Author: Jordi Alexander
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Chapter 1: Answers to the Ultimate Questions About Life, the Universe, and Everything
I hear you want to learn how to navigate the uncharted waters of the Ponzi universe!
Since you've traveled all these light years to get here, I'll get straight to the point:
The answer to the ultimate question you seek is (-4,+2).
This game-theoretic notation represents the outcome of an interaction—(X,Y) means that player 1 ends up with X and player 2 with Y.
The fact is that if one player in a Ponzi scheme ends up winning, the other player loses even more.
Simply put, for every 2 Lamborghinis a Ponzi scheme earns, it sucks more tickets from people who walk away empty-handed.
The game of pooling resources is as old as humanity, and over the centuries it has become more and more efficient at tapping into our basic human needs.
Human beings all yearn to succeed, to belong to a community, to be part of something bigger than themselves.
As we enter the web 3.0 era and everything around us becomes financialized and tokenized, these mechanisms will only get more complex and weird.
therefore,
therefore,Chapter two:。
Chapter two:Three Fundamental Laws of the Ponzi Universe
In thermodynamics, an "isolated system" describes a system that is completely isolated from its environment.
We thus introduce the concept of "isolated investment systems":Funds that enter a protocol purely with the expectation of generating a monetary return.
If you want to illustrate it vividly, you can imagine it as a poker table composed of 8 people.
If 4 of them are pros working there and the other 4 are there for socializing and entertainment, then the table is an open system.
But if 8 players are all pros, then the table is an economically isolated system.
The First Law of Ponzi Economics:
The amount of money in an isolated system can be moved, but it cannot grow more than the money invested.
An economically isolated system cannot create money, it can only redistribute the money it puts in. Thus, while it can produce winners, such wins can only be at the expense of other players.
Zero-sum games can have some cooperative parts where people band together against each other and it turns into Hunger Games. But in the end they are still opposing each other, and it will become a battle between players, a battle between anonymous players and anonymous players.
This is not just a zero-sum game, but a negative-sum game when hidden costs are taken into account.
The Second Law of Ponzi Economics:
Entropy loss in isolated systems only increases over time.
Transaction fees; arbitrage bots and sandwich attacks lurking all around us, intent on sucking value; high mining costs; potential code bugs.
The cost of the operating system alone keeps adding up...
...and all this without even taking into account whether the founders have left a back door to reallocate the money to themselves.
As time goes on and costs pile up, players win less and less money. In the example of the poker game, if they keep playing for a long time, the casino's rake will get higher and higher, and eventually all the money on the table will be taken by the casino.
With increasing losses in the system, we arrive at the last law.
The third law of Ponzi economics:
As the amount of currency in the system begins to decrease, the activity of the system also drops to zero.
Without sufficient fresh income, once the rocket's power is exhausted, a death spiral begins. Hope for future wealth is lost, word gets out, and community and thought shares can go into a downward spiral.
This death spiral can take months or years to unfold, but eventually as the Ponzi scheme grows in size, it requires exponentially more capital to keep the game going.
Once a Ponzi scheme grows to billions of dollars, it needs to rely on a large number of new entrants just to maintain the system's organic losses, which creates an insurmountable gravitational pull.
In the world of cryptocurrencies, we have seen this evolution countless times in the field of DeFi protocol forks. They don't add anything particularly useful other than an identity and a new chain, and they enter a Ponzi cycle. Positive rewards for liquidity mining gradually attract users to farm, increasing the total value locked (TVL), and momentum is building.
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Chapter 3: First Principles Framework and FAQs
The basic structure of every game is the same:
1. Opening: people pool their money together;
2. Middle part: Mechanism for shredding and moving money;
3. Closing: Pooled funds are redistributed to determine winners and losers.
The middle part, as we know it, is where psychological problems occur. So ignore this part and go straight to the final "closing" link.
Whether you're entering the future of financial farming or dancing to earn the web3.0 revolution, it's time to ask yourself:
"Who will be the benefactors that provide returns to investors, and what good reasons do they have for choosing to do so?"
Legitimate projects will have a definitive answer to this question. They explain the execution risks involved in the project so that potential investors have a transparent understanding and can make a decision.
Meanwhile, the modern-day Ponzi brothers have learned the art of speaking with vague circular logic. When confronted with this problem, they keep coming back to the mechanics of psychology.
The following is pure scam and"social ponzi scheme"common (and unimaginative) scenario.
scam:We have a secret system that generates high yields through super artificial intelligence machine learning trading/mining/Mumbo Jumbo. But don't ask what it is, because it's a proprietary secret alpha.
