Token Distribution Models

Kajetan Olas

15 Mar 2024
Token Distribution Models

The landscape of blockchain and cryptocurrency is continually evolving, marked by the relentless pursuit of models that not only enhance network security and decentralization but also deepen user engagement and ownership. At the heart of this evolution lies the concept of token distribution, a pivotal strategy that can transform users from passive participants into active stakeholders and owners within digital ecosystems. Token distribution is not merely about allocating digital assets; it's about creating a framework where each token serves as a beacon of ownership, rights, and incentives, aligning the interests of users with the long-term success of the platform.

As we delve into the world of token distribution, we find ourselves tracing the path of its evolution. From the foundational Proof of Work mechanisms, to the speculative fervor of ICOs, and onto the community-centric airdrops. Each era has brought with it lessons, challenges, and a deeper understanding of what it means to distribute ownership.

New trend

However, the journey has not been without its pitfalls. Many strategies, while successful in bootstrapping networks and attracting initial interest, have struggled to foster genuine user engagement or have inadvertently encouraged speculative behaviors that detract from the project's core value proposition. It's within this context that we explore the concept of "Progressive Ownership"—a model that aims to refine the token distribution process into a more nuanced, loyalty-driven approach that rewards true product-market fit and user commitment.

The Evolution of Token Distribution Models

The concept of token distribution has undergone significant transformation since the inception of blockchain technology. Each era has introduced new mechanisms for distributing tokens and lowering barriers to entry, while also revealing unique challenges. Let’s explore these pivotal stages in the evolution of token distribution models.

Proof of Work (2009–present): The Dawn of Hardware Formation

The journey began with Bitcoin, which introduced the world to the Proof of Work (PoW) model. This approach allowed anyone with computational resources to participate in network security operations, known as "mining," in exchange for tokens. This mechanism not only secured the network but also democratized access to token ownership. However, as the sector matured, mining became increasingly professionalized, requiring significant investments in specialized hardware. This shift heightened the barriers to entry, gradually sidelining the average user and emphasizing the need for substantial upfront investment. This altered the initial egalitarian vision.

ICOs (2014–2018): The Era of Capital Formation

Following the PoW era, the cryptocurrency space witnessed the rise of Initial Coin Offerings (ICOs). This period came with a new model where projects could raise capital by selling tokens directly to the public. This approach theoretically democratized investment opportunities, allowing projects to reach a broader audience beyond traditional venture capital avenues. Ethereum's ICO in 2014 stood as a landmark event, inspiring a wave of similar endeavors. However, the ICO craze also attracted numerous fraudulent schemes, leading to a regulatory crackdown and a reevaluation of this model,

Airdrops (2020–present): Bootstrapping Usage through Community Engagement

In response to the pitfalls of ICOs, the industry shifted towards a more user-centric model: airdrops. This approach involved distributing tokens freely to existing communities or users based on their engagement or historical usage. In principle this fosters a sense of ownership and participation without a direct financial investment. The era of airdrops, particularly during the "DeFi Summer" of 2020, sought to catalyze network usage and decentralization. However, the emphasis on broad, indiscriminate distribution often attracted short-term speculators rather than committed users. This complicates efforts to achieve sustained growth and genuine community development.

Reflections on the Evolution

Each era of token distribution has contributed to the blockchain landscape's growth, expanding access and participation in unique ways. From the hardware-intensive commitments of PoW, through the speculative enthusiasm of ICOs, to the community-focused aspirations of airdrops. The evolution of token distribution models reflects the cryptocurrency sector's dynamics to balance inclusivity, security, and sustainable development. Yet, as we've learned, each model comes with its set of challenges, highlighting the need for continuous innovation. New token distribution strategies come up to foster genuine user ownership and engagement in the ever-evolving digital ecosystem.

Progressive Ownership: A New Frontier

Amidst the evolution of token distribution models, with each era bringing its blend of innovation and challenge, the concept of "Progressive Ownership" emerges. This is a transformative approach aimed at realigning the incentives of blockchain applications and their users. This novel framework represents a significant pivot from previous models, focusing on nurturing genuine user engagement.

