What does rebate mean? The Web3 incentive project shifts from zero-sum competition to a new paradigm of win-win coexistence

In the Web3 incentive wars, you’ll observe a harsh reality: most projects’ Odyssey tasks appear lively, with millions of active addresses on paper, yet actual retention rates are less than 5%. Behind this lies a long-ignored truth—when Rebate reward systems are merely one-way “money sprinkling” rather than two-way “value exchange,” the incentive mechanism is essentially a zero-sum game.

After the market’s baptism in 2024-2025—from Linea’s “The Surge” to zkSync Era’s illusion of 6 million addresses, and the collapse of incentives in countless L2 projects—we finally see a pattern: those “wealth creation myths” are actually just compressing future inflation expectations into a false prosperity of the present. True game-changers are adopting a new incentive paradigm—making mechanisms like Rebate, fee discounts, and profit sharing genuinely reflect users’ value contributions.

Why 90% of Odyssey Projects Fail

When you open any mainstream Layer 2 ranking, you’ll see a comical scene: users constantly switch among dozens of protocols with identical logic—cross-chain, staking, forwarding, swapping—yet they receive a continuous devaluation of Points. This phenomenon is called incentive entropy increase.

Specifically, 90% of projects copy the same template:

First mistake: Homogenization leading to attention collapse

Imagine 100 projects all requiring you to complete the same “cross-chain–stake–swap” three-step process. The first ten feel fresh; by the 50th, users are just mechanically copying. Even worse, each new project’s incentives shrink—since reward pools are limited but participant numbers grow exponentially. That’s why early token values in Arbitrum, Optimism, Base, and others can drop from a few cents to fractions of a cent.

Second mistake: Witches’ attacks dilute genuine user rewards by 99%

zkSync Era claimed 6 million active addresses, sounding like 6 million real users. But after airdrops, data shows over 90% of addresses sold off tokens immediately after TGE—project teams then realized a harsh truth: most of these addresses aren’t humans but automated scripts from professional “wool-pulling” farms.

These “Farmers” operate at minimal cost (just gas and server fees) but generate millions of fake interactions efficiently. Projects spend huge incentives but 98% flow to these “fake users.” Genuine long-term contributors are diluted and become mere “workers.”

Third mistake: Incentives disconnected from core product value

Many Odyssey tasks are unrelated to the core value of the product. For example, a privacy protocol’s Odyssey might require users to “publicly shout out” on Twitter—fundamentally contradicting privacy’s purpose. The result: users are “task-hoppers” who complete tasks for points and leave, contributing nothing to long-term product stickiness.

Data confirms this: DeFi projects that force social tasks see short-term fan growth to tens of thousands, but TVL often drops 50-80% within 24 hours after the task ends. This isn’t growth; it’s false fire.

The Mathematical Principle of Win-Win Incentives: Rebate Is More Than a Discount

To break this deadlock, the key is understanding an overlooked economic concept—Incentive Compatibility. Simply put: users’ pursuit of their own maximum benefit should align with the protocol’s goal of long-term healthy development.

From the project side, consider a simple formula:

Unit Economic Benefit of Protocol = User’s Long-Term Value (LTV) – Incentive Cost

When the total value users generate via fees, liquidity provision, governance participation exceeds their rewards (Rebates, points, airdrops), the Odyssey is sustainable. Otherwise, it’s just “burning money to buy fake users.”

Successful projects optimize both ends of this formula:

One end: Significantly increase the cost for witches’ attacks.
No longer rely on blacklists, but introduce AI behavior entropy detection—analyzing interaction patterns, fund flows, and “human-like” behaviors. Once suspected scripts are identified, dynamically increase their gas costs (via “punitive coefficients”), destroying the profitability of scripts. This shifts farmers’ costs from “almost zero” to “perpetual loss.”

The other end: Deeply optimize reward structures.
Stop issuing “pure governance tokens” that may plummet after token issuance. Instead, build a “hybrid rights package” with:

• Real-time Rebate: Direct distribution of protocol fee dividends (Real Yield), so users earn actual transaction fees rather than illusionary points.
• Permanent Privileges: Fee discounts, cross-protocol lending interest boosts, etc., rewarding ongoing use rather than one-time airdrops.
• Weighted Governance: Giving voting power to long-term holders and high-frequency participants, so “real engagement” yields influence, not just profits.

