidy ends, declining returns and liquidity outflows may occur simultaneously.
Fifth, there are significant incentive differences between ordinary users and special participants. For example, different user groups have different point weights, cooperation rewards, and funding costs. These differences may be commercially reasonable, but should be assessed through publicly available rules whenever possible. Ordinary users need to calculate their benefits based on the conditions they can actually obtain.
Sixth, valuation expectations are overly reliant on market hype. When a points strategy requires an extremely high TGE FDV to break even, its expected returns become exceptionally sensitive to market pricing. Project financing and investment institutions can be used as references, but they cannot directly guarantee the token's price after listing.
Seventh, the exit mechanism is complex and liquidity is insufficient. This includes long redemption cooling-off periods, queued withdrawals, quota restrictions, lock-up periods, and secondary market discounts. For users who need to adjust their positions at any time, the ability to exit is itself an important investment condition.
VII. Establish your own anti-fraud system: from project selection to fund management
For those who have been involved in points programs for a long time, I think the most important thing is to establish a fixed evaluation process to avoid relying on market sentiment to make decisions every time a new program is launched.
First, classify the risk levels of the points program.
I usually categorize projects into three types based on the relationship between basic returns and expected points.
The first type is more suitable for long-term capital allocation. The second type requires continuous monitoring of changes in the points economy and alternative returns. The third type requires extremely strict position limits, especially in YT, Perp volume manipulation, and high-cost lock-up strategies.
This classification is particularly meaningful for users with larger capital. As capital increases, the absolute amount of stable, reasonable returns also increases. Sacrificing significant basic returns to compete for uncertain points could lead to a decline in the overall portfolio performance.
Secondly, all point-based strategies must have predetermined exit conditions.
Many points-based events undergo season adjustments, rule changes, and time extensions. If participants continue to invest money because they have already accumulated a large number of points, they are easily affected by sunk costs.
Therefore, before entering a project, one should clearly define the planned duration of participation, the maximum amount of capital to invest, the acceptable cost, and the circumstances under which reducing investment or exiting the project may occur. For example, when the rate of point growth slows significantly, total points continue to inflate, loan interest rates rise, project subsidies end, or redemption conditions change, it is necessary to recalculate the expected net return.
The costs already incurred are irreversible; future decisions should be based on the future returns that the remaining funds can generate. Even if you've been participating for several months, there's no need to continue paying unreasonable new costs just to retain existing points.
Finally, the points are evaluated within the entire portfolio.
Participating in ten projects simultaneously does not necessarily achieve sufficient diversification. If these ten projects all rely on the same stablecoin, lending asset, or cross-chain bridge, the underlying risks may still be highly concentrated.
Particular attention needs to be paid to multi-layered DeFi structures. For example, depositing funds into a protocol to obtain interest-bearing certificates, then using these certificates as collateral for lending, and finally depositing the loan into another points program. Such combinations can indeed combine multiple sources of income, but they also increase reliance on smart contracts, asset conversion paths, and liquidation risks.
Therefore, the cash management statement should at least record the project's invested principal, current net equity, loan balance, basic returns, points valuation, redemption period, and underlying protocol dependencies.
For points that have not yet been redeemed, it is best to set up a separate category and use a conservative valuation. This will make it clearer to distinguish between earnings already earned and potential future rewards.
8. Use a scoring sheet to quickly determine whether participating in a points-based program is worthwhile.
To improve screening efficiency, the previous analysis can be transformed into a simple scoring system.
Each dimension is evaluated on a scale of 0 to 100, and a comprehensive score is calculated based on the weights. For now, scores above 80 can be considered a priority for research, scores between 60 and 80 are considered a range requiring cautious participation, and scores below 60 should be postponed.
The purpose of this scoring system is to help establish a unified decision-making standard; however, the specific weights and scores remain subjective. For projects with significant vulnerabilities in their smart contracts, opaque custody arrangements, or clearly abnormal redemption mechanisms, independent risk veto conditions should be set to prevent high expected returns from masking serious principal risks.
Besides rating, the expected return of points can also be estimated through scenario probabilities. Assume that there are four possible outcomes after participating in a points-based program:
If participating in this project requires a fixed payment of 500 U and there are no other benefits, then the expected net return is -20 U.
These probabilities are purely hypothetical and cannot represent the project's true future distribution. However, this model has a significant advantage: it requires participants to consider both low-return and zero-airdrop scenarios, avoiding decisions based solely on the most optimistic outcome.
For higher-risk strategies, it is also necessary to examine the maximum loss under extreme scenarios, in addition to the expected return. This is because even if the expected return is positive, a large loss of principal can still destroy the long-term compounding effect of the entire portfolio.
9. From Points-Based Speculation to Long-Term Cash Flow: The larger the capital, the more important it is to focus on underlying returns.
