Split Ponzi Explained

+-----------------------------------------------------------+
|                      SPLIT PONZI                          |
+-----------------------------------------------------------+
|                                                           |
|   Leverage --> Bubble --> Collapse                        |
|                                                           |
|   Best way to reduce bubble: real output                  |
|   Fastest way: open another ponzi                         |
|                                                           |
|   Pool: YES | Free Exit: YES | Fixed Return: NO           |
|   Risk: HIGH | Analogy: Equity Investor                   |
+-----------------------------------------------------------+

1/ Split Ponzi Definition

Under the condition of unchanged total system capital, multiplying the asset quantity corresponding to unit capital to attract subsequent capital entry.

"Multiplying" is where the term "split" comes from. The multiplied assets can refer to the same asset type or different asset types.

2/ The Demolished House Story

Using a worn-out pitch from ancient split schemes to explain:

Asset quantity multiplies, total value keeps doubling

Ancient wisdom, do you see it clearly now?

3/ Liquidity Pool Perspective

Two hidden assumptions in this story:

Ancient split schemes (like MBI) would promise electronic shares only go up, because they centrally closed the channel for discounted cash-out.

4/ Implied Beta

In fact, cashing out requires liquidity. AMM curves tell us every price has corresponding liquidity, but when prices are inaccurate, liquidity can be terrifyingly low - your chips simply can't be sold.

Regardless of promises, the market will psychologically price your current situation. This pricing is often derived by comparing with other projects, called Implied Beta

5/ Collapse Models

Assumptions:
- Government splits 1 unit into 2 units each time
- Prices double every N splits
- Pre-split total property value X
- New immigrant buying pressure K

Formula: New purchases = Post-split total price - Post-split unsold total value

Four Collapse Points:

6/ Case Study: North India Property Crisis

Let's apply this to the property crisis in the Asian country of North India:

Therefore North India property prices broadly decline, even death spiral

7/ North India Authority Policy Options

Since property as collateral comprises too high a proportion of the financial system, price decline would trigger LUNA-style cascading liquidation:

8/ Crypto Split Scheme: FriendTech

FriendTech rules:

• Users connect Twitter accounts to mint keys and own their room
• Keys priced via AMM curve
• No lockup period
• Holding earns points

Applying the model:

9/ FriendTech Collapse Analysis

New buying/Price expectations:

• Theoretical ceiling = Total Twitter users in crypto
• But KOL onboarding speed is fast, price discovery is fast
• Declining split speed reduces new user entry enthusiasm (top too expensive, no more unboarded big influencers)

Existing selling:

• Small scheme, high tax → Users have strong low-buy-high-sell tendency
• Only deterrent: Points airdrop weekly based on holdings, Paradigm backing
• But with Post changing policies, this insurance is nearly void

Final blow:

Inscriptions rise, crypto pumps, Beta surges. FT unable to split further and create profit effect completely dies out

10/ Case Study: BNB and Binance

$BNB was initially just a fundraising tool. So-called fee burning before '19 was just burning future unlocked shares, no real meaning.

Rights Evolution:

• '19: Launchpad/Launchpool began showing holding benefits
• '20: After BSC, became gas and base trading pair

11/ BNB Split Scheme Analysis

A split scheme's greatest enemy is another higher-return, more explosive split scheme

12/ Ethereum: Split Scheme's Steam Engine Moment

Smart contracts + gas opened unlimited splitting industry imagination

Ethereum's base: Mining rig dividend scheme (still is after POS)

Inflationary output before ICO could only become sell pressure. ICO's emergence opened Ethereum's split scheme era.

13/ Ethereum vs Binance Split Logic

Binance splitting:
└── Concentrate entire platform attention/liquidity on new scheme = System-level bleeding

Ethereum splitting:
└── Project teams invest operations to buy attention (like airdrops) = Acquire system liquidity
└── Split speed = Annual new high TVL/liquidity project count

14/ Ethereum Era Analysis

15/ Vitalik's Legitimacy Narrative

From split scheme perspective, ICO era's chaotic splitting gave Vitalik huge trauma. So he established splitting rules through narrative and Ethereum inner circle white gloves:

DeFi narrative ──► NFT/SBT non-financial apps ──► LSD ──► Layer2 ──► Restaking

Each narrative's core positions are very limited = Control split rate

Reflexivity Problem:

• to-V entrepreneurship becomes mainstream
• Project philosophy increasingly homogeneous
• Legitimacy = High valuation
• Wild approaches/low liquidity no more
• Falls into insufficient split rate
• Beta crushed by BTC, Solana

16/ Split Scheme: Infinity Stones

Split schemes are Ponzi's infinity stones, crown jewels, because split schemes are cross-disciplinary engineering, the scheme type with fewest closed-system assumptions

You need to ensure three equilibria:

Split Scheme Three Equilibria:

Core Formulas

Operator profit = Project team's total selling profits

Collapse conditions:
├── New buying < Split demand
├── Existing mass selling
├── Splitting too fast, bleeding out
└── Price can't rise after split

Split scheme three equilibria:
├── Entry capital ⟷ Split rate
├── Split return rate > Beta
└── Existing sell pressure ⟷ Entry capital

Everything is a scheme. A good project in Crypto must first be a good scheme.

Next: Composability Explained