Industrialization Theory

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|                   INDUSTRIALIZATION                        |
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|   "One hit wonder" is gambler's fallacy                   |
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|   To profit: launch continuously, at low cost             |
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1/ Understanding Schemes Industrially

To industrially produce schemes, you must first understand them industrially.

The Three-Scheme Theory is essentially a high-level abstraction of Ponzi forms, transcending bull/bear markets, cycles, and specific models. This helps you understand, conceptualize, and design schemes.

Like wafers need design but also manufacturing process, scheme production execution is even more important

2/ Scheme Lifecycle Costs

Five major costs in scheme lifecycle:

3/ Trust Cost

Costs paid to gain sufficient audience trust and hook them:

Most people trust authority and are lazy thinkers

By scheme type, trust cost from high to low:

Dividend Ponzi > Split Ponzi > Mutual-Aid Ponzