Author: Crypto Weituo Source: X, @thecryptoskanda

Foreword

Whether you are willing to admit it or not, human civilization Much of our progress has been based on unfounded but optimistic assumptions, and money is the best example of this assumption - a blindly optimistic assumption about the ability of other entities to "equivalent returns".

Our ancestors unquestioningly accepted money as a substitute for food in exchange for the value they created. The fact is, however, that money is simply an accounting symbol that records social relationships between creditors and debtors and never needs to have any intrinsic value.

But now, we have given this phenomenon a more appropriate name - "Ponzi". Next, I will explain my theory on how to identify, understand, design, and ultimately control Ponzi mechanisms in cryptocurrency and other fields to maximize profits-this is what I call the "Three Traps Theory" (The Three Ponzi Problem)

What is Ponzi?

In short, Ponzi is an economic system in which the mismatch between capital demand and expected returns creates a "gap" that is only can be filled by further mismatches. (This definition is my own original creation, and I would like to express it hereby.)

Is every Ponzi an "artificially" designed system? Yes.

But it may not be a scam.

This depends on whether this "gap" is considered reasonable and acceptable by the audience. Historically, these "gaps" have often been beautified and packaged into other terms, such as "sovereign credit", "legitimacy" or "market consensus". Ponzi is not an absolute concept. Its true nature often needs to be examined from a macro perspective, as many Ponzi do not exhibit typical characteristics at the micro level.

In fact, Ponzi schemes are more common in everyday life than you might think, and they often seem reasonable. Take the residential real estate market, which has existed since 3000 BC and is considered a “productive” store of value. However, in fact, if it were not for the printing of money caused by modern legal tender,This value logic simply cannot be maintained due to rapid and continuously growing inflation.

What is the three-pan theory?

Every Ponzi must be based on one or more of the following three basic forms: Mining, Pooling and Splitting (Splitting)

It may sound absurd, but the Three Traps Theory can serve as a guide to designing and operating almost any Ponzi system Framework – both at the macro and micro levels.

Three Disks - Dividend Disks

Dividend Disks is a system in which users need to bear the initial sunk costs and expect to gradually increase their profits over a period of time. Get the promised fixed returns.

Types of dividend plates

A. Fund-type sunk costs Users need to invest funds (including liquidity opportunity costs) to start earning benefits. Examples include the mining ecosystem of Bitcoin/KASPA/FIL (excluding Bitcoin itself), PoS staking/re-staking on L1, DePIN, and dividend disks like Plustoken.

B. Time/Energy Sunk Cost Users invest a lot of time or energy in the hope of obtaining benefits. Examples include Pi Network, Galxe badge campaigns, pointless Discord role battles, and Telegram mini-programs like DOGS.

Key indicators for evaluating dividend disks

Fixed sunk costs : A one-time non-recoverable investment (such as Bitcoin mining machines).

Incremental sunk costs: Periodic non-recoverable costs (such as electricity and maintenance costs) incurred to obtain each unit of incremental revenue.

Withdrawable returns: earnings that can be freely withdrawn and realized.

Reinvestment cycle: the period in which reinvestment is required after the expiration of sunk costs.

External liquidity: externalThe available liquidity for this dividend token on all trading venues.

Crash model

Conditions for the collapse of the dividend plate:

Actual incremental sunk cost + external liquidity< withdrawable return

At this point, the system creator should stop dividends and "Running away" to make a profit.

How to delay the collapse (taking BTC mining as an example)

Activate the flywheel effect: High Coin price → higher mining machine demand → higher mining machine price → manufacturers get more cash → manufacturers further push up the currency price.

Increase the total sunk cost: Continue to increase the minimum total sunk cost to obtain additional tokens, driving a higher "shutdown price".

Pricing sunk costs in fiat currency: Avoid using token pricing as this gives early participants an unfair advantage and undermines the ability to push higher by raising sunk costs Shutdown Price Purpose.

Control liquidity in the early stages: Minimize external liquidity in the early stages to prevent premature selling and maintain control over token holdings.

Case Study: Bitcoin Mining Ecosystem

Let’s review the Bitcoin Mining Ecosystem—one of the most classic and well-functioning crypto-Ponzi systems— — and Bitcoin ($BTC) itself. Many historical mysteries can be explained.

Why did BTC surge in 2013 ($10 → $1000)?

2013 was the year that ASIC miners were introduced, which gave miner manufacturers a dominant position in revenue and sales, making them the first choice for Bitcoin. The first batch of "market makers". At the same time, there were no highly efficient and liquid trading venues and liquidity models, and low external liquidity also made price manipulation easier, thus initiating the flywheel effect. How did Bitcoin rise in a miner-led cycle before 2021?

