Level 11: Airdrops & Points, Attention & Risk: Consumer vs DeFi

On Differences in DeFi and Consumer Crypto; Flywheels & Funnels, Villages & Citadels II

As Points Airdrop discourse intensifies, it's crucial to distinguish between consumer crypto and DeFi. While both sectors share technology and terminology, their strategies, intentions, and target markets differ significantly.

We use the same tech and language (airdrops, points), and of course owe the lineage of such tactics, tech and language to the original airdrops and points meta originators, but the strategies, intentions and target markets differ.

Consumer Crypto (Games, SocialFi): The Attention Economy

In consumer crypto, attention is everything.

Points and airdrops serve as catalysts for attention-distribution flywheels, elevating the traditional free-to-play (F2P) model to a more potent free-to-own (F2O) approach.

An airdrop is meant to be the spark for an attention-distribution flywheel. A funnel is good enough, but a flywheel is better.

The free-to-play (F2P) business model is about funnels, estimating LTV, and stacking more users (CAC) that you aim to retain, in the goal of eventual spend. The business takes on the upfront risk by developing the product.

The free-to-own (F2O) business model is that on steroids — since you can do the same, but acquire users for cheaper. You also acquire more engaged users (even evangelists), since you can give early adopters value that (hopefully) appreciates with additional adoption.

In the end, users interact with consumer crypto the primary goal of:

• Fun: Enjoyable experiences and social interactions. (see Level 3 on Player Archetypes)

• Speculation.

We use the same tech, and language, but the strategies and objectives differ.

DeFi: Risk & Liquidity

DeFi airdrops serve a different purpose: compensating users for the financial risks associated with exploring new protocols.

New protocols are at risk of exploit, and users can take on risk especially as they stack the farming various protocols for yield & speculation.

More liquidity tends to directly benefit protocols — they improve the product or service that is offered to an end user. (Network effect)

Since liquidity is provided disproportionately (e.g. a single user providing 800M), “whales” (big holders of crypto) tend to be rewarded accordingly, & there’s consternation if they are not.

Users interact with DeFi primarily for:

• Utility - A user needs to swap into another token. A user wants to get leverage on their token. A user wants to bridge to the newest L2 to play a game there.

• Speculation.

We use the same tech, and language, but the strategies and objectives differ.

Tools and Tactics

There are a few more tools in the toolbox as well — all these are game-like / gamification-oriented in nature, and are used increasingly by both DeFi and Consumer Crypto apps —

[1] Lock-ups — encouraging long-term holding and rewarding users for their long-term belief in the project. At the same time, they become evangelists due to the mere ownership effect.

[2] Rewarding based on the meta (anticipation) — an expectation that long-term holders will be rewarded (“Diamond Hands”).

[3] Cross-promo — Airdropping to prominent communities in the discourse (Milady, Penguins, etc)

Villages & Citadels II

Token use cases are strongest when you can help bootstrap a network effect. When you’re providing a push to a flywheel, instead of (merely) bringing people down a funnel.

In most games, this initial push or network effect may have enough of a push to create a village size — a few thousand loyal users.

But in some consumer crypto companies, (ecosystems, publishers), they may grow to be as large as citadels, and far outgrow incumbents due to the power of new incentive-alignment tech, and the ability to harness attention on the margin at a level never seen before.

This is where we are focused.

• Ryze (twitter.com/0xRyze)