Referral programs are obsolete. They are static, one-dimensional, and fail to capture the composable value of onchain actions. A user bridging assets via LayerZero or swapping on Uniswap creates more value than a simple sign-up.
airdrop-strategies-and-community-building
Blog
The Future of User Acquisition: Quest-Driven Network Effects
Airdrop farming killed simple referral programs. The new frontier is quest-driven network effects: on-chain tasks that require social invites or collaboration, creating exponential, defensible growth. This is how protocols build unstoppable communities.
introduction
THE SHIFT
Introduction: The Referral Program is Dead
Onchain user acquisition is shifting from static referrals to dynamic, programmable quests that generate measurable network effects.
Quest-driven growth is the new standard. Protocols like Galxe and RabbitHole demonstrate that users complete tasks for rewards, creating a verifiable onchain resume. This shifts acquisition from marketing spend to protocol utility.
Network effects become programmable. Each completed quest is a composable primitive. A user's proof-of-participation from an Optimism governance vote can unlock access in a Aave liquidity pool, creating a cross-protocol growth loop.
Evidence: The top 10 quest platforms facilitated over 50 million onchain task completions in 2023, directly onboarding users into the core workflows of protocols like Arbitrum and Polygon.
key-trends
THE FUTURE OF USER ACQUISITION
The Three Pillars of Quest-Driven Growth
Protocols that treat users as passive wallets are dead. The new model uses structured, on-chain quests to bootstrap liquidity, governance, and community.
01
The Problem: Airdrop Farming is a Parasitic Loop
Sybil attackers extract value without contributing to the network's long-term health, creating a $500M+ annual drain on protocol treasuries. This leads to immediate sell pressure and zero sustainable engagement.
- Real Cost: ~90% of airdropped tokens are sold within 30 days.
- Network Degradation: Incentivizes empty wallets, not real users or builders.
90%
Sell-Off
$500M+
Annual Drain
02
The Solution: Programmable On-Chain Reputation
Quests create a verifiable, portable identity graph by scoring users based on specific, valuable actions (e.g., providing liquidity during volatility, voting on key proposals). This turns engagement into a composable asset.
- Composable Credentials: Reputation scores can be used as collateral in DeFi or for governance weight.
- Sybil Resistance: Proves quality of engagement, not just quantity of transactions.
1000x
Harder to Sybil
Portable
Identity
03
The Flywheel: Cross-Protocol Quest Composability
When quest frameworks like RabbitHole or Galxe become the standard, completing a quest on Uniswap can automatically unlock rewards on Aave. This creates a positive-sum growth loop where protocols co-market to high-intent users.
- Acquisition Efficiency: Cuts user onboarding CAC by ~70% via partner networks.
- Liquidity Begets Liquidity: A quest for stablecoin LP on Curve can feed directly into a yield-optimizer quest on Convex.
-70%
CAC
Composable
Rewards
deep-dive
THE ENGINE
Mechanics of a Viral Loop: From Transaction to Tribe
Protocols are engineering social coordination into their core transaction flow, turning users into recruiters.
Quest-driven growth replaces airdrops. Airdrops are a one-time subsidy; quests are a continuous, programmable incentive layer. Platforms like Layer3 and Galxe let protocols embed on-chain tasks directly into user flows, converting a simple swap on Uniswap into a shareable achievement.
The viral loop is a state transition. The model moves a user from 'Actor' (completing a task) to 'Amplifier' (sharing a referral) to 'Ambassador' (governing a sub-community). This is the cohort-based bootstrapping that Friend.tech and Farcaster channels monetize.
Smart accounts are the required infrastructure. Without ERC-4337 account abstraction, managing quest states and social graphs is impossible. The user's 'tribe' identity and reward eligibility become portable, verifiable assets within their smart account.
Evidence: Arbitrum's Odyssey campaign, powered by Galxe, drove a 550% increase in weekly unique bridging addresses. The cost per acquired, engaged user was a fraction of a generic airdrop.
USER ACQUISITION ENGINE
Quest Mechanics: A Builder's Comparison Matrix
A first-principles breakdown of on-chain questing protocols, comparing core mechanics that dictate user quality, scalability, and defensibility.
| Core Mechanism | Galxe (Legacy Model) | Layer3 (XP-Based) | RabbitHole (Skill-Based) |
|---|---|---|---|
Primary Incentive | ERC-1155 NFT Badges | ERC-20 $XP Token | ERC-20 Skill Tokens |
User Payout Model | Retroactive Airdrop Speculation | Direct Task Rewards | Direct Task Rewards |
On-Chain Proof | Snapshotted Completion | Verifiable Claim Signature | On-Chain Task Submission |
Sybil Resistance | Low (Web2 OAuth Focus) | Medium (Staking $XP for tiers) | High (Progressive Skill Gating) |
Builder Cost Per User | $2 - $10 (NFT Mint Gas) | $0.50 - $5 (Token Transfer) | $1 - $8 (Token Transfer + Verification) |
Composable Task Logic | |||
Native Cross-Chain Support | |||
Avg. User Retention (D7) | 12% | 28% | 35% |
protocol-spotlight
QUEST-DRIVEN NETWORK EFFECTS
Protocol Spotlight: Who's Executing This Now?
Protocols are shifting from mercenary liquidity to engaged communities by embedding quests directly into their core product loops.
01
LayerZero: Sybil-Resistant Onchain Reputation
The Problem: Airdrop farming creates low-value, extractive users. The Solution: LayerZero's OFT standard and Stargate bridge embed quests (e.g., cross-chain swaps) that build verifiable, sybil-resistant onchain history. This creates a reputation graph for future airdrops and governance.
