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Arthur Hayes Advocates for 'Points' Over ICOs and Yield Farming in Crypto Growth

Arthur Hayes' new vision for crypto adoption

Arthur Hayes, co-founder of BitMEX and the brain behind Maelstrom's investment strategies, has thrown his weight behind a novel concept: the adoption of a "points" system over traditional Initial Coin Offerings (ICOs) and yield farming methods. 

Through a detailed blog post titled "Points Guard," Hayes articulates why this innovative approach could be the key to unlocking widespread adoption and engagement in the Web3 space. 

Arthur Hayes (@CryptoHayes):

“Points Guard” is an essay on the new pseudo-ICO crypto fundraising and engagement method. If you don’t understand what points are and why they going to be used and abused, read on.”

This sets the stage for a compelling argument in favor of a method that promises to navigate the regulatory and practical challenges plaguing current crypto project funding mechanisms.

The challenges of ICOs and yield farming

Arthur Hayes, in his insightful exposition, sheds light on the inherent challenges faced by traditional crypto fundraising methods such as ICOs and yield farming. ICOs, while democratizing investment opportunities by allowing retail investors early access to potentially groundbreaking innovations, inadvertently invite stringent regulatory scrutiny. Hayes vividly illustrates this point, stating: 

"When you sell something to retail, some regulators call that a ‘security’ and require you to do a lot of shit that you don’t want to do." 

This blunt assessment underscores the cumbersome regulatory hurdles that can stifle innovation and deter project launches.

Similarly, yield farming, designed to reward users with tokens for engaging with protocols, bears its own set of challenges. Hayes critiques this approach for potentially inflating token supply too quickly, leading to a precipitous drop in token value and diminishing user incentives. He explains, highlighting the precarious balance projects must maintain between stimulating engagement and ensuring long-term value stability. 

"This will have repercussions if pursued too aggressively," 

The proposed shift to points programs

Arthur Hayes champions a vital shift towards "points" programs as a groundbreaking alternative for crypto projects seeking engagement without the regulatory entanglements of ICOs and the pitfalls of yield farming. This innovative approach, as Hayes argues, allows projects to reward user participation with points, which can be converted into tokens at the user's discretion. 

He asserts: 

"Instead of giving users tokens immediately for using the protocol, which leads to an aggressive token emissions schedule, the projects can provide points for participation in the protocol that could be converted to tokens at users’ will."

This methodology, according to Hayes, sidesteps the legal complexities associated with direct token rewards, potentially making it more palatable to regulators. He suggests that this model does not constitute a contract for future rewards in tangible assets, thereby avoiding the classification as a security. 

"This seemingly suggests that regulators may potentially find the use of points acceptable," 

Hayes notes, highlighting the regulatory flexibility of this approach.

Despite the promising outlook, Hayes is candid about the challenges, acknowledging the potential for abuse. He emphasizes the importance of trust between projects and users. Nevertheless, Hayes acknowledges the risk of exploitation by malicious actors, warning that such breaches of trust could ultimately undermine the effectiveness of points as a mechanism for user engagement and fundraising. 

Yet, he remains optimistic about the future, predicting that successful Web3 projects will likely adopt points programs to foster protocol usage, generate hype, and potentially lead to a successful public token launch.