Points are the latest fad or meta in crypto, depending on who you ask. Either way, they are a growing force that wallet users, speculators, airdrop hunters and others have to deal with.
To briefly explain, points are off-chain numbers given to users as a “reward” for certain actions, such as exchanging tokens on the project’s own platform. They are typically done prior to a potential airdrop to let users know which actions will be rewarded, except the airdrops are usually not guaranteed.
The problem is that while crypto tokens are recorded on the blockchain, the points are not. That’s not to say that tokens don’t have problems – from unclear circulating supplies to confusing token unlocks – but points are much less transparent.
Let’s start with a simple statistic. How many points have been awarded by each project offering them? With crypto tokens, you can ping the blockchain with Etherscan to check the token supply (or look at CoinGecko). In the vast majority of cases, this information is not public.
There are a few ways to get close to these numbers. Most projects that offer points have a public leaderboard, so you can add up the top 10 or top 100 accounts with the most points and extrapolate from there – guessing at the real number. You can also ask the team and hope they tell you.
However, in some cases, some projects do offer a live number, such as crypto wallet Rabby. Competitor Rainbow also provided a live track in its Chrome extension, but this appears to have been recently removed.
However, some projects do not indicate how many points there are. Magic Eden co-founder and COO Zhuoxun Yin said the company does not share the number of points, known as diamonds, it has handed out. When contacted for comment, Orbiter Finance said: “We don’t have that [a] system to count all points awarded, sorry sir, we have to keep this.”
As a result – especially in these cases – it is anyone’s guess.
Why does this matter?
The reason this is important is twofold.
First, let’s say you want to qualify for a potential airdrop and you want to take some actions to earn points. If you don’t know the total number of points, you have no idea whether 1 million points gets you 1% of the airdrop allocation or 0.0001%. You can guess it by looking at the leaderboard, but it’s still inaccurate.
The other reason is that people are now speculating on points. Give something potential value, and people will find a way to trade it. A few years ago, people were trading Reddit’s moon tokens while on a testnet (where tokens typically have no value). Last month, crypto media publication CoinDesk was published on the shelf its DESK token because it discovered that traders had set up a secondary market for it, despite this being against its terms and conditions. Unsurprisingly, the same thing happened to the points.
Points trading largely takes place on two platforms: Whales Market and Pendle Finance. For Whales Market, the core idea is that traders are betting on the value of the potential tokens that the points could turn into. So if someone makes a trade to buy some points, they won’t receive the points, but in the future they would receive whatever tokens the seller gets. For Pendle, traders can gain up to 74x leverage on points, or access the underlying asset at a discount without the points exposure.
Yet these traders are betting on limited information. Part of that is that the points-to-token distribution is not predefined or even guaranteed. The other part is that they may not know how many points there are.
“I think this is where the speculation and the magic happens in yield trading for the points,” said Pendle CEO TN Lee. “So no one knows how many points will be handed out. No one even knows how many points you need to actually get a profitable or lucrative airdrop. So the speculation allows users to actually speculate and leverage or hedge against the proceeds.”
Lee added that some Pendle team members speculate that points will be more lucrative than simply focusing on the underlying assets, such as ether. However, he said: “Some users have hedged against the points because it’s pretty much oversaturated in the sense that the points are inflated so much that it doesn’t even really matter to collect points because the numbers are just crazy – and you can’t get them not really following because they are all outside the chain,” he added.
This inability to track points forces traders to become even more speculative.
Estimating the number of points
In a post on X, Messari research analyst Kunal Goel said broke off his approach for valuing points available for trading on these platforms. When he looked at EigenLayer, he had to start with the total value captured in the project and estimate the number of points based on a Disagreement comment that each re-staked ETH earns 1 point per hour. While this resulted in a reasonable estimate, it shows how difficult it is to obtain even a rough estimate of the point distributions.
The point distribution is also incredibly variable. For example, ClayStack has given out a total of 200,000 points to date, while the top 1,000 wallets on MarginFi have earned 42 billion points (this is an estimate based on adding up the leaderboard rather than knowing the full amount). This would make a huge difference when it comes to trading the respective points – although of course there are other important factors involved as well.
If points are a short-lived fad, this might not matter – but with 115 billion points issued across 14 projects to date and crypto users increasingly exchanging points, it might be time for some transparency.
