What types of incentives exist in web3 and how to choose the best one for your project?

Incentives have been used for as long as we can remember. Businesses offer discounts to loyal customers, airlines reward frequent flyers with miles, and companies provide bonuses to employees who go the extra mile. These rewards aren’t just about being nice—they’re a proven way to motivate behavior and build long-term relationships.

Incentives are everywhere, from retail and banking to gaming and fitness apps. Each industry tailors rewards to its specific goals, whether it’s encouraging repeat purchases, driving sales, or boosting productivity.

In web3, incentives are even more critical. Unlike traditional businesses, web3 projects rely on users not just as customers but as participants. They stake, trade, refer, lend, borrow, and even help govern decentralized ecosystems. Without the right incentives, it’s hard to attract users or keep them engaged. That’s why designing effective incentive programs is critical to the success of any web3 project.

So, what kinds of incentives work best in web3? And how do they help projects grow and thrive? 

This guide will break down two essential elements of web3 incentives:

• The Actions You Incentivize (e.g., trading, staking, providing liquidity).
• The Rewards You Offer (e.g., tokens, points, NFTs).

Let’s explore how these work together to create successful incentive programs.

Actions you can incentivize in Web3

In web3, the actions users take are the backbone of your project’s success. Unlike traditional platforms where users mostly consume content or services, web3 users actively contribute to the ecosystem. They stake, trade, provide liquidity, and more, all of which keep the wheels turning.

When designing an incentive program, it’s crucial to think about what behaviors you want to encourage. These actions should align with your project’s goals, whether it’s growing your user base, strengthening your network, or driving more transactions. 

Here’s a closer look at the key actions you can incentivize in web3:

Trading

Trading is a foundational activity in decentralized exchanges (DEXs) and many blockchain-based financial platforms. When users actively trade tokens, they boost transaction volume and liquidity, making the platform more attractive to others. Encouraging trading ensures that markets remain dynamic and accessible, creating a better experience for all participants. High trading activity can also signal the platform’s health, drawing in new users and investors.

Staking

Staking allows users to lock up tokens in support of a network’s operations, like validating transactions or securing the blockchain. This action is particularly important for proof-of-stake blockchains, where network security relies on active participation. Staking not only strengthens decentralization but also encourages long-term engagement, as users are often required to commit their tokens for extended periods.

Providing Liquidity

Liquidity provision is essential for enabling seamless token swaps on DEXs. Liquidity providers (LPs) deposit token pairs into pools, ensuring that other users can trade efficiently without relying on centralized market makers. By incentivizing liquidity provision, projects can reduce slippage, improve trading experiences, and attract more users to their platforms.

📌 Learn more about LP incentives by checking out Clipper DEX Case Study.

Referrals

Referral programs leverage personal connections to drive organic growth. When users invite friends or colleagues to join a platform, they act as ambassadors, creating a trust-based entry point for new participants. This action not only helps projects expand their user base but also fosters a sense of community and loyalty among existing users who feel directly involved in the project’s success.

📌 Learn more about referral programs by checking out Vertex Protocol Case Study.

Community engagement and social media

A strong, active community is a hallmark of successful web3 projects. By incentivizing engagement in spaces like Discord, Telegram, or Twitter, projects can keep conversations alive and attract new participants. Encouraging users to share content, participate in discussions, or create educational materials amplifies the project’s reach and builds credibility in the broader ecosystem.

Governance participation

Governance activities, such as voting on proposals or submitting new ideas, are central to many decentralized projects. By involving users in decision-making, governance participation ensures that the community has a say in shaping the project’s future. This strengthens trust, builds alignment between users and the project, and creates a sense of shared responsibility.

Holding Tokens

Simply holding tokens can be a meaningful action to incentivize. When users choose to hold rather than sell, it reduces token supply in circulation, potentially stabilizing or increasing its value. This action signals trust in the project’s vision and helps create a more stable ecosystem for all participants.

Lending and Borrowing

Lending and borrowing are critical activities for many DeFi projects. Encouraging users to lend ensures the availability of liquidity, while motivating borrowing helps drive platform activity. These actions balance the ecosystem, supporting its utility and functionality while creating value for both lenders and borrowers.

Other contributions

Projects often benefit from incentivizing less conventional but equally valuable actions. Testing new features, reporting bugs, or participating in beta programs can provide early feedback that improves the platform. These contributions not only help refine the product but also build loyalty among users who feel directly involved in its growth and development.

Types of Rewards you can offer in Web3

Now that we’ve identified the key actions you can incentivize, the next step is to explore the types of rewards you can offer. Incentives are what motivate users to participate actively in your project, and they should align with the value users bring. From tokens to exclusive benefits, the right incentives can drive engagement, foster loyalty, and create a thriving ecosystem.