Foundation of Progressive Ownership

Progressive ownership stands on the idea that tokens should be distributed to users progressively for their contributions to the network. This model asserts that achieving product-market fit remains paramount and that token distribution should complement, not precede this fit.

In the realm of progressive ownership, tokens become a means to deepen users' commitment to an application. They transform active users into stakeholders with a vested interest in the platform's success. This approach aims to move beyond the shortcomings of indiscriminate airdrops and speculative ICOs. It proposes a more sustainable method of community building.

Key Principles and Advantages

  • Incremental Engagement: Progressive ownership advocates for rewarding users in stages, reflecting their growing engagement and value to the ecosystem. This method encourages long-term participation and deters speculative behavior by closely aligning token incentives with genuine user activity and contributions.
  • Opt-in Ownership: Central to this model is the concept of opt-in ownership, where users have the choice to convert their earned incentives or revenue shares into tokens representing a more profound stake in the project. This voluntary transition from user to owner ensures that tokens are held by those most aligned with the project's long-term vision and success.

Implementing Progressive Ownership

Successful implementation of progressive ownership requires careful planning and a deep understanding of user behavior and incentives. Projects must first establish a clear value proposition and product-market fit, creating an ecosystem where users’ contributions are quantifiable and rewardable. Following this, a transparent and accessible mechanism for transitioning users from passive beneficiaries of revenue share to active token holders must be established, ensuring clarity around the benefits and responsibilities of ownership. 

Example Implementation - Project Catalyst

Project Catalyst is a Cardano-based initiative. It’s a decentralized funding mechanism that invites community members to propose projects, which are then voted on by ADA holders. Successful proposals receive funding in ADA, with over $79 million allocated to fund more than 1600 projects by March 2024. This process not only democratizes innovation within the Cardano ecosystem but also aligns with the principles of progressive ownership by giving token holders a vested interest in the network's growth and success. Through Project Catalyst, Cardano effectively engages its community in governance and decision-making, fostering a deeper sense of ownership and participation among ADA holders.

Conclusion

By aligning token incentives with genuine user engagement projects can pave the way for more sustainable development. Such an approach not only deepens user loyalty and retention but also fosters a more vibrant, participatory community. This is the groundwork for the next generation of Champions that will spread the knowledge about your platform.

If you're looking for ways to foster the adoption of your DeFi project, please reach out to contact@nextrope.com. Our team is ready to help you create a strategy that will grow your user base and ensure long-term growth.

FAQ

How to go about designing token distribution in practice?

  • It's a good idea to take inspiration from projects similar to yours, which succeded in terms of fostering progressive ownership.

Are airdrops effective?

  • Yes. Despite all their shortcomings, if implemented correctly airdrops can do great for marketing purposes for relatively low cost.

Why is fostering an ownership-based culture important?

  • Because if your users feel like they partially own the project, then they will contribute to the development process, and share that project with all their friends.

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AI-Driven Frontend Automation: Elevating Developer Productivity to New Heights

Gracjan Prusik

11 Mar 2025
AI-Driven Frontend Automation: Elevating Developer Productivity to New Heights

AI Revolution in the Frontend Developer's Workshop

In today's world, programming without AI support means giving up a powerful tool that radically increases a developer's productivity and efficiency. For the modern developer, AI in frontend automation is not just a curiosity, but a key tool that enhances productivity. From automatically generating components, to refactoring, and testing – AI tools are fundamentally changing our daily work, allowing us to focus on the creative aspects of programming instead of the tedious task of writing repetitive code. In this article, I will show how these tools are most commonly used to work faster, smarter, and with greater satisfaction.

This post kicks off a series dedicated to the use of AI in frontend automation, where we will analyze and discuss specific tools, techniques, and practical use cases of AI that help developers in their everyday tasks.

AI in Frontend Automation – How It Helps with Code Refactoring

One of the most common uses of AI is improving code quality and finding errors. These tools can analyze code and suggest optimizations. As a result, we will be able to write code much faster and significantly reduce the risk of human error.

How AI Saves Us from Frustrating Bugs

Imagine this situation: you spend hours debugging an application, not understanding why data isn't being fetched. Everything seems correct, the syntax is fine, yet something isn't working. Often, the problem lies in small details that are hard to catch when reviewing the code.