Miner costs (power and facilities) are denominated in fiat currencies

The incremental costs are much higher than electricity, especially in a country where the crackdown since 2019 has caused many miners to pursue possible total loss due to lower electricity prices.

Due to these, the total sunk cost and "shutdown price" are much higher than what appears on the books, objectively and unintentionally pushing up the price of Bitcoin.

Three Pans - Mutual Aid Pan

Mutual Aid Pan is a system in which users provide liquidity in exchange for a fixed return promise per unit of contribution. Unlike the bonus plate, the mutual aid plate does not need to lock assets, but relies on high transaction volume to operate, just like a casino does not directly rely on individual wins and losses to make profits, but takes a certain percentage from the total transaction volume.

Types of mutual aid disks

Pure MLM money-sharing users obtain dividends by attracting more participants and rely only on capital inflows (such as : Forsage.io, 1040 Sunshine Project).

Quasi option funds are circulated among participants, and new funds are used to pay the returns of old participants (for example, A transfers money to → B to → C Transfer → A), often including liquidation or restart provisions in case funding targets are not met (eg: FOMO3D, 3M, the memecoin market in general).

Liquidity mining users earn income by providing liquidity, usually sacrificing exit opportunities in exchange for higher returns.

DeFi users are no strangers to mutual aid disks, because most DeFi tools are essentially part of the "macro L1 mutual aid disk", such as lending agreements, etc. Speculative token dynamics in the system are the core source of mismatch.

Crash model

Conditions for the collapse of mutual aid markets:

Systemic debt> Liquidable assets+ The profits of external liquidity Ponzi designers usually come from fees or front-running profits.

How to delay the collapse:

Clearly set the liquidation threshold Maximum profit cap or enforced stop loss/restart mechanism

A ban on arbitrage eliminates arbitrage opportunities that could undermine systemic debt rules and drain liquidity

Preventing runs allows for an orderly exit that avoids damaging effects on the remaining assets in the pool

Case Study: The Evolution of AMMs and Mutual Aid Disks

AMMs (automated market makers) have achieved a major breakthrough in mutual financing infrastructure, comparable to the emergence of commercial banks.

Why did LP liquidity mining collapse after DeFi Summer?

Why do new income mutual aid disks tend to be Uni V3 type models, such as @MeteoraAG's LP Army?

Uni V2 Liquidity Mining:

In Uni V2, users can mine indefinitely Provide liquidity and be rewarded with high annualized yield (APY) on the same token.

Why it crashed:

No liquidation threshold proceeds were allocated to of the entire liquidity pool, even if only a small portion is actually used. But as long as the liquidity provided is in the pool, you can obtain unlimited local currency output

The "dig, sell, and withdraw" strategy of arbitrage loopholes has enabled early participants to Quickly recover the capital, which is equivalent to risk-free arbitrage, and exhaust the liquidity of the remaining LPs by selling local currencies

No run prevention measures and no exit Limitations result in APY Panic selling occurred during the decline, eventually bringing down the entire pool

How to fix the problem in Uni V3:

Liquidation Threshold Only liquidity within a specific price range is eligible for yield rewards.

Run prevention Liquidity exit in a certain price range will not affect rewards or liquidity in other ranges.

Fix arbitrage loopholes. Most projects have removed instant token rewards and replaced them with a points mechanism (Post-DeFi Summer), although this mechanism has caused new problems in the split disk design.

Three Disks - Split Disks

Split is a Ponzi system in which the total funds remain constant at a specific point in time, but the number of equity or assets corresponding to each unit of funds is doubled, and the price of the newly generated equity or assets is Proportionately lower to attract subsequent inflows This is very similar to stock splits in traditional finance

In my opinion, split trading is the most complex and difficult to control Ponzi system. It usually does not exist alone, but serves as a "de-bubble" mechanism nested in one or two other In Ponzi form

Crypto's split plate

In Crypto, all L1 /L2 They are essentially dividend disks. As long as they need to establish an "ecosystem", they are also split disks. For example:

BTC inscription/rune/. What L2 is to BTC

PumpdotFun is to Solana

aixbt/Luna/Game is to Virtual

The ultimate goal of the split is to convert a certain token into a unit of account for as many assets as possible, just like the dollar is for U.S. stocks.

Why?

Because both USD and L1 tokens are essentially created out of thin air. Alchemy is achieved by providing a higher nominal ROI, "Fake money for real money"

Crash model

Conditions for a split-pan collapse:

ROI below market benchmark Beta Competition with higher ROI and similar risk Splitting the system will attract users to churn.

