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IMX Updates
4/4/2023

IMX Rewards - Web3 Disrupting Loyalty Programs

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TL;DR

In 2008, Dropbox introduced a program that played a pivotal role in shaping the cloud storage industry. By offering users additional free storage space for every successful referral, Dropbox incentivized its user base to spread the word, leading to rapid growth and widespread adoption. Today, the cloud storage industry has grown exponentially, with countless businesses and individual users benefiting from the ease, accessibility, and security of storing and sharing data in the cloud – powered by Dropbox's innovative rewards program.

Reward programs have changed the way companies achieve and sustain growth by leveraging the momentum generated from a continuous cycle of customer acquisition, engagement, and retention. Reward programs (aka loyalty programs) encourage virality, increase loyalty and stimulate repeat engagement or purchases, leading to a self-perpetuating growth engine.

Airlines have reaped the benefits of implementing robust reward programs, offering rewards such as frequent flyer miles, priority boarding, and lounge access. By rewarding their loyal customers and providing a seamless travel experience, airlines are able to attract more passengers, retain existing customers, and maintain a strong competitive edge, propelling their growth.

Similarly, in the ride-hailing industry, Uber pioneered a rewards program that offered perks such as discounted rides, priority support, and flexible cancellations, creating a personalized experience for users, fostering long-term relationships, and encouraging customer loyalty. This, in turn, drives increased driver engagement and bolsters growth for Uber.

Web3 gaming is exploring how these models can work to create a virtuous cycle of growth and bridge the chasm to mainstream adoption. According to a report by DappRadar, gaming was the most popular crypto category, representing 49% of all daily blockchain activity. However, the number of unique active wallets (UAWs) in the blockchain gaming sector is low at 1.15 million daily UAW on average. In comparison, Fortnite, one of the most popular games from Epic Games, reported to have 20+ million daily active users (DAU) in 2021. The gap between web3 gaming and mainstream adoption is large.

Web3 (aka Crypto, aka Blockchain) technology introduces unique advantages to disrupt the standard set by traditional reward programs. Reward programs can be built on blockchain technologies, such as Ethereum, that allow for secure, fully transparent, and efficient transactions. These features combine to provide a better deal and more power to the consumer:

  • Inherent security features of blockchain technologies, like Ethereum, ensure the integrity and reliability of reward transactions. 
  • The transparent nature of blockchain allows customers to track their rewards in real-time, bolstering trust and confidence in the program.
  • Web3 rewards can be seamlessly integrated across different platforms or projects. This interoperability allows customers to accumulate and use their rewards in a broader ecosystem, increasing the value and utility of the rewards and fostering customer loyalty. 
  • Finally users can “exit” the rewards program at any time. Unlike traditional reward programs where rewards are trapped within the ecosystem of the provider, a recipient of web3 rewards can sell them at their discretion.

Like any disruptive technology that brings 10x better or completely novel features there are issues to overcome to make the product appealing to mainstream markets. Clayton Christensen describes the typical journey in his book The Innovators Dilemma. One challenge with web3 rewards is the observed extractive behavior - users who engage with the product only to earn rewards and then sell those rewards. A prime example of this phenomenon can be seen in the Play-to-Earn paradigm, popularized by games such as Axie Infinity. To truly achieve widespread adoption, web3 platforms must find a balance between incentivizing user engagement and fostering genuine, long-term interest in the ecosystem.