User Stratification: From “Wool-Pullers” to “On-Chain Citizens”

Understanding project incentives, we must also understand users. Web3 participants are highly stratified.

Based on behavior and motivation, we can divide on-chain users into three layers:

Gamma Layer—Extreme Arbitrageurs

These users are calculators. They care nothing for project vision, only for “risk-free rates” and “certainty of returns.” Their behavior is highly standardized—using scripts during low gas periods, with fixed, efficient interaction paths.

Gamma users have extremely low costs and zero loyalty. They migrate with incentive pools like migratory birds. If a project offers 5% APY and another offers 6%, they switch. For projects, they are “necessary liquidity” but not “core assets.”

Beta Layer—Resonant Hardcore Participants

Beta users are true “ecosystem participants.” They value deep product experience, community identity, and long-term rights. They analyze in Discord, participate in beta testing, and take pride in earning unique SBT badges.

Beta users are sticky and highly contributive. Their actions are driven by subjective preferences, not standardized repetition. Instead of chasing 3,000 points, they care about being recognized by the community and influencing protocol decisions.

Alpha Layer—Long-term Pillars

Alpha users are a minority but the real backbone—large capital providers, technical contributors, early believers. Their incentives aren’t short-term points but long-term governance, dividends, and sovereignty within the ecosystem.

Alpha users are behaviorally stable and value-oriented. They won’t jump for an extra 1% APY elsewhere; they invest more because they bet on the ecosystem’s future.

Key insight: Identity isn’t fixed. A Gamma user initially just “wool-pulls” can, through deep interaction, be moved by product experience or technical logic into Beta, or even become Alpha. That’s why well-designed Odysseys are essentially “funnels”—they recognize Gamma’s value but use clever incentives to guide users upward.

Dynamic Difficulty Adjustment: Balancing Incentives and Ecosystem Pressure

On the execution side, the most successful Odysseys adopt a mechanism inspired by Bitcoin—Dynamic Difficulty Adjustment (DDA).

Simply put: when the Odyssey experiences explosive growth—addresses and TVL surge rapidly—the system automatically “hits the brakes.”

Trigger mechanism:

When daily interaction volume exceeds a threshold (e.g., 500% of baseline), the system reduces the point coefficient for that period. Simultaneously, the amount of transaction or liquidity needed for the same points increases. For example, a simple swap might require multi-protocol strategies—borrowing from A, staking in B, hedging in C—to earn equivalent points.

Why do this?
For projects, DDA acts as a safety valve—preventing speculative surges from overwhelming liquidity pools. For high-value users, it filters out less capable “wool-pullers,” ensuring rewards flow toward genuine, high-net-worth participants.

The Value Proof Model: Replacing “Address Count” with “Contribution Density”

By 2026, projects realize that “active address count” is a vanity metric.

What’s the use? 99% of 10 million addresses are fake, making such data worthless for fundraising, user growth, or ecosystem health. The new paradigm shifts toward Proof of Value (PoV), using a “Contribution Density” metric instead of raw address numbers.

Contribution Density formula:

Contribution Density = (Capital Stickiness × Lock-in Duration + Community Contribution Factor × Governance Activity) / Total Reward Pool

This formula’s advantages:

• Capital Stickiness: measures how long funds stay in the ecosystem, e.g., TVL(T+90)/Peak. A low ratio indicates poor retention.
• Community Contribution Factor: multiplier for active governance participation, content creation, or social media impact—can reach 2x or more.
• Total Reward Pool: denominator to control inflation; as participation grows, rewards per unit decrease.

This approach yields a real ecosystem participant map—not just cold addresses. Users’ “labor”—writing docs, proposing ideas—can be rewarded as “capital.”

This mechanism shifts the focus from “capital is king” to “capital + talent governance.”

Zero-Knowledge Proofs Empowering Anti-Witch-Hunt

Technologically, by 2026, Odysseys no longer rely on KYC or blacklists. Instead, they employ a sophisticated Zero-Knowledge (ZK) protocol.