Splitting it down.The split ratio is too high or too low. A high split ratio will dilute liquidity, while a low split ratio cannot maintain ROI

Capital loss, new capital inflows dry up, and now There are holders who quickly exit using it as exit liquidity.

The main profit point of Ponzi designers lies in front-running behavior.

Case Study: Ethereum, ICOs, and Solana

Ethereum is the classic dividend spinoff, but it became the most important splitting mechanism in history through the ICO era. Why does Ethereum need an ICO?

Mining is inflation: the rising "shutdown price" that is too high will naturally prevent new participants from entering.

Split mechanism attracts funds: ICO attracts participants to hold $ETH, and these participants need to purchase ICO tokens, convert $ETH into pricing units and Achieve de-foaming.

Why do ICOs succeed/fail?

High ROI: ICO returns far exceed those of holding $BTC or other outdated tokens. Many ICOs have close to 100% circulating supply and low FDV, creating explosive ROI in a low-liquidity environment.

High split rate: Too many ICOs too quickly dilute the overall liquidity.

Capital Leakage: Most ICO tokens at the time were illiquid and participants were unable to recover their funds. This was not the case with $ETH. Developers were selling ETH faster than funds were flowing in, turning ICO participants into pushing out liquidity. Ultimately leading to ROI collapse.

Thus, $ETH experienced a "Davis Double Click" at that time.

Ethereum’s dilemma in 2024

Capital loss: through LSD, re-staking ) and PointFi lock funds and reduce the effective circulation (the trading volume that can participate in speculation).

DismantleThe distribution rate is too slow: new projects are mainly led by the inner circle, in the name of "alignment and legitimacy with the Ethereum Foundation and Vitalik", to V Entrepreneurship

Low ROI: Compared with Solana, which has restored the ICO model of the ETH era (such as Pump.fun), Ethereum's ROI is less competitive.

Why are spin-offs like Solana’s 2024 successful?

Balancing split rate and dilution through Pump

Meme Coin is Solana’s split asset, priced at $ SOL is used as the unit of account and is accelerated through the Pump mechanism. Pump itself operates as a mutual fund, with liquidity turnover so fast that it almost simulates a quasi-options cycle. This effectively alleviates the liquidity dilution problem caused by high split rates, allowing funds to remain on the market to continue to participate in speculation, while maintaining low-threshold entry opportunities for new users.

Increase ROI through marketing machine

Solana is the only L1 has its own "marketing machine", from the Colosseum/Superteam community to large vloggers and KOL networks (such as Jakey, Nick O'Neil, Banger, Threadguy, etc.). Combined with core influencers such as Toly, Mert, and Raj, Solana deliberately brings liquidity to emerging low-liquidity meme coins and projects, provides super-exponential multiple ROI (exceeding market benchmarks), and drives the $SOL-meme coin flywheel effect. Similar strategies are also imitated by Sui and Virtual (such as Luna and aiXBT).

Three-pan design mentality and three-pan combination

Each Ponzi operates under the assumption of its closed system and is subject to its collapse Inherent limitations of the model. These limitations can be alleviated by integrating the features of Mining, Pooling and Splitting, each form has its own unique role:

Dividend plate: Lock assets to maximize assets under management (AUM).

Mutual aid market: pump money through high trading volume.

Split plate: Use the price fluctuations of sub-plates to remove bubbles from the main plate.

When designing a Ponzi system, start with the following basic questions:

In this design How do bookmakers make money?

How can Zhuang accept its collapse?

Then you will know which disk type to choose

Choose your cabal and understand your target audience< p style="text-align: left;">Ponzi is a zero-sum game, where profits and losses come from the same source. The key question is: who are your allies and who are your “prey”? First, understand the scope of your cabal’s capabilities:

a. People who directly influence and persuade

b. People who can be reached but not necessarily convinced

c. People who are completely unreachable

c. p>

An effective cabal should:

Maximize the coverage of a + b

Highly aligned on interests

Assign clear roles to each member

Members No more than 7 people to ensure smooth collaboration

This also explains why some "particularly popular" advisors appear on multiple teams, or why some VCs are replaced by exchange VCs in early funding rounds.

Secondly, understand your audience and their characteristics. Key indicators include:

Age: Is it 80s, 90s or 00s? How liberal was their upbringing?

Information source: using Twitter, Telegram, TikTok, or WeChat?

Financial concepts: What is their attitude towards freelancing, financial freedom and time autonomy?

Knowledge level: Can they grasp the basics of cryptocurrency?

Risk preference: Do they prefer passive returns (interest) or active returns (trading)?