Let’s take a look at an example:

function fetchData() {
    fetch("htts://jsonplaceholder.typicode.com/posts")
      .then((response) => response.json())
      .then((data) => console.log(data))
      .catch((error) => console.error(error));
}

At first glance, the code looks correct. However, upon running it, no data is retrieved. Why? There’s a typo in the URL – "htts" instead of "https." This is a classic example of an error that could cost a developer hours of frustrating debugging.

When we ask AI to refactor this code, not only will we receive a more readable version using newer patterns (async/await), but also – and most importantly – AI will automatically detect and fix the typo in the URL:

async function fetchPosts() {
    try {
      const response = await fetch(
        "https://jsonplaceholder.typicode.com/posts"
      );
      const data = await response.json();
      console.log(data);
    } catch (error) {
      console.error(error);
    }
}

How AI in Frontend Automation Speeds Up UI Creation

One of the most obvious applications of AI in frontend development is generating UI components. Tools like GitHub Copilot, ChatGPT, or Claude can generate component code based on a short description or an image provided to them.

With these tools, we can create complex user interfaces in just a few seconds. Generating a complete, functional UI component often takes less than a minute. Furthermore, the generated code is typically error-free, includes appropriate animations, and is fully responsive, adapting to different screen sizes. It is important to describe exactly what we expect.

Here’s a view generated by Claude after entering the request: “Based on the loaded data, display posts. The page should be responsive. The main colors are: #CCFF89, #151515, and #E4E4E4.”

Generated posts view

AI in Code Analysis and Understanding

AI can analyze existing code and help understand it, which is particularly useful in large, complex projects or code written by someone else.

Example: Generating a summary of a function's behavior

Let’s assume we have a function for processing user data, the workings of which we don’t understand at first glance. AI can analyze the code and generate a readable explanation:

function processUserData(users) {
  return users
    .filter(user => user.isActive) // Checks the `isActive` value for each user and keeps only the objects where `isActive` is true
    .map(user => ({ 
      id: user.id, // Retrieves the `id` value from each user object
      name: `${user.firstName} ${user.lastName}`, // Creates a new string by combining `firstName` and `lastName`
      email: user.email.toLowerCase(), // Converts the email address to lowercase
    }));
}

In this case, AI not only summarizes the code's functionality but also breaks down individual operations into easier-to-understand segments.

AI in Frontend Automation – Translations and Error Detection

Every frontend developer knows that programming isn’t just about creatively building interfaces—it also involves many repetitive, tedious tasks. One of these is implementing translations for multilingual applications (i18n). Adding translations for each key in JSON files and then verifying them can be time-consuming and error-prone.

However, AI can significantly speed up this process. Using ChatGPT, DeepSeek, or Claude allows for automatic generation of translations for the user interface, as well as detecting linguistic and stylistic errors.

Example:

We have a translation file in JSON format:

{
  "welcome_message": "Welcome to our application!",
  "logout_button": "Log out",
  "error_message": "Something went wrong. Please try again later."
}

AI can automatically generate its Polish version:

{
  "welcome_message": "Witaj w naszej aplikacji!",
  "logout_button": "Wyloguj się",
  "error_message": "Coś poszło nie tak. Spróbuj ponownie później."
}

Moreover, AI can detect spelling errors or inconsistencies in translations. For example, if one part of the application uses "Log out" and another says "Exit," AI can suggest unifying the terminology.

This type of automation not only saves time but also minimizes the risk of human errors. And this is just one example – AI also assists in generating documentation, writing tests, and optimizing performance, which we will discuss in upcoming articles.

Summary

Artificial intelligence is transforming the way frontend developers work daily. From generating components and refactoring code to detecting errors, automating testing, and documentation—AI significantly accelerates and streamlines the development process. Without these tools, we would lose a lot of valuable time, which we certainly want to avoid.

In the next parts of this series, we will cover topics such as:

Stay tuned to keep up with the latest insights!

The Ultimate Web3 Backend Guide: Supercharge dApps with APIs

Tomasz Dybowski

04 Mar 2025
The Ultimate Web3 Backend Guide: Supercharge dApps with APIs

Introduction

Web3 backend development is essential for building scalable, efficient and decentralized applications (dApps) on EVM-compatible blockchains like Ethereum, Polygon, and Base. A robust Web3 backend enables off-chain computations, efficient data management and better security, ensuring seamless interaction between smart contracts, databases and frontend applications.