Social Ponzi Scheme:We are like Bitcoin, but because of our superior design, we will replace the dollar as the "reserve currency" and Bitcoin will fail.
While these stories can make for great marketing slogans, offering this kind of alpha to the public or the world deciding to live on "XYZ shitcoin" clearly doesn't look real. If you have a Ponzi scheme detector, it will certainly sound the loudest alarm in these situations.
Hitchhiking FAQ 1: How to consider the extent of a Ponzi scheme if it's not black and white? Isn't everything a Ponzi scheme in some way?
In fact, Ponzi schemes have a sliding scale,It is divided into 4 levels in order from worst to best:
Open scam:The founder has been planning to pull the head;
Cryptocurrency Ponzi Scheme (CRYPTO PONZI):Untrue and confusing plans aimed at achieving real utility;
It is possible to go from fake to real (MIGHT FAKE IT TILL MAKE IT):There is revenue, but they are heavily incentivized and still struggling to achieve enough moat to undo some of the incentives.
Not a Ponzi scheme:A moat exists and sustainable revenue is generated.
Hitchhiker FAQ #2: Where do memecoins like $DOGE fit on the spectrum?
Memecoins are also a Ponzi scheme, but not malicious. Since everyone is generally in on the joke, they can be seen as willing to invest and gain entertainment value from the memo's community. You can even take it a step further:
Haha, this is a funny meme (stalk). Others might like it too, and it might catch on! Also, some of these folks might be wealthy and powerful whales and decide to spend resources to create real utility for the coin! That's why our coin is called DOGE.
For example, holders of $DOGE can bet that Elon will use his money to create value for holders in exchange for his daily LOLs (lol).
Hitchhiker's Guide FAQ 3: If the first law is true, the protocol mechanism itself does not generate money, then how can it pay the rate of return? Some of them said they were even able to maintain 50,000% APR.
It is important for you to understand that the rate of return that protocols pay in their own tokens is misleading.
The value of the protocol remains constant at Y tokens * V value per token.
Think of it as a rectangle with constant area, you can increase the length but the width will decrease proportionally. The value of each token is thus diluted at the same rate.
A 10% annual interest rate per day (3660% a year) reduces the value of each coin at the same rate of 10%/day. The Smart(er) Coin game demonstrates this devastating effect.
Coins that people originally bought for 6 cents ended up worth less than a millionth of a millionth, all diluted by high annual interest rates.
What the high APY allows, however, is the "Squid Game" type of player-to-player battle where whoever sells first and lowers the price to match V can gain new value from other users.
Hitchhiker's Guide FAQ #4: But what if no one sells and the price goes up? Isn't this increasing market cap?
It does, which is why market capitalization is not a good measure for coins that are manipulated or tightly held. If liquidity is low, its price can easily be kept artificially high while pumping supply, at least for a while.
Here's a (generously assuming no entropy) zero-sum version:
However, this is always a game where sell is the dominant strategy, and any equilibrium other than (sell, sell) will not be stable over time.
The only possible way for a (3,3) outcome to exist between two users who don't sell anything is to add a bigger fool as a third player.
(3,3) is fake.
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Chapter Four: The Possibility of Redemption
If we give a very broad definition of utility, there are many ways that protocols can exit the segregated investment system and introduce utility.
Some are more dubious, but if a Ponzi scheme decides to ditch its thug ways and go legal, here's the exit path.
Gambling and entertainment:The prevalence of both brick-and-mortar and online casinos is a testament to the huge market for those willing to trade the currency EV for a fun speculative experience. Make PvP dynamics fresh and interesting enough that they can become sustainable items.
Community and meme (stalk):Create a sense of belonging that people will eventually pay for. Interesting content further increases this opportunity. NFTs are probably the best design for this.
Charity/Donation:If people believe the project is good for the world, they can make a "money -> feel good charity" deal. This is an unproven token model so far, but it might work at some point.
investment plan:Pooling funds from Ponzi schemes into a decentralized hedge fund/yield aggregator/VC fund. While the business model itself has been proven, its use as a starting point to move from a different ending to an investment plan leaves many questions to be answered and keeps people stuck in it.
Group attention and sell:Time and attention are the ultimate scarce goods, and with thousands of protocols/products competing for people's time and attention at the same time, it's increasingly possible to monetize it.
After capturing enough users, a protocol can attempt to generate open system revenue by packaging them into a salable product.
New protocols give liquidity mining rewards to their first users to bootstrap activity, in which case the rewards can be attributed directly to the protocol.
In web2.0, if you don't pay for the product, you are the product.
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