A decentralized finance (DeFi) protocol called Whales Market allows traders to swap their airdrop points for cash and has scored a return of over 10,000% in 2024.

What Are Loyalty Points In Crypto?

Loyalty points in crypto work similar to Starbucks loyalty points: the more you use an app, the more points you gather.

Decentralized finance protocols have discovered that combining loyalty points and hinting at airdrops – rewards for participation — works fantastic for user acquisition. Airdrops like Jupiter dish out hundreds of millions in rewards and make some users' millionaires. 

But unlike at Starbucks, loyalty points are not guaranteed to translate into juicy airdrops. Many decentralized applications dangle the airdrop carrot but don't specify if or when loyalty points will be converted.

Trading Loyalty Points, But Different

Whales Market allows users to trade their points and realize gains. Buyers deposit money into a smart contract to "lock in" the loyalty points. Sellers are obliged to provide the token rewards they receive for their loyalty points once the airdrop is live, or face a penalty.

Put differently, purchase the potential linked to the loyalty points before a token has launched and determined their value.

This price discovery mechanism is reportedly remarkably accurate. It has helped the WHALES token surge from $0.02 after the launch on Jan. 1 to $2.55 on Feb.8 for a market capitalization of over $40 million.

Aren't Loyalty Points Just Another Fad?

Loyalty points in the "regular" economy were cool until they weren't. But Joaquim Miro, partner at GDA Capital, thinks they make sense to onboard retail users into the crypto economy.

Points can be easier for beginners to navigate thanks to familiar mechanisms like airline miles and credit card loyalty points, he says. Points are more sustainable for protocols.

According to Miro, tokens can "cause a lot of sell pressure" while points just work with a promise.

Anticipating narratives in the cryptocurrency industry is said to be the "most important skill to succeed." Whether loyalty points are a fad or not, traders should know how to capitalize on their earned rewards. 

Now Read: GameStop's Tweet Adds Fuel To Panic Over Xbox's Future: What's Next For The Brand?

Image: Shutterstock