Why 'Points as a Service' Platforms Are Doomed

PaaS platforms optimize for quantity, not quality, creating a race to the bottom in user acquisition. Their core metric is points issued, not protocol revenue generated.

• >90% of points are farmed by mercenary capital.
• Creates negative-sum competition between protocols for the same sybil actors.
• Zero sustainable LTV (Lifetime Value) for the acquired 'users'.

Platforms like EigenLayer, EigenDA, and Espresso Systems are commoditizing restaking and shared sequencing. Native protocols can now build loyalty and data layers directly.

• Direct integration eliminates the PaaS middleman tax.
• Enables customized incentive curves aligned with actual protocol utility.
• ~$10B+ in restaked ETH creates a native capital base for loyalty programs.

The rise of intent-centric systems (UniswapX, CowSwap, Anoma) and modular settlement (LayerZero, Hyperlane, Circle CCTP) abstracts away user actions. Loyalty becomes a function of flow, not manual task completion.

• User does not specify 'how', only 'what' they want.
• Automatic yield optimization and fee discounts replace checkbox farming.
• Points become a legacy UX patch for poorly designed incentive systems.

Platforms like Galxe and Layer3 issue points on their own databases, creating a black box. This leads to: \n- Zero composability: Points cannot be used as collateral, traded, or integrated into DeFi.\n- Rug risk: The issuer can arbitrarily change rules or devalue the program.\n- Fragmented identity: User activity is siloed, preventing a unified on-chain reputation.

Protocols like EigenLayer (restaking points) and friend.tech (key-based loyalty) bypass points by issuing directly transferable, liquid assets. The shift is from accounting entries to real economic units.\n- Real yield: Rewards are staking yields or fee shares, not promises.\n- Instant liquidity: Users can exit at any time via AMMs like Uniswap.\n- Composability: Assets plug into the entire DeFi stack (Aave, Compound).

The final nail for Points-as-a-Service is intent-centric architectures from UniswapX, CowSwap, and Across. They prove you can coordinate complex user actions and reward participation without inventing a points ledger.\n- User specifies goal (e.g., 'bridge and swap to ETH').\n- Solvers compete to fulfill it, baking rewards into the optimal route.\n- Reward is the better execution, not a future token promise.

Points are a regulatory and technical crutch, a digital version of company scrip. Their only utility is to delay token distribution. As shown by Blur's airdrop model, direct, claimable rewards create stronger alignment.\n- Regulatory clarity: Points blur the security/utility line; on-chain assets have established frameworks.\n- Capital efficiency: Locked liquidity in points programs is a massive deadweight loss.\n- Innovation ceiling: You cannot build a new financial system on a glorified spreadsheet.

PaaS platforms monetize user acquisition but externalize the cost of Sybil resistance to the protocol. You pay for fake engagement, not real users. The result is a negative-sum game where the platform's fee is pure extractive value.

• Cost: Protocol pays ~$0.10-$1.00 per point for mostly worthless addresses.
• Outcome: >90% of 'engaged' wallets are abandoned post-airdrop.

Points create mercenary capital, not sticky users. Platforms like Galxe and Layer3 train users to chase the next incentive, not your product's utility. This is the opposite of sustainable growth; it's paying for a leaky bucket.

• Result: <5% retention of points farmers post-reward distribution.
• Alternative: Build protocol-owned liquidity and fee accrual that rewards real usage.

The 'rich user data' sold by PaaS is low-fidelity on-chain noise. It tracks wallet interactions with the points campaign, not genuine protocol utility. This corrupts your analytics and leads to poor product decisions.

• Reality: Data shows campaign completion, not product-market fit.
• Solution: Instrument first-party data from your own smart contracts and frontend.

Points are a transparent attempt to skirt securities laws by delaying token distribution. Regulators (e.g., SEC) view this as a single integrated scheme. Using a PaaS platform aggregates this regulatory risk, creating a systemic liability for every client protocol.

• Risk: Retroactive enforcement action on all past campaigns.
• Precedent: The Howey Test applies to the expectation of profit, not the asset's name.

EigenLayer's points succeeded because they were tied to a scarce, yield-bearing resource (restaked ETH). This created real economic cost for farmers. PaaS platforms have zero cost of forgery; points are minted from thin air. This is the critical difference between financialized attention and valueless gamification.

• Contrast: EigenLayer = Staked Capital. PaaS = Faucet Capital.
• Lesson: Incentives must be backed by scarcity and slashing risk.

Bypass the middleman. Use retroactive public goods funding, targeted liquidity mining, or usage-based fee discounts directly in your protocol's economic design. Allocate capital to users who provide verifiable, on-chain value.

• Examples: Optimism's RetroPGF, Uniswap's fee switch, Liquity's stability pool.
• Outcome: Incentives align with long-term protocol health, not short-term vanity metrics.