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

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.