Exponential vs Linear Compensation: Referral Programs | by mjrs Labs | Sep, 2023

The main challenge faced by 99% of DeFi projects is getting those users on board. This is true for real-world businesses too btw.

There exists a growth hacking strategy that stands as a beacon of hope, tried and tested, yet curiously underused: referral programs.

DeFi, like a fertile field, is brimming with opportunities for projects to tap into the exponential potential of referrals.

Projects such as GMX, Unibot, and even the innovative minds behind friendtech have tried referrals, each with their own unique stories of success or, in some cases, a learning curve.

In this article, we delve into the crucial role of referral programs, emphasizing their undeniable importance, both for influencers and DeFi projects. We’ll unveil the key elements for creating a powerful referral program, one that can attract the next billion users to your project.

Referral Programs: The Catalyst for Exponential Growth

Encouraging users to share your product with others is a cornerstone growth hacking tactic.

Imagine a system where each user brings in more and more users — this is the essence of referral programs. A Ponzi Scheme actually.

They possess the power to trigger exponential growth, turning every user into a valuable asset in the quest for project expansion.

Why Referral Matters to Influencers

In the wild and wacky world of crypto, influencers reign supreme, and we all get it, right?

Picture this: Influencers usually come knocking with a “show me the money”, demanding a massive upfront payment that could make your 10 ETH budget feel like nothing. It’s no joke; being an influencer in crypto is like hitting the $$$ jackpot.

But let’s be real, most projects can’t drop that kind of cash on influencers. That’s where the referral programs enter the stage:

Think of a one-time influencer payout as the old-school, linear compensation. You throw your $, and that’s the end of the story.

Now, meet the referral program, the exponential compensation model. Here, the influencer is in on the action, helping the protocol grow and profiting from its wild expansion.

This isn’t your average one-and-done payment. The influencer is getting paid for his grind and the value he’s pumping into the project.

Sure, linear compensation might seem juicier in the short term, but the exponential compensation model, aka the referral program, is where the true magic happens. It aligns the interests of the project and the influencer perfectly.

The influencer works his magic, the user base grows substantially, he pockets the $$$, and it’s all smiles all around. That’s the deal.

The Keys to a Successful Referral Program

Ok, we showed that influencers should go for referral programs when they believe they will have a big impact on the project. Cool.

So, what makes a referral program successful?

• Mutually Beneficial Incentives: Your program should offer rewards that are not just appealing but also tailored to the audience. Referrers get rewards, but new users should also benefit. Consider what your users need and desire — whether it’s lower fees or exclusive access to features. It’s a symbiotic relationship where everyone wins.
• Easy Sharing: The referral process should be effortless, eliminating any entry barriers or friction. Simplicity is the key to widespread adoption. Make sharing easy.
• Transparent Tracking: Users should be able to track their referral progress. Transparency builds trust, keeps participants engaged, and ensures accountability in the program. Whether it’s a leaderboard or milestones, enable your referrers to monitor their journey. They are the cornerstone of your program.

Combine these elements with a dash of creativity, and then boom… your referral program will have a higher chance of success, boosting your project’s user base expansion far beyond your expectations.

A well-structured referral program has been proven to drive exponential growth in various real-life businesses, and it’s time to apply the same principles in our beloved DeFi ecosystem.

Remember, this time is NOT different — referral programs are the missing piece to unlock your project’s true potential.