Below, we’ll explore the most common types of incentives used in web3, how they work, and why they matter.

Tokens

Tokens are the backbone of most web3 incentive programs. They represent value within the ecosystem and can serve multiple purposes, from governance to staking. Offering tokens as rewards is an effective way to align users with the success of your project. When users earn tokens, they’re not just rewarded—they become stakeholders in your platform, with a vested interest in its growth.

Points

Points are an excellent option for early-stage projects or pre-launch phases. Unlike tokens, points aren’t immediately tied to financial value but can be converted into tokens or rewards later. This flexibility makes points a low-risk way to incentivize users while building momentum for a token launch.

Non-Fungible Tokens (NFTs)

NFTs offer a unique way to reward users with something tangible and exclusive. These digital assets can range from collectible art to utility-based NFTs that grant access to premium features or events. By offering NFTs, projects can create excitement and provide users with rewards that are both memorable and valuable.

Governance Rights

For projects focused on decentralization, governance rights are a powerful incentive. Rewarding users with voting power or the ability to propose changes gives them a direct say in the project’s direction. This fosters trust and engagement, as users feel like active contributors to the platform’s future.

Exclusive Benefits

Sometimes, the most effective incentives are those that offer unique privileges. This can include early access to new features, reduced platform fees, merchandising, or invitations to exclusive events. These benefits not only reward users but also make them feel valued and recognized for their contributions.

Cashback or Discounts

Offering cashback or discounts on platform fees is another practical incentive. This approach directly ties rewards to user activity, such as trading or borrowing, and provides immediate value. It’s especially effective for driving ongoing engagement.

Airdrops

Yes, airdrops are after all tokens. But we wanted to separate them because they are a different way of giving them. Airdrops are one of the most recognizable incentives in web3. By distributing free tokens to eligible users, projects can quickly generate buzz and attract attention. Airdrops are often used to reward early supporters or to encourage specific actions like holding tokens or joining the community.

Tiered Rewards

Tiered rewards are not a type of incentive on their own but rather a structured way to distribute rewards. By setting milestones or performance-based levels, projects can encourage users to aim higher. For instance, users might earn increasing amounts of tokens or points as they refer more participants, stake higher amounts, or achieve other measurable goals. This system adds motivation and drives ongoing engagement.

Gamified Rewards

Gamification is another method of distributing rewards that adds fun and competition to the user experience. Leaderboards, challenges, or activity streaks are great examples of gamified systems. Users might compete for top spots or earn rewards for completing specific tasks within a timeframe. Gamified rewards make engagement more dynamic and enjoyable, encouraging users to stay active over time.

Combined Incentives

Some of the most effective programs combine multiple types of rewards. For example, a project might offer tokens for liquidity provisioning, points for testing new features, and exclusive NFTs for top performers. By diversifying rewards, you can appeal to a broader audience and meet different user motivations.

What Makes an Incentive Program Sustainable?

Designing a sustainable incentive program is one of the biggest challenges in web3. While rewards are a powerful tool for growth, poorly planned programs can lead to issues like token inflation, short-term interest, or even budget exhaustion. The goal is to create a system that benefits both users and the project in the long run.

Key elements of a sustainable incentive program

1. Clear goals: Start by defining what you want to achieve. Is it user acquisition? Or network security? Or perhaps community engagement? Tailor the rewards to match these objectives.

2. Balanced rewards: Avoid over-rewarding actions. Too many incentives can devalue the token or strain the project’s resources. Balance is key to keeping users engaged without overspending.

3. Dynamic design: A good program evolves over time. As the project grows, reward structures should adapt to reflect new priorities, like retaining loyal users or encouraging governance participation.

4. Measurable impact: Use analytics to track how incentives are performing. Are users staying engaged? Are they contributing to the network’s growth? Metrics help you identify what’s working and what needs adjustment.

How Fuul supports smarter Incentive Programs

Incentive programs in web3 can be complex, but they don’t have to be. Fuul provides the tools to help projects reward meaningful actions while keeping things simple and efficient. From staking and liquidity provisioning to referrals and community engagement, our platform supports a wide range of use cases, all designed to fit your project’s needs.

Fraud prevention is a priority for any rewards system, and Fuul’s sybil detection tools make it easier to ensure rewards go to genuine users. By setting clear eligibility criteria, like wallet age or transaction activity, you can protect your program while building trust with your community.

With real-time analytics, Fuul gives you full visibility into how your program is performing. You can track user engagement, monitor results, and make informed adjustments to improve impact. Plus, Fuul allows phased rollouts, so you can introduce new incentives over time and keep your audience engaged.

Whether you’re launching your first program or optimizing an existing one, Fuul helps you design incentive systems that are fair, scalable, and built for long-term success.