Exploring Tokenomics Design Space

In 2014, Jet.com, an upstart e-commerce company, introduced an equity giveaway competition that rewarded the top 10 referrers with shares in the company and attracted over 350,000 new signups. The winner spent more than $18,000 to secure over 8,000 referrals, and his efforts netted him $10 million one and a half years later when Jet.com was acquired for $3.3 billion. This equity share program resembles what we now know in crypto as liquidity mining, as both strategies aim to incentivize user participation and engagement in exchange for a stake in their corresponding entities.

However, a notable difference is that Jet.com's program is a "can't lose" type deal whereby the company gets publicity and new users in exchange for less than 1% of their equity only in case they execute a successful exit. In contrast, DeFi liquidity mining typically entails ongoing incentives akin to continuous equity dilution. This shifts the paradigm from "can't lose" to a very complex balancing act wherein the protocol is trying to bootstrap a loyal user base while kneecapping them through continuous dilution.