Unlike traditional Web2 applications that rely entirely on centralized servers, Web3 applications aim to minimize reliance on centralized entities. However, full decentralization isn't always possible or practical, especially when it comes to high-performance requirements, user authentication or storing large datasets. A well-structured backend in Web3 ensures that these limitations are addressed, allowing for a seamless user experience while maintaining decentralization where it matters most.

Furthermore, dApps require efficient backend solutions to handle real-time data processing, reduce latency, and provide smooth user interactions. Without a well-integrated backend, users may experience delays in transactions, inconsistencies in data retrieval, and inefficiencies in accessing decentralized services. Consequently, Web3 backend development is a crucial component in ensuring a balance between decentralization, security, and functionality.

This article explores:

  • When and why Web3 dApps need a backend
  • Why not all applications should be fully on-chain
  • Architecture examples of hybrid dApps
  • A comparison between APIs and blockchain-based logic

This post kicks off a Web3 backend development series, where we focus on the technical aspects of implementing Web3 backend solutions for decentralized applications.

Why Do Some Web3 Projects Need a Backend?

Web3 applications seek to achieve decentralization, but real-world constraints often necessitate hybrid architectures that include both on-chain and off-chain components. While decentralized smart contracts provide trustless execution, they come with significant limitations, such as high gas fees, slow transaction finality, and the inability to store large amounts of data. A backend helps address these challenges by handling logic and data management more efficiently while still ensuring that core transactions remain secure and verifiable on-chain.

Moreover, Web3 applications must consider user experience. Fully decentralized applications often struggle with slow transaction speeds, which can negatively impact usability. A hybrid backend allows for pre-processing operations off-chain while committing final results to the blockchain. This ensures that users experience fast and responsive interactions without compromising security and transparency.

While decentralization is a core principle of blockchain technology, many dApps still rely on a Web2-style backend for practical reasons:

1. Performance & Scalability in Web3 Backend Development

  • Smart contracts are expensive to execute and require gas fees for every interaction.
  • Offloading non-essential computations to a backend reduces costs and improves performance.
  • Caching and load balancing mechanisms in traditional backends ensure smooth dApp performance and improve response times for dApp users.
  • Event-driven architectures using tools like Redis or Kafka can help manage asynchronous data processing efficiently.

2. Web3 APIs for Data Storage and Off-Chain Access

  • Storing large amounts of data on-chain is impractical due to high costs.
  • APIs allow dApps to store & fetch off-chain data (e.g. user profiles, transaction history).
  • Decentralized storage solutions like IPFS, Arweave and Filecoin can be used for storing immutable data (e.g. NFT metadata), but a Web2 backend helps with indexing and querying structured data efficiently.

3. Advanced Logic & Data Aggregation in Web3 Backend

  • Some dApps need complex business logic that is inefficient or impossible to implement in a smart contract.
  • Backend APIs allow for data aggregation from multiple sources, including oracles (e.g. Chainlink) and off-chain databases.
  • Middleware solutions like The Graph help in indexing blockchain data efficiently, reducing the need for on-chain computation.

4. User Authentication & Role Management in Web3 dApps

  • Many applications require user logins, permissions or KYC compliance.
  • Blockchain does not natively support session-based authentication, requiring a backend for handling this logic.
  • Tools like Firebase Auth, Auth0 or Web3Auth can be used to integrate seamless authentication for Web3 applications.

5. Cost Optimization with Web3 APIs

  • Every change in a smart contract requires a new audit, costing tens of thousands of dollars.
  • By handling logic off-chain where possible, projects can minimize expensive redeployments.
  • Using layer 2 solutions like Optimism, Arbitrum and zkSync can significantly reduce gas costs.

Web3 Backend Development: Tools and Technologies

A modern Web3 backend integrates multiple tools to handle smart contract interactions, data storage, and security. Understanding these tools is crucial to developing a scalable and efficient backend for dApps. Without the right stack, developers may face inefficiencies, security risks, and scaling challenges that limit the adoption of their Web3 applications.

