Designing loyalty programs in the Web3 space is tricky. On one hand, you want to incentivize participation. On the other, you don’t want to attract low-quality users who vanish once the rewards stop. This guide explores how to build loyalty systems that create sustainable user relationships instead of mercenary traffic.
1. Introduction: The Web3 Loyalty Dilemma
Designing loyalty programs in the Web3 space is tricky. On one hand, you want to incentivize participation. On the other, you don’t want to attract low-quality users who vanish once the rewards stop. This guide explores how to build loyalty systems that create sustainable user relationships instead of mercenary traffic.
In Web2, loyalty was measured by repeat logins or purchase behavior. In Web3, where identity is wallet-based and users can remain pseudonymous, loyalty requires a completely new approach.
Protocols often rely on rewards like tokens or NFTs to keep users engaged. But as many have learned the hard way, those incentives can attract the wrong crowd: mercenary users who hop from one reward campaign to another, leaving nothing but on-chain dust behind.
The challenge is clear: how do you build loyalty without dependency on constant giveaways? And how do you identify users who genuinely care about your ecosystem?
This blog dives deep into that problem—and offers solutions.
2. Who Are Mercenary Users?
Mercenary users are individuals or wallet operators who engage with Web3 projects solely for immediate gain. They:
- Join airdrops without intent to stay
- Mint NFTs only to dump them for profit
- Farm tokens and move on to the next opportunity
- Rarely participate in community or governance
They are not scammers—they’re opportunists. But their behavior undermines community health, pollutes data, and inflates short-term metrics while damaging long-term sustainability.
Many protocols, eager for hype, mistake mercenary activity for growth. In reality, it’s just a spike that fades quickly.
3. Why Traditional Airdrops Fail
Airdrops were once the go-to method for bootstrapping communities. In 2017–2021, they generated buzz, grew Telegram channels, and boosted token holders. But by 2025, savvy users have gamified airdrops using bots, sybil wallets, and orchestrated farms.
The result?
- 80% of airdrop recipients never interact again
- Token dumping drives price instability
- Community signal is drowned by noise
- DAO governance becomes vulnerable to hijacks
Airdrops alone are no longer enough. They can kickstart attention—but without layered incentives, they rarely foster loyalty.
4. The Psychology Behind True Loyalty
Loyalty is emotional before it's transactional. In Web3, users feel loyal when:
- They resonate with your mission
- They feel seen and rewarded beyond money
- They contribute to a community where their voice matters
- They have ownership (real or perceived)
Tokens are only part of the equation. The feeling of being part of something larger—of belonging—is what converts a passive wallet into a committed user.
Brands like Ethereum, ENS, and Bankless achieved loyalty by creating narratives, involving users in decision-making, and rewarding based on contribution, not just consumption.
5. Core Principles of Sustainable Loyalty Programs
Sustainable Web3 loyalty programs rely on five essential principles:
- Proof of Participation: Reward users who perform meaningful on-chain actions, like staking, governance voting, or content creation.
- Dynamic Earning: Adjust rewards based on behavior and longevity, not just initial action.
- Time-Locked Incentives: Use vesting or staking-based rewards to delay gratification and reduce mercenary exit points.
- Community Curation: Let active users help choose who deserves additional rewards.
- Transparent Criteria: Make loyalty logic clear. Ambiguity invites bots and gamification.
These foundations help filter for users who are willing to stay, learn, and contribute.
6. Case Study: Projects That Got It Right
Some Web3 projects have already figured out how to build loyal communities:
- Bankless DAO: Created value through educational content and governance participation. Users earned BANK tokens for sustained contributions.
- Rabbithole: Used quests to guide users through real interactions, rewarding not just wallet connections but proof of learning.
- Gitcoin: Moved from passive grants to community-curated rounds. Loyal funders and developers are now incentivized through multiple mechanisms.
- Lens Protocol: Prioritized social graph-building over speculation. Users gain long-term value through engagement, not short-term token farming.
What these examples have in common is purpose-driven incentives, where loyalty is a byproduct of shared vision and ownership.
7. On-Chain Tools to Measure and Filter Loyalty
Web3 offers native ways to measure loyalty far better than Web2 cookies or logins:
- Nansen & Arkham: Provide wallet intelligence based on historical activity, interaction types, and known behaviors.
- Galxe & Layer3: Track quest completions and user progression across campaigns.
- POAP: Proof of Attendance Protocol can serve as a loyalty credential system.
- ZK Credentials: Zero-knowledge reputation systems can verify loyalty while preserving anonymity.
These tools let you filter out sybil attackers, reward repeat users, and track true ecosystem contributors.
8. Designing Tiered Incentive Structures
One-size-fits-all rewards often fail to distinguish loyal users from opportunistic ones. Instead, tiered incentive structures can play a crucial role in filtering quality engagement from superficial interactions.
