At Merkl, we sit at the very center of the incentive distribution ecosystem. Every day, we observe how protocols design their campaigns, what works, what doesn’t, and most importantly, what creates lasting impact.
One of the biggest challenges for protocols is avoiding the infamous “TVL spike and crash.” Campaigns often generate short-term liquidity but struggle to ensure long-term retention. So, what separates campaigns that truly deliver from those that fade quickly?
Here are three key learnings we’ve gathered from running and analyzing incentive programs across the industry.
1. Simplicity beats complexity
The most effective programs are often the simplest. In fact, complexity is often the enemy of effectiveness.
Every additional rule or condition introduces friction. When eligibility becomes too complex, many users simply won’t bother to check whether they qualify and will walk away. Others may participate, only to later discover they weren’t eligible after all, leaving them frustrated and disengaged.
That’s why the strongest campaigns keep things simple: clear eligibility, straightforward reward distribution, and transparent mechanics. This doesn’t mean you can’t design multi-protocol strategies. It simply means the reward structure itself should remain easy to understand.
The clearer the design, the stronger the incentives.
2. Decouple rewards from immediate payouts
Another growing trend we’re seeing is the decoupling of reward scores from direct payouts. Instead of distributing immediately liquid tokens, many protocols now use point systems or wrapped tokens.
For example:
- Some distribute points that are not directly redeemable but can later be converted into rewards.
- Others, like Etherlink with the Apple Farm program or Euler with wrapped versions of their tokens (rEUL), require vesting periods.
This structure has two major advantages:
1. It reduces sell pressure by preventing instant dumping of rewards.
2. It aligns incentives with long-term growth. As TVL grows, token value often increases, making the eventual claim more attractive.
By slowing down liquidity while still rewarding participation, these systems create healthier ecosystems and stronger alignment between protocols and users.
3. Retention comes from sustainable rewards
At the end of the day, retention is the hardest challenge. If incentives dry up, participants move to the next opportunity. That’s just the nature of the market.
But the campaigns with the best retention all share a common trait: they operate as continuous programs, funded by real and recurring revenues. Unlike short-term campaigns that dry up once the budget is spent, these revenue-backed systems provide ongoing rewards that users can count on.
A strong example is Aave’s Merit program, where incentives are distributed from actual DAO revenues. This model creates a loyalty loop built on sustainable value-sharing rather than temporary boosts.
In practice, these programs behave less like one-off incentive campaigns and more like loyalty mechanisms—structures that can run indefinitely.
When users know rewards are permanent and revenue-driven, they see long-term value in staying, rather than chasing the next opportunity.
Final thoughts
Incentive campaigns can drive powerful growth, but designing them requires a balance between simplicity, alignment, and long-term sustainability:
- Keep mechanics simple to keep users engaged.
- Use decoupled reward systems to align long-term incentives.
- Build revenue-backed programs to maximize retention.
At Merkl, we’ve seen these three principles consistently make the difference between campaigns that truly engage communities and those that don’t reach their full potential. And as the incentive industry matures, protocols that embrace them will not only grow faster but also keep their communities stronger for the long run.
Ready to launch your incentives with Merkl?
→ Book a demo to get started in minutes.