A Look At Web3 Infra Token Incentives

Key Insights

• Token incentives are a powerful mechanism to jumpstart the cold start problem and initialize two-sided marketplaces.
• However, various Web3 infrastructure protocols are burning tens of millions to hundreds of millions in token incentives per quarter.
• Web3 infra protocols need to analyze their token incentives and determine the concrete value that they’re generating from incentives. Additionally, protocols need to dynamically adjust their incentives as their protocols expand.
  

In all marketplaces, buyers need sellers, and sellers want buyers. But oftentimes, two-sided marketplaces struggle to generate enough supply and demand to jumpstart this exchange. While there are many possible solutions to this “cold start” problem, tokens have clearly become the most efficient mechanism to incentivize both sides of supply and demand. Cryptonetworks use unique strategies for their token incentives, resulting in different efficacies per token.

Token Incentives Analysis

While DeFi token incentives have been explored at length, token incentive distribution is arguably less explored within Web3 infrastructure networks and middleware protocols.