What is the Three-Market Theory?

Crypto Veda believes that one of the greatest values ​​of Crypto is democratization and CryptoSkanda believes that one of the greatest values of Crypto is the first realization of Ponzi democratization and tradability. Everyone can participate and trade shares. Ignoring external factors, each bull market in Crypto is driven by fundamental innovations of Ponzi. By studying Ponzi, you can find major trend-level alphas in the market according to the primary needs of Ponzi innovation. Although Ponzi may seem dazzling, ultimately, there are only three models: dividend market, mutual aid market, and split market. All Ponzi schemes are combinations of these three models. Based on this logical analysis method, he refers to it as the “Three-Market Model.” Each market can appear alone or in combination, each with its own advantages and disadvantages, corresponding to the logic of starting, operating, and collapsing the market.

• Dividend Market: A one-time investment of an entire sum of money, earning returns linearly over time.

• Mutual Aid Market: A gives money to B, B gives to C, and C gives to A, forming a mismatched cash flow, and profits are settled by transactions.

• Split Market: Continuously splitting an asset target into new targets. Incremental funds are attracted by new low-price targets. Profits are realized through the appreciation of targets. In terms of logical design, the characteristics of the Three Markets are as follows:

MEME is a Mutual Aid Market

The core of the traditional mutual aid market lies in the mismatch of cash flows. This model typically involves multiple participants transferring funds to each other in sequence, forming a cycle of funds. Generally, a user receives more money from the next participant than the amount given to the previous one, thus earning more money than their original investment. Project operators typically earn returns through fees charged on each transaction.

This Ponzi model is the most decentralized among the three models because once the rules are established, there is no need for intervention by a “management party” since the fees essentially serve as taxation.

Traditional mutual aid markets involve a spatial-scale mismatch of funds, so they do not need to form a capital market, and most cannot freely enter and withdraw funds, but they inevitably promise high returns. So why do we say that MEME coins are mutual aid markets?

We generally consider MEME coins to have two most important attributes:

Fair launch: Everyone can participate (everyone can help each other)

Full circulation: No need for project reserves

The so-called “cultural attributes” and “extremely large total amount” are not necessary.

MEME coins are actually a mismatch of funds on a time scale. We assume that in the context of a certain bull market, a certain MEME coin has been consistently strong, so today’s buyers at high prices transfer money to those who bought the coin yesterday, who in turn transfer money to those who bought at the lowest price the day before. And because of the uniqueness of time itself, it forms a “passive lock-up” (people cannot always step into the same river). So we have the comparison shown in the diagram below:

DeFi is a Dividend Market

DeFi is the core narrative of the last bull market (2020), technically referring to the incorporation of financial rules into smart contracts (a way of combining blockchain technology with a particular field). From the perspective of token economics, it is the distribution of protocol tokens through liquidity mining: depositing money into a protocol to earn tokens.

For example, the two most important aspects of the financial sector are trading and lending, which gave rise to Uniswap and Compound. In Uniswap, users provide liquidity by depositing token A and token B pairs into liquidity Markets to earn profits. In Compound, users need to deposit tokens available for borrowing into liquidity Markets to earn profits. The profits are mostly protocol tokens, with a small amount being actual money (stablecoins).

DeFi is a typical dividend Market because the basic logic of a dividend Market is “a one-time investment of an entire sum of money, earning returns linearly over time,” which is exactly the same as the above approach. We have the comparison shown in the diagram below:

ICO is a Split Market

ICO was the core narrative of the bull market two cycles ago (2017). Its general practice involved writing an idea from any field into a whitepaper, then fundraising and issuing tokens, leading most people to mistakenly believe that the only application scenario for blockchain was “issuing tokens” (another way of combining blockchain technology with a particular field). Therefore, during that period, many strange tokens appeared, such as “doing environmental protection and issuing tokens,” “doing computers and issuing tokens,” “doing charity and issuing tokens,” and so on.

We know that the split Market continuously splits an asset target into new targets, attracting incremental funds through new low-price targets. Profits are realized through the appreciation of targets. Isn’t this exactly the behavior of ICOs? If we regard the cryptocurrency field at that time as a capital Market, the emergence of various ICOs precisely split the cryptocurrency asset target continuously through “new stories” into new investment targets (new ICO tokens), thereby attracting incremental funds. So we still have the comparison diagram:

Crypto Circle Is the Same as the Market Circle.

If We Ignore Specific Technological Evolution and Just Consider Token Economics, It Seems That the Past Decade Has Indeed Represented the Evolution of the Ponzi Scheme, and We Can Even Consider Bitcoin Mining as a Dividend Market (Staking Mining Machines Generating BTC Revenue).

So, Is the Evolutionary Sequence: Dividend Market (BTC Mining) — Split Market (ICO) — Dividend Market (DeFi) — Mutual Aid Market (MEME)? Meanwhile, Projects Are Becoming Increasingly Decentralized.

On the Other Hand, If We Consider MEME as a Track, With More and More MEME Coins Emerging, It’s Actually a Manifestation of the Split Market. Therefore, MEME Can Be Regarded as a Combination of a Dividend Market and Split Market.

Mutual aid Market might be the real answer to “no one picks up the pass” in this bull market (Restaking is a dividend Market, DePin is a dividend Market, Layer2 is a split Market, obviously, retail investors in this bull market just want to play mutual aid Market).

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