A tiered system works by creating multiple levels of rewards based on user activity and contribution. These levels could be structured around metrics such as:
- Frequency and depth of protocol use (e.g., how often users engage with staking, swaps, DAO voting)
- Time-based commitment (e.g., how long tokens or NFTs are held without selling)
- Referral quality (e.g., how many referred users become long-term contributors themselves)
Each tier unlocks different rewards:
- Base Tier: Limited NFTs or small token rebates for completing entry-level quests
- Intermediate Tier: Governance rights, higher staking APY, early access to features
- Elite Tier: DAO council eligibility, protocol revenue share, or exclusive brand NFTs
These tiers encourage users to go beyond basic interactions and evolve into power users who sustain your project’s long-term growth.
9. Loyalty Quests vs. Short-Term Giveaways
Short-term giveaways are commonly used to generate quick hype. But they often result in inflated KPIs and low-quality engagement. In contrast, loyalty quests offer a structured, long-term approach to user retention.
A loyalty quest is a multi-step journey that rewards cumulative behavior. Example:
- Step 1: Stake tokens for 30 days
- Step 2: Vote in a DAO proposal
- Step 3: Refer two wallets that reach Tier 2 status
- Step 4: Contribute feedback or a tutorial on Discord
Platforms like Layer3, Zealy, and Galxe allow you to gamify this journey with badges, XP points, and NFTs. Quests create habit loops—each task brings the user closer to unlocking something valuable, and that emotional investment increases retention.
This structure is superior to giveaways because it demands action, education, and emotional buy-in.
10. Retargeting and Engagement in Wallet-Native Ways
Web2 relied heavily on cookies, emails, and social media pixels. In Web3, those tools don’t work because identities are decentralized. However, wallet-native retargeting is emerging as a powerful replacement.
Tools like XMTP and Notifi allow you to send encrypted, wallet-specific messages. You can:
- Remind users of an unfinished quest
- Alert them about a new staking opportunity
- Drop exclusive rewards for prior engagement
You can also use NFT-gated access to offer:
- Premium Discord channels
- Beta testing slots
- IRL event invitations
Retargeting in Web3 is about respecting privacy while keeping the connection alive. And it works best when it’s opt-in and value-driven.
6. Case Study: Projects That Got It Right
Some Web3 projects have already figured out how to build loyal communities:
- Bankless DAO: Created value through educational content and governance participation. Users earned BANK tokens for sustained contributions.
- Rabbithole: Used quests to guide users through real interactions, rewarding not just wallet connections but proof of learning.
- Gitcoin: Moved from passive grants to community-curated rounds. Loyal funders and developers are now incentivized through multiple mechanisms.
- Lens Protocol: Prioritized social graph-building over speculation. Users gain long-term value through engagement, not short-term token farming.
What these examples have in common is purpose-driven incentives, where loyalty is a byproduct of shared vision and ownership.
7. On-Chain Tools to Measure and Filter Loyalty
Web3 offers native ways to measure loyalty far better than Web2 cookies or logins:
- Nansen & Arkham: Provide wallet intelligence based on historical activity, interaction types, and known behaviors.
- Galxe & Layer3: Track quest completions and user progression across campaigns.
- POAP: Proof of Attendance Protocol can serve as a loyalty credential system.
- ZK Credentials: Zero-knowledge reputation systems can verify loyalty while preserving anonymity.
These tools let you filter out sybil attackers, reward repeat users, and track true ecosystem contributors.
8. Designing Tiered Incentive Structures
One-size-fits-all rewards often fail to distinguish loyal users from opportunistic ones. Instead, tiered incentive structures can play a crucial role in filtering quality engagement from superficial interactions.
A tiered system works by creating multiple levels of rewards based on user activity and contribution. These levels could be structured around metrics such as:
- Frequency and depth of protocol use (e.g., how often users engage with staking, swaps, DAO voting)
- Time-based commitment (e.g., how long tokens or NFTs are held without selling)
- Referral quality (e.g., how many referred users become long-term contributors themselves)
Each tier unlocks different rewards:
- Base Tier: Limited NFTs or small token rebates for completing entry-level quests
- Intermediate Tier: Governance rights, higher staking APY, early access to features
- Elite Tier: DAO council eligibility, protocol revenue share, or exclusive brand NFTs
These tiers encourage users to go beyond basic interactions and evolve into power users who sustain your project’s long-term growth.
9. Loyalty Quests vs. Short-Term Giveaways
Short-term giveaways are commonly used to generate quick hype. But they often result in inflated KPIs and low-quality engagement. In contrast, loyalty quests offer a structured, long-term approach to user retention.
