digital asset startups are adopting loyalty points programs as a strategy to attract and retain users. While these programs have received attention and investment, there are concerns about their transparency and potential regulatory risks.
(Image Source)
GLOAccording to a report by Bloomberg on February 8th, digital asset startups are adopting loyalty points programs as a strategy to attract and retain users. While these programs have received attention and investment, there are concerns about their transparency and potential regulatory risks.
Token airdrops, previously popular for marketing digital asset startups, have faced challenges in retaining users and increased regulatory scrutiny. Consequently, startups are now turning to loyalty points programs to encourage user engagement.
In November, Blast, a blockchain project, introduced a loyalty points program that attracted over $1.3 billion worth of crypto from users, despite not having a live blockchain. This success has inspired other projects like Manta and Mantle to launch similar programs.
Christopher Newhouse, an analyst at Cumberland Labs, noted that this shift represents a new approach to product, strategy, and marketing in the crypto space, with startups aiming to gamify their protocols and expand their user base.
However, loyalty points programs in the digital asset realm face challenges related to transparency and regulatory risks. Many programs lack clarity on how points can be used, leading to user speculation. Additionally, the regulatory classification of these points remains uncertain, potentially impacting compliance with securities laws.
Unlike tokens, loyalty points are not recorded on the blockchain, making them less transparent and harder to evaluate in terms of market size. Tokens represent ownership and operate on decentralized systems, while points are controlled by the issuer and can be revoked or have their value changed at any time.
An example of the impact of loyalty program changes is seen with Crypto.com, whose cronos (CRO) exchange token dropped 22% in a day in 2022 when it announced reductions in its loyalty program rewards.
