Glossary · P
Points System
A pre-token incentive mechanism used by DeFi protocols before their governance token launches. Users earn points by using the protocol (depositing, trading, referring) — points later convert to token allocations in a retroactive airdrop. Points systems allow protocols to incentivise early usage without immediately launching a token. EigenLayer, EtherFi, Ethena, and dozens of others used points systems ahead of their token launches in 2024-2025.
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How Points System works in practice
Points are off-chain scores a protocol awards for using it, with a strong implication that they will convert to tokens later. They let a team defer tokenomics decisions while still attracting capital, and they are not a contractual claim on anything.
Worked example
A protocol awards 1 point per dollar deposited per day. A 10,000 deposit held 30 days earns 300,000 points. What those points are worth is unknown until the team announces a conversion — if they announce one.
Figures are illustrative and chosen to be checkable, not live market data.
The mistake that costs people money
Points are a promise, not an asset. The rules can change, the conversion rate is set after you have committed capital, and some programmes end without a token. Capital parked purely for points is exposed to the underlying protocol's risk for a return that may never arrive.
Points System: common questions
- What is Points System?
- A pre-token incentive mechanism used by DeFi protocols before their governance token launches. Users earn points by using the protocol (depositing, trading, referring) — points later convert to token allocations in a retroactive airdrop. Points systems allow protocols to incentivise early usage without immediately launching a token. EigenLayer, EtherFi, Ethena, and dozens of others used points systems ahead of their token launches in 2024-2025.
- How does Points System work in practice?
- Points are off-chain scores a protocol awards for using it, with a strong implication that they will convert to tokens later. They let a team defer tokenomics decisions while still attracting capital, and they are not a contractual claim on anything.
- Can you give an example of Points System?
- A protocol awards 1 point per dollar deposited per day. A 10,000 deposit held 30 days earns 300,000 points. What those points are worth is unknown until the team announces a conversion — if they announce one.
- What do people get wrong about Points System?
- Points are a promise, not an asset. The rules can change, the conversion rate is set after you have committed capital, and some programmes end without a token. Capital parked purely for points is exposed to the underlying protocol's risk for a return that may never arrive.