Core functions include:

• On-chain behavior tracking: automatically recording deep interactions—liquidity, transaction frequency, governance participation, even dwell time—via ZK proofs, without user effort.
• Privacy analysis and filtering: generating “high-net-worth” or “seasoned DeFi player” proofs without revealing wallet details.
• Uniqueness verification: using ZK-STARKs to confirm non-repetitive interactions over 180 days, distinguishing real humans from scripts.

This tech fundamentally redefines “Incentive Compatibility”: it raises the cost of witch attacks beyond feasible levels, while genuine users gain “credit premiums” through verified identities.

Evolving from Marketing Tool to Embedded Incentive Protocol

Throughout Web3’s evolution, Odysseys are undergoing a fundamental identity shift.

Previously, Odysseys were marketing tools—time-limited, with clear “endpoints.” In the future, they will be embedded into protocol code as a permanent growth module.

Evolution path:

Stage 1: Embedded Incentives (GaaS mode)
Odysseys become integrated into smart contracts—dynamic reward logic. As users generate positive value (reducing slippage, providing long-term liquidity, participating in governance), the protocol recognizes and rewards automatically. UX: “Interact and get Rebate, rewards arrive instantly.”

Stage 2: Cross-protocol Credibility Lego
Odyssey performance in one protocol (e.g., lending) translates via ZK proofs into initial levels in another (e.g., social). Rewards become portable, like Lego bricks, breaking current project silos.

Stage 3: Universal On-Chain Reputation
A unified “Contribution Score” across the entire Web3 ecosystem replaces fragmented Points. It reflects cumulative contributions—governance, liquidity, content—making incentives a shared asset rather than project-specific.

Core Principles for Project Execution

If you’re a project aiming to design an effective Odyssey, follow these core principles:

1. Abandon vanity metrics.
Don’t be fooled by Twitter followers or address counts. In an era where engines can generate millions of addresses easily, these are useless. Focus on:

• Sticking TVL ratio: TVL(T+90)/Peak; below 20% indicates poor retention.
• Net Contribution Score: total fees generated per address divided by incentives paid—measures genuine value.
• Governance Engagement Entropy: actual participation depth in proposals, not just voting.

2. Build layered task funnels.
Successful Odysseys use a “three-tier” approach:

• Basic Layer: Low-threshold entry—SBT badges, small rebates—to generate initial contact.
• Growth Layer: Deep liquidity, multi-protocol strategies, higher APYs, fee discounts to lock funds.
• Ecosystem Layer: Content creation, proposals, node operation—governance rights and RWA dividends—to cultivate core builders.

This funnel converts traffic into real value step-by-step.

3. Set “circuit breakers” to prevent collapse.
Implement dynamic coefficients, anti-witch flags, staged reward unlocks—these safeguard against sudden over-inflation or attack-driven crashes.

4. Pre-empt community governance.
Don’t wait until token launch to start DAO experiments. During Odyssey, involve users in simulated voting—familiarize them with governance, filter genuine supporters, and reduce future governance friction.

The Final Step: From Zero-Sum to Value Coexistence

By redefining Odysseys with “Incentive Compatibility,” “Dynamic Difficulty,” and “Contribution Density,” we essentially use math and code to dissolve traffic bubbles. When the bubble pops, what remains is a foundational trust—every genuine contribution is permanently recorded in code—paving the way from “speculative wilderness” to “value civilization.”

Rebate’s ultimate meaning isn’t just discounts; it’s what they represent:
The protocol’s willingness to share a portion of real income with contributors. This shift—from “project-user zero-sum” to “protocol-citizen shared interests”—redefines Web3’s incentive ecology.

In this new paradigm, there are no winners all at once, nor victims to be harvested. Every participant is rewarded according to their genuine contribution—Alpha’s large capital deposits stabilize the ecosystem, Beta’s deep engagement drive product iteration, Gamma’s fluid interactions energize markets. Incentives become a self-sustaining ecosystem, not a one-way squeeze.

This is the true vision of Odyssey 3.0.