Unlike traditional backend development, Web3 requires additional considerations, such as decentralized authentication, smart contract integration, and secure data management across both on-chain and off-chain environments.

Here’s an overview of the essential Web3 backend tech stack:

1. API Development for Web3 Backend Services

  • Node.js is the go-to backend runtime good for Web3 applications due to its asynchronous event-driven architecture.
  • NestJS is a framework built on top of Node.js, providing modular architecture and TypeScript support for structured backend development.

2. Smart Contract Interaction Libraries for Web3 Backend

  • Ethers.js and Web3.js are TypeScript/JavaScript libraries used for interacting with Ethereum-compatible blockchains.

3. Database Solutions for Web3 Backend

  • PostgreSQL: Structured database used for storing off-chain transactional data.
  • MongoDB: NoSQL database for flexible schema data storage.
  • Firebase: A set of tools used, among other things, for user authentication.
  • The Graph: Decentralized indexing protocol used to query blockchain data efficiently.

4. Cloud Services and Hosting for Web3 APIs

When It Doesn't Make Sense to Go Fully On-Chain

Decentralization is valuable, but it comes at a cost. Fully on-chain applications suffer from performance limitations, high costs and slow execution speeds. For many use cases, a hybrid Web3 architecture that utilizes a mix of blockchain-based and off-chain components provides a more scalable and cost-effective solution.

In some cases, forcing full decentralization is unnecessary and inefficient. A hybrid Web3 architecture balances decentralization and practicality by allowing non-essential logic and data storage to be handled off-chain while maintaining trustless and verifiable interactions on-chain.

The key challenge when designing a hybrid Web3 backend is ensuring that off-chain computations remain auditable and transparent. This can be achieved through cryptographic proofs, hash commitments and off-chain data attestations that anchor trust into the blockchain while improving efficiency.

For example, Optimistic Rollups and ZK-Rollups allow computations to happen off-chain while only submitting finalized data to Ethereum, reducing fees and increasing throughput. Similarly, state channels enable fast, low-cost transactions that only require occasional settlement on-chain.

A well-balanced Web3 backend architecture ensures that critical dApp functionalities remain decentralized while offloading resource-intensive tasks to off-chain systems. This makes applications cheaper, faster and more user-friendly while still adhering to blockchain's principles of transparency and security.

Example: NFT-based Game with Off-Chain Logic

Imagine a Web3 game where users buy, trade and battle NFT-based characters. While asset ownership should be on-chain, other elements like:

  • Game logic (e.g., matchmaking, leaderboard calculations)
  • User profiles & stats
  • Off-chain notifications

can be handled off-chain to improve speed and cost-effectiveness.

Architecture Diagram

Below is an example diagram showing how a hybrid Web3 application splits responsibilities between backend and blockchain components.

Hybrid Web3 Architecture

Comparing Web3 Backend APIs vs. Blockchain-Based Logic

FeatureWeb3 Backend (API)Blockchain (Smart Contracts)
Change ManagementCan be updated easilyEvery change requires a new contract deployment
CostTraditional hosting feesHigh gas fees + costly audits
Data StorageCan store large datasetsLimited and expensive storage
SecuritySecure but relies on centralized infrastructureFully decentralized & trustless
PerformanceFast response timesLimited by blockchain throughput

Reducing Web3 Costs with AI Smart Contract Audit

One of the biggest pain points in Web3 development is the cost of smart contract audits. Each change to the contract code requires a new audit, often costing tens of thousands of dollars.

To address this issue, Nextrope is developing an AI-powered smart contract auditing tool, which:

  • Reduces audit costs by automating code analysis.
  • Speeds up development cycles by catching vulnerabilities early.
  • Improves security by providing quick feedback.

This AI-powered solution will be a game-changer for the industry, making smart contract development more cost-effective and accessible.

Conclusion

Web3 backend development plays a crucial role in scalable and efficient dApps. While full decentralization is ideal in some cases, many projects benefit from a hybrid architecture, where off-chain components optimize performance, reduce costs and improve user experience.

In future posts in this Web3 backend series, we’ll explore specific implementation details, including:

  • How to design a Web3 API for dApps
  • Best practices for integrating backend services
  • Security challenges and solutions

Stay tuned for the next article in this series!