- Key Benefit: Filters for high-intent users who interact with the protocol's core utility.
- Key Benefit: Generates ~$10B+ in cross-chain message volume as a byproduct of quest completion.
10B+
Msg Volume
Sybil-Proof
Reputation
02
Rabby Wallet: Quests as Onboarding Funnels
The Problem: Wallet onboarding is a cold start; users have no reason to switch from MetaMask. The Solution: Rabby's Quest Platform offers token rewards for performing specific, security-educating actions within the wallet (e.g., reviewing a transaction simulation).
- Key Benefit: Drives ~2M+ installs by making security a gamified, rewarded activity.
- Key Benefit: Creates a sticky user base educated on DeFi risks, reducing support costs and fraud.
2M+
Installs
-90%
User Error
03
Galxe: The Protocol-Agnostic Quest Engine
The Problem: Building quest infrastructure is a distraction for dev teams. The Solution: Galxe provides a full-stack credential and questing protocol used by ~4000+ projects like Optimism and Arbitrum to design custom campaigns.
- Key Benefit: Offloads campaign logistics with a ~$200M+ credential data economy.
- Key Benefit: Creates composable reputation; a Galxe OAT from one protocol can be a gate for another's quest.
4000+
Protocols
200M+
Credential Economy
04
Karak Network: Quests for Secured Yield
The Problem: Restaking is abstract; users don't understand what they're securing. The Solution: Karak frames restaking deposits as "Quests" where users allocate security to specific protocols (e.g., an oracle or rollup) in exchange for enhanced yield.
- Key Benefit: Transforms passive TVL into active, directed economic security.
- Key Benefit: Aligns user rewards with protocol health, creating a ~$1B+ TVL flywheel based on utility, not just APY.
1B+
TVL
Active Security
Model
risk-analysis
THE INCENTIVE MISMATCH
The Sybil's Gambit: Risks and Mitigations
Quest-driven growth creates a perverse incentive for users to farm rewards, not adopt the protocol.
Quest-driven growth subsidizes Sybil attacks. Platforms like Layer3 and Galxe pay users for simple on-chain actions, creating a direct financial incentive for automated farming. This inflates user metrics with low-value, non-retentive actors.
The cost of verification exceeds the reward. Projects like RabbitHole attempted to gate quests with skill-based proofs, but the economic cost of manual verification for millions of users destroys unit economics. Automated Sybil detection from providers like Gitcoin Passport remains an arms race.
The solution is proof-of-diligence. Effective quests must require meaningful capital risk or time commitment. Protocols like EigenLayer succeed by requiring staked ETH, aligning user incentives with long-term network security. The future is costly signaling, not free clicks.
takeaways
USER ACQUISITION
TL;DR for Builders
The next wave of growth will be powered by composable, on-chain quests that turn users into network participants.
01
The Problem: Airdrops Are a One-Time Hit
Current airdrops create mercenary capital, not sticky users. Post-claim, >90% of recipients exit, leaving the protocol with a high-cost, low-retention user base. This is a $10B+ industry inefficiency.
>90%
Exit Rate
$10B+
Inefficiency
02
The Solution: Protocol-Owned Quests
Build a persistent, on-chain questing layer that rewards meaningful, repeatable actions. Think RabbitHole meets Galxe, but with native protocol integration. This turns user acquisition into a programmable, composable primitive.
- Key Benefit 1: Acquire users based on verifiable on-chain behavior, not wallet balances.
- Key Benefit 2: Create a continuous feedback loop where quests drive protocol usage and data.
50%+
Higher Retention
10x
LTV Increase
03
The Mechanism: Cross-Chain Credential Graphs
Leverage attestation protocols like Ethereum Attestation Service (EAS) to create portable user reputation. This allows quests and rewards to be composable across ecosystems (e.g., LayerZero, Axelar), breaking down liquidity silos.
- Key Benefit 1: Users build a persistent, multi-chain identity tied to actions, not assets.
- Key Benefit 2: Protocols can target high-value user cohorts with precision, reducing acquisition waste.
EAS
Core Primitive
Multi-Chain
Portability
04
The Flywheel: Quests as Liquidity Hooks
Design quests that directly bootstrap core protocol metrics. For a DEX, a quest isn't "connect wallet"—it's "provide $100 LP for 30 days." This aligns user incentives with protocol health from day one, creating a positive-sum growth loop.
- Key Benefit 1: Directly converts user growth into TVL, volume, or fee generation.
- Key Benefit 2: Replaces costly incentive programs with targeted, gamified engagement.
30%
Lower CAC
2x
TVL Growth
05
The Risk: Sybil Attacks & Quest Design
Poorly designed quests are trivial to Sybil. The solution is a multi-layered defense: on-chain proof-of-personhood (e.g., Worldcoin), stake-weighted actions, and time-based commitments. The quest itself must be the Sybil filter.
- Key Benefit 1: High-cost Sybil attacks become economically irrational.
- Key Benefit 2: Ensures rewards flow to genuine, high-intent users.
Worldcoin
PoP Layer
-99%
Sybil Noise
06
The Endgame: Autonomous Growth DAOs
The final evolution is a quest factory DAO (e.g., Layer3's model) where the community proposes and funds quests that drive strategic goals. Governance shifts from token voting to impact voting, measured by quest completion KPIs.
- Key Benefit 1: Decentralizes growth marketing, leveraging community insight.
- Key Benefit 2: Creates a self-sustaining ecosystem where users become growth hackers.
Layer3
Archetype
DAO-Led
Growth Engine
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