Table of Contents
Researcher
Related Projects
1. Background - Point System and its sustainability
In crypto industry, airdrops have long been regarded as an indispensable tool for launching new projects. From the project’s perspective, issuing tokens as rewards to users is an excellent way to generate network effects without incurring marketing costs. This strategy aligns the interests of early users with the project, encouraging them to contribute consistently to the network.
Similarly, points have served a comparable role. However, unlike tokens, points offer the advantage of flexible application, as they are not bound by the same constraints. The uncertainty regarding the exact exchange rate of points for tokens can also be an effective tool for building user anticipation.
However, these systems are often exploited by both users and protocols. Users frequently become airdrop hunters, constantly chasing airdrops without becoming regular users. Meanwhile, protocols often struggle to maintain momentum after the airdrop, leading to difficulties in retaining users.
Ultimately, while airdrops are important, the most crucial aspect is whether the project genuinely delivers what is needed and clearly addresses the problem it aims to solve.
Incentive systems like airdrops and points can be highly effective for projects that have a good product but lack visibility and thus require marketing and networking efforts.
So, what constitutes a good product? It is one that can solve a problem. In this context, The Graph serves as a good example.
2. Author’s Opinion
(This graph illustrates the monthly successful gateway queries since early 2022. Queries before June 2024 appear relatively low because most data were hosted by centralized services. However, after the "Sunrise" event, which marked the complete decentralization of the querying interface, you can see a significant increase in volume.
As I am preparing this analysis in early July, I will forecast the monthly successful queries for July based on the daily successful queries recorded by The Graph so far this month.)
Although the Graph rewarded early indexers with tokens, it’s significant that protocol usage continued to rise even after the airdrop. This demonstrates that the demand for the protocol was not artificially generated. The airdrop genuinely aimed to reward early contributors rather than artificially inflate protocol usage.
Why is that? It is because the Graph focused on addressing real problems that needed solving(data query and data indexing), rather than artificially creating demand for something that wasn’t genuinely needed.
I believe that now is an opportune time to reconsider the sustainability of protocols. While I do not condemn the airdrop strategy itself, I do criticize the practice of replicating identical services and promising large airdrops to attract initial users. The primary focus should be on the quality and utility of the product itself, rather than on the effectiveness of incentives.
The Graph is evolving btw, now positioning itself as an infrastructure for the crypto and AI sector. Beyond serving as an indexer, it provides a platform for running inference models. The Graph has consistently focused its resources on addressing meaningful industry needs rather than on trivial pursuits. I believe that protocols like The Graph deserve greater recognition.
Of course, @FourPillarsFP is planning to publish about detail architecture and structure of the Graph soon. So stay tuned for detailed research!
3. Other’s Opinion
3.1 Ingeun Kim from Four Pillars
Everything in the world is subject to the fate of rise and fall, from human lifespans to the birth and death of stars. In the scientific community, these phenomena are collectively explained by entropy, while in economic or social contexts, they are often described in terms of fatigue.
From this perspective, the rampant issuance of tokens and points in the current crypto scene is causing significant fatigue for those involved in the industry. This situation is preventing high-quality projects with truly excellent narratives and supporting use cases from gaining the recognition they deserve.
Therefore, to reduce fatigue in the Web3 industry, we need to reflect on ourselves and seek out projects with noble goals. In other words, we should pursue value rather than blindly chasing money. By recognizing and DYOR on projects that promote actual usage data, like the aforementioned case of The Graph, we can reward value and foster a healthier Web3 ecosystem. At the very least, within this ecosystem, our small actions can counteract entropy.
3.2 Jay Jeong from Four Pillars
One of the strengths of crypto is its potential to facilitate a wide range of activities through incentives schemes. Airdrops are a prime example of this. As Steve mentioned, airdrops initially started as a way to generously reward early contributors who did not intend to seek profit, but their use has expanded and they are now actively used as marketing tools for various protocols. Unlike traditional marketing, airdrops allow protocols to effectively allocate their desired budget directly to target users without intermediaries.
However, the more important question is the next step: how can we keep users who join through airdrops continuously engaged on the platform? To strengthen and solidify the customer lifetime funnel, the protocol's subsequent strategy is crucial. In this regard, it is not just about marketing to increase on-chain transaction volume, but rather about providing a carefully designed product experience that is genuinely valuable. Observing cases where new users are converted into organic users through such well-thought-out marketing strategies would not only create a more sustainable initiative for the product but also significantly enhance the quality of the market, which is often filled with cherry pickers.
3.3 Eren from Four Pillars
Except for a few L1/L2, the only models that seem to have found product-market fit (PMF) and are sustainably running without relying on buzzwords are projects with B2B2C structures such as Oracle (Chainlink, Pyth), Bridge Network (LayerZero, Wormhole), and RPC (Pocket Network). Among these, The Graph, which intermediates blockchain data indexing services, stands out as a representative example of a project that has found PMF by consistently providing necessary services to the market.
The indiscriminate use of airdrop campaigns by projects without technological or market differentiation to perform fake loyalty tests is problematic. However, the more significant issue is the mass dumping of tokens that become unnecessary after the airdrop, leading to a continual decline in value. Recently this has caused many retail investors to leave the market. As Steve suggests, it is only after providing services genuinely needed by the market that airdrops and tokenomics can find their true purpose.
$GRT functions as the internal currency needed to operate a service, used for tasks such as staking by indexers, qualifying subgraph validators, and paying query consumers. This exemplifies the typical use of a "work token." The Graph underscores the importance of the principle that "sustainable services create sustainable tokenomics" and presents a meaningful direction in terms of both PMF and tokenomics.
4. References
https://thegraph.com/blog/the-graph-ai-crypto/
