What I'm Reading This Week (2025/04.20-04.26)

Table of Contents

• Trends
• What I Am Reading
  • 1. Used Keling 2.0 to animate the Longzu and Dao Gui Yi Xian figurines generated by o3
  • 2. Douyin held an Algorithm Transparency Day, revealing their mysterious algorithm
  • 3. New arbitrage strategies for Unichain and all DeFi
  • 4. Now I view all projects through a Ponzi lens

Trends

What I Am Reading

1. Used Keling 2.0 to animate the Longzu and Dao Gui Yi Xian figurines generated by o3

2. Douyin held an Algorithm Transparency Day, revealing their mysterious algorithm

3. New arbitrage strategies for Unichain and all DeFi

• Background

  • The user earned 86% APR (only 14% from incentives) in the Unichain USDC/USDT0 stablecoin pool with 0 impermanent loss (IL).
  • Core strategy: Adjust Fee Level to earn trading fees.

• Unichain Incentive Program

  • TVL rose to $120M, and APR dropped to 14%.
  • Incentive structure: 98% of rewards come from trading fees. Full-range LPs earn close to zero, so the competition focuses on narrow ranges and capital efficiency.

• User Strategy

  • Avoid direct competition: Instead of competing with whales (e.g. $30M TVL), the user focuses on earning fees.
  • Adjust Fee Level:
    • Incentives only apply to the 0.01% Fee Level pool (TVL near $120M).
    • Created a 0.008% Fee Level pool and deployed $100K.
    • Result: Controlled only 0.08% of TVL but absorbed 20% of the trading volume.
  • Strategy Effectiveness:
    • DEX prioritization: enough liquidity, low Fee Level, stablecoin pairs (minimal price fluctuation).
    • Volume timing: good to capture fees in early and late trading volume spikes.
    • Near-zero IL: stablecoin pairs have minimal price fluctuation.
  • Strategy Adjustment:
    • As the system matures, volume drops and competition intensifies (0.007% Fee Level appears).
    • The user pivots to a new strategy instead of competing further on Fee Level.

• Execution Logic

  • Understand incentives: Only the 0.01% Fee Level pool receives rewards.
  • Direct trading volume: Create 0.008% Fee Level pool to attract flow.
  • Timing: Enter early to capture high volume.

• Lessons Learned

  • Strategy may fail during stabilization + competition phase.
  • Key: Learn to analyze incentive structures, DEX logic, and trading volume changes to spot arbitrage opportunities.

4. Now I view all projects through a Ponzi lens

• Background

  • @thecryptoskanda’s “Three Disk Theory”: All financial behavior (including crypto projects) can be seen as Ponzi schemes.
  • Core mechanism of Ponzi: the gap between capital demand and expected return must be filled by new capital inflow.
  • Sustainability and profit maximization are achieved via combinations of Dividend Disk (Mining), Mutual Aid Disk (Pooling), and Splitting Disk (Splitting).

• Bittensor dTAO Economic Analysis

  • Dividend Disk (Mining Ponzi):
    • Users bear sunk costs (e.g., GPU investment) in exchange for fixed returns.
    • Feature: Bittensor’s AI subnet miners must invest capital — classic dividend Ponzi.
    • Collapse condition: new sunk cost + external liquidity < withdrawable return.
    • Coping mechanisms: suspend dividends/“rug pull”, or introduce new Ponzi models to deleverage.
  • Splitting Disk (Splitting Ponzi):
    • Total system funds remain unchanged, equity units increase exponentially, and new assets are attractively priced to lure fresh capital.
    • dTAO model: TAO acts as the base currency for subnet tokens (like USD to US stocks).
    • Subnet Alpha tokens offer high nominal ROI, creating TAO buy pressure while also providing exit liquidity for root node sell orders.
    • Failure conditions:
      • Subnet Alpha tokens underperform market Beta ROI, leading to investor perception of poor risk-reward balance.
      • Capital flees to more stable/high-yield assets, causing:
        • Over-dilution of subnets and liquidity desertification.
        • Reflexivity trap: low split rate lowers ROI; high split rate depletes liquidity.
        • Exit speed crisis: root node TAO sell orders outpace incoming capital.
  • Unsustainable End of dTAO:
    • dTAO’s total market cap stagnated at ~$100M for weeks while subnet expansions accelerated capital outflow.
    • Participants end up as exit liquidity for earlier entrants; ROI game collapses.
    • Root issue: dTAO failed to craft a compelling ROI narrative to attract outside capital, and internal participation was weak.