As I've been involved in DeFi for longer, I've noticed a very interesting phenomenon: many people are willing to spend a lot of time researching points multipliers and potential airdrops, but rarely do they seriously calculate how much cash flow their existing capital can generate each year.
For participants with limited capital, low-cost interaction and small-scale points speculation can indeed be attractive. Because the absolute returns generated by the capital itself are relatively limited, investing time to achieve high multiples of returns can sometimes significantly improve the overall outcome. However, the situation changes when the capital reaches 100,000, 300,000, or even 500,000 USDT.
Assuming you have 300,000 USDT and can achieve an 8% annualized return under acceptable risk conditions, theoretically you could generate 24,000 USDT in profit per year, averaging about 2,000 USDT per month. Of course, this needs to deduct actual transaction fees, taxes, and potential losses, and the rate of return itself will fluctuate with the market; the assumed annualized return cannot be considered a long-term guarantee. Even so, the basic return at this scale of capital already possesses considerable economic value.
If a significant amount of funds is diverted from the existing earnings strategy to participate in a points program, resulting in a 4% decrease in the base annualized return, then the annual opportunity cost for 300,000 USDT would be 12,000 USDT. Even if the funds are only tied up for three months, this would still generate a difference in returns of approximately 3,000 USDT. This means that even if a points program ultimately distributes several thousand dollars in airdrops, the actual increase in net returns may be quite limited.
Ideally, I believe the majority of funds should be allocated to fundamental strategies that we fully understand and can continuously monitor for risk, with a limited risk budget used for credit-based investments. For protocols that already offer reasonable returns, credits can be viewed as additional potential income; for strategies heavily reliant on airdrops, position size should be determined based on actual costs and worst-case losses.
Additionally, special attention should be paid to situations where the same amount of money is used across multiple reward programs. Some people like to deposit funds into one protocol to earn points, then deposit the vouchers into other protocols to continue earning rewards, and finally further amplify their exposure through lending. Such a strategy may be highly capital efficient when the market is stable, but once the underlying assets or a particular protocol encounter problems, the risk can spread along the entire funding chain.
For those hoping to build long-term cash flow through DeFi, the clearer the source of returns, the easier it is to calculate costs, and the more controllable the exit conditions, the easier the entire portfolio will be to manage.
The points system is still worth studying, but it should be evaluated within a comprehensive financial management framework.
10. Final Anti-Masturbation Checklist
When you encounter a new points program in the future, I suggest answering at least the following ten questions before deciding whether to invest money.
Are the points rules clear? Does the project clearly explain the purpose of the points, the reward methods, and the eligibility requirements?
Is it possible to estimate the reward size? Do you know the allocation ratio of the corresponding points pool, and the approximate size of the total points across the entire network?
Is the points allocation reasonable? Can potential airdrops be estimated based on one's valid points, rather than simply relying on points multipliers?
What are the direct costs? Have gas fees, transaction fees, slippage, lending interest, and other expenses been fully calculated?
What is the opportunity cost? How much return could be obtained by investing the same amount of money in a comparable risk alternative strategy?
What are the risks associated with the underlying assets? Are there risks of decoupling, price volatility, LP rebalancing, or YT value loss?
Is leverage used? If revolving lending exists, are the health factor, liquidation threshold, and interest rate changes within a controllable range?
Is it easy to exit? Are there any issues with lock-up periods, redemption queues, insufficient liquidity, or penalties for early exit?
Can we withstand the worst-case scenario? If the airdrop ultimately has zero value, how much loss might the entire strategy incur?
When should we exit? Have we set maximum costs, target deadlines, and reassessment criteria in advance?
In conclusion: Experienced point-based players should learn to forgo some opportunities.
Looking back at the development of cryptocurrency points systems, a significant change can be observed. Early participants primarily competed on time, information asymmetry, and interaction efficiency; now, more and more projects are starting to compete on real capital, funding costs, and risk-bearing capacity.
In the future, the cryptocurrency space will likely see more complex points-based systems, potentially involving new yield certificates, trading mechanisms, capital efficiency tools, and multi-protocol incentive combinations. While the methods for acquiring points may evolve, the fundamental principles for assessing returns remain applicable: focus on actual investment, calculate total costs, estimate redeemable rewards, and allow sufficient margin for adverse outcomes.
I've always believed that once you have a certain amount of capital, the most valuable skill to cultivate is the ability to make informed choices among seemingly tempting opportunities. Often, avoiding high-cost reward programs and keeping your funds in easier-to-understand and manage profit-generating strategies is itself an effective investment decision.
Points can improve portfolio returns, but every additional gain needs to be evaluated along with the costs and risks incurred.
Can you guess what the next Point is Point project will be?