A loyalty quest is a multi-step journey that rewards cumulative behavior. Example:
- Step 1: Stake tokens for 30 days
- Step 2: Vote in a DAO proposal
- Step 3: Refer two wallets that reach Tier 2 status
- Step 4: Contribute feedback or a tutorial on Discord
Platforms like Layer3, Zealy, and Galxe allow you to gamify this journey with badges, XP points, and NFTs. Quests create habit loops—each task brings the user closer to unlocking something valuable, and that emotional investment increases retention.
This structure is superior to giveaways because it demands action, education, and emotional buy-in.
10. Retargeting and Engagement in Wallet-Native Ways
Web2 relied heavily on cookies, emails, and social media pixels. In Web3, those tools don’t work because identities are decentralized. However, wallet-native retargeting is emerging as a powerful replacement.
Tools like XMTP and Notifi allow you to send encrypted, wallet-specific messages. You can:
- Remind users of an unfinished quest
- Alert them about a new staking opportunity
- Drop exclusive rewards for prior engagement
You can also use NFT-gated access to offer:
- Premium Discord channels
- Beta testing slots
- IRL event invitations
Retargeting in Web3 is about respecting privacy while keeping the connection alive. And it works best when it’s opt-in and value-driven.
11. Avoiding Over-Incentivization: Balance Is Key
There’s a fine line between rewarding and over-rewarding. If every action yields a reward, users start expecting a payout for everything. This creates:
- Token inflation
- Psychological entitlement
- Lack of intrinsic motivation
To avoid this, consider the following balance:
- Reward major milestones—not every interaction
- Mix extrinsic and intrinsic incentives (e.g., status, access, recognition)
- Communicate clearly that some contributions are voluntary
Use delayed gratification mechanisms like vesting, staking, or governance thresholds to filter for those who genuinely want to stick around.
12. Community-Led Rewards: Let the DAO Decide
The most powerful rewards are those given by the community, not the core team. When recognition comes from peers, it builds mutual respect and social capital.
Community-led rewards can take several forms:
- Seasonal contributor votes: Members vote on who deserves tokens, NFTs, or public shoutouts
- Quadratic funding rounds: The crowd decides how to distribute matching funds
- Reputation NFTs: Earned for DAO proposals, content creation, or conflict resolution
This approach transforms loyalty from something bought to something earned and admired. It also fosters accountability and decentralization.
13. Loyalty Metrics That Matter
Tracking loyalty requires more nuance than counting wallets or social followers. Effective metrics include:
- Streak-based activity: Wallets that return weekly or monthly
- Time-weighted token holding: Not just holding tokens, but holding longer
- Governance participation rate: Proposals read, commented on, or voted on
- Quest completion rate: Across seasons or campaigns
- Social graph integration: Interactions across Discord, Farcaster, Lens, etc.
Tools like Dune Analytics, Nansen, and custom dashboards can help visualize and score loyalty.
14. Mistakes to Avoid When Building Loyalty Programs
- Over-optimizing for quantity: Attracting 10,000 low-value wallets is worse than nurturing 1,000 active ones.
- Ignoring post-reward drop-off: If users leave once rewards end, your system failed.
- Complicating eligibility: Overly complex requirements scare away real users.
- No feedback loop: Not asking your community what motivates them is a missed opportunity.
- Short-term thinking: Design your program to evolve as your project matures.
15. FAQs
Q1: Can I still run airdrops and avoid mercenaries?
Yes. Use on-chain filters like sybil resistance, quest-based qualification, and vesting. Make them a starting point—not the entire program.
Q2: How do I know if a wallet is loyal?
Look for sustained behaviors like repeated staking, governance votes, consistent quest completions, and Discord activity. Loyalty is about longevity and interaction diversity.
Q3: What’s the best platform to create loyalty quests?
Platforms like Layer3, Zealy, Galxe, and Rabbithole help you structure quests with XP, badges, and even NFT integrations.
Q4: How do I reward loyalty without spending tokens?
Use NFTs, badges, governance roles, IRL perks, and exclusive Discord access. Recognition and reputation are powerful incentives.
Q5: Can NFTs play a role in loyalty programs?
Absolutely. Use them as dynamic achievements, gated access tools, or proofs of contribution. They add prestige and utility.
Q6: What chains support wallet-native retargeting?
Ethereum, Polygon, Arbitrum, Optimism, Base, and Avalanche support integrations like XMTP, Notifi, and POAP-based reminders.
Q7: How do I prevent gamification abuse?
Use soulbound NFTs, identity verification, progressive quests, time locks, and randomness in rewards to make systems hard to game.
Q8: What’s better: points or tokens?
Points are better for shaping behavior. Tokens are better for ownership. Use both, but don’t rely solely on tokens to build loyalty.