The IMX Rewards Program (IMX Rewards) is designed to help drive the growth of the Immutable Ecosystem which ultimately benefits the community and Token Holders. This is how IMX Rewards kick-starts network effects for the Immutable ecosystem:

  1. More trading volume generates more staking rewards
  2. Greater staking rewards increase the productivity of $IMX
  3. Greater productivity of $IMX results in more games, marketplaces, and traders
  4. More games, marketplaces, and traders create more trading volume

IMX Rewards started on June 22 to help with step 3 in this flywheel, increasing the number of traders on the platform. The program was introduced during a deep bear market after the implosion of Terra/Luna. The intent was to launch a program to stimulate trade growth and reward current users. The program was launched as a 6 week campaign to celebrate the $72m Illuvium land sale on Immutable X. There was enough initial traction to move ahead and create an ongoing program. The basic idea was to reward traders with $IMX tokens according to the amount of NFTs they traded on an Immutable powered marketplace. The Digital Worlds Foundation, in partnership with Immutable, has spent the past 10 months learning the best way to provide the rewards to achieve these growth goals, which as the chart below shows have been very successful. 

Total Active Buyers on Immutable - January 2022 - January 2023 

One of the first learnings was that value extractors would trade collections without royalty fees to optimize their $IMX rewards. As a gaming focussed platform the Foundation wanted to focus rewards on gaming collections, where royalties are an important revenue source for the creators. Therefore, the Foundation in partnership with Immutable created an eligible list of collections that requires the collection to be a game and have a non zero royalty fee. 

The learning was to increase the efficiency of the program by minimizing value extracting behavior that takes away from Immutable ecosystem growth. The Foundation has partnered closely with Gauntlet to use data to improve program efficiency. A major milestone on this journey was the community governance vote which demonstrates the value proposition of web3 rewards program. The community of $IMX holders voted on a major change to how rewards were distributed. This is equivalent to people with frequent flyer miles being able to decide how status is determined. The vote was passed with 76.2% in favour and has resulted in a 47% increase in reward efficiency. Ultimately, this higher efficiency benefits all $IMX holders by fostering a more sustainable and thriving ecosystem for the long term.

IMX Rewards will continue to evolve to target the user segments or behaviors most needed within the Immutable ecosystem. For example, higher status members often earn more frequent flyer points than those on lower tiers. Or hotels offer bonus points to specific destinations where hotel capacity is highest. Once network effects take hold, the cost and scope of the IMX Reward will change.

Currently we are investigating a number of avenues of improvement. One area is how rewards can be used to bootstrap the games themselves on Immutable, helping the games grow and be more successful. Another area is exploring how rewards can incentivise liquidity on the platform, meaning users will be able to buy & sell the NFTs they want, when they want. Finally we are excited about the potential opportunities for utility growth with the introduction of Immutable zkEVM. We invite any ideas from the community about IMX Rewards so that the Foundation with the help of Immutable can continue to improve the program.

For more information about the the $IMX token and Immutable ecosystem visit:

https://www.immutable.com/imx-token 

Please note:

  • IMX Rewards is designed to encourage Immutable ecosystem activity as a whole. The Foundation and Immutable are in no position to choose which projects are ‘deserving’ of volume. 
  • Digital Worlds Foundation is a non-profit organization dedicated to the decentralization, growth and security of blockchain gaming. The Foundation’s primary mechanism to drive this outcome is through the IMX Rewards program. By maximizing the value for the Immutable ecosystem, bootstrapping user acquisition and user activity the Foundation generates more utility and productivity for the $IMX token which also benefits the Immutable ecosystem community.
  • The $IMX token is a ERC-20 utility token built to reward pro-network activities on Immutable and is issued by Digital Worlds NFTS Ltd (a part of the  Foundation). Immutable X Pty Ltd is not the issuer of the tokens.  The Foundation contracts Immutable to build and run the IMX Rewards program. Immutable does not take part in IMX Rewards. 
  • 20% of the protocol fee on every Immutable transaction is paid in $IMX. All fees paid in $IMX are sent to the “staking reward pool”. Community members that stake $IMX have the opportunity to earn rewards from this pool. 

Disclaimer: This post is for general information purposes only. It is not an offer, invitation, solicitation, advice or recommendation to buy or sell or to refrain from buying or selling any tokens. It should not be relied on by the recipient in considering the merits of any particular transaction. Nothing in this post constitutes investment advice.

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