Typical portrait of "destined to enter the currency circle and become a family":

At least 80/ Post-90/00

Use Twitter, TikTok or Telegram

Tend to freelance and refuse Institutionalization of social animals

Prefer active financial activities and value transactions

TikTok users are slightly different - they tend to prefer the PVP mode, after all, most of them Growing up in an era of stock games that lacked macro-growth, these are the "new humans" (the kind mentioned by Gundam) who have accepted a hyper-financial worldview. Sell ​​them a “fair start”, “anti-establishment” and “anti-right” narrative.

If the above portrait does not fit your audience:

Borrow or falsify their blind faith in authority endorsement. They are more like docile people under authoritarian rules.

The first principle of three-disc design: never violate human nature

History has proven one thing: the developer's beliefs are irrelevant. As with any cryptocurrency project (not just Ponzi), sustainability usually gives way to popularity (you need to survive first), and popularity relies on being consistent with human nature:

Nothing lasts forever: don't expect your project to be the exception.

Perception trumps reality: at its core, Ponzi is the art of manipulating people's minds. Your project doesn’t need to be what you claim it is, it just needs to match your audience’s perception and convince them that it is.

Let them gamble: Don’t make the decision for your users and sacrifice gaming opportunities for safety. Your audience likes to take risks, otherwise they will not get involved in the crypto space.

Say "thank you for participating" calmly: face it rationally. Your priority is profit, not emotional investment in the project. When the trend stops, retreat decisively.

Timing

"When times come, heaven and earth are all united, and heroes are not free when they are destined." How successful you can be depends on resources, but whether you can succeed or not depends entirely on On timing. Many Ponzis take off simply by launching at the right time, while others with comprehensive products struggle to break even

How to evaluate timing?

For crypto users, the primary consideration is the risk-benefit ratio—the balance between perceived risk and expected return

Two expectations to consider:

Users are expected to be subject to the average price per transaction they are accustomed to relative to market liquidity. The impact of daily trading volume. For example, in a bull market, $SOL may have a daily trading volume of $1 billion, while in a bear market, most coins only have a daily trading volume of $500,000 on Binance. - Why it matters: Liquidity determines how easy it is for users to convert book value into cash, which is a key factor in decision-making. - How to measure: Analyzing 30 days of DEX and CEX trading volumes can provide clear indicators.

Expected Market Beta ROI under Similar Risk Conditions In a bull market, even 100% APY may struggle to attract $1 million of TVL, while in a bear market, Everyone may be more inclined to chase the safer 10% mining income. - Why it’s important: Users will compare returns based on market conditions and adjust risk preferences accordingly

Specific to market type:

Liquidity: Mining type (early stage) < Split type < Capital pool type < Mining type (mature stage)

Expected return Rate: Mining type (mature stage) < Mining type (early stage) < Capital pool type ≤ Split type

Quick Test:

Liquidity Test: If Ponzi’s liquidity is lower than current market expectations, it is not a launch good time.

Return test: If Ponzi's returns are lower than market beta returns, it's not a good time to launch either.

Don’t be overconfident, opportunities are fleeting

Opportunities are like water and constantly changing. If your resources are insufficient to change the tide, focus on speed: fast delivery and speed to market. In this case, leveraging an industrial, replicable, and cost-effective product framework may become key.

Can Ponzi finally be rationalized?

Honey, isn't that what we've been doing for thousands of years - rationalizing predatory systems into social normalcy. This process is so efficient that people no longer pursue predictable gains, but instead pursue "give a chance" and blame losses on their own "technical problems." So what is the outcome of the three Ponzi types?

Mining type: evolved into a similar form of mutual funds (by locking TVL dividends, such as mining pools, JITO model)

p>

Fund pool type: evolved into casino (such as PumpdotFun, Crash Games, JLP/GLP pool)

Split type: Evolving into alternative asset markets (such as Bubble Mart, BTC Inscription, NFT, ICO)

Before the end

Thank you for taking the time to read this long article. I tried to be concise but comprehensive. The three-pan theory was first released last year as part of my banker teaching project Open Rug (Open Source Sickle) in the Chinese currency circle. This series of articles is derived from the experience I have accumulated over the past eight years. Regardless of victory or failure, the peak capital volume of Ponzi projects exceeded $1 billion, and tens of millions were withdrawn.

Today, the three-pan theory has become one of the most cited analysis frameworks among degens and developers in the Asian circle. From a relatively mild perspective, the three-disk theory is a set of extremely lethal growth hacking methodologies.

The real purpose of the three-pan theory is mainly to disenchant and deconstruct the overly complex and hypocritical narratives woven by the Western currency circle and refocus developers' attention on what is truly important. : Through ubiquitous Ponzi economics, we build a hyper-financial world where everything can be priced, traded, and frictionless.

Of course, the main thing is to make big money.

Hope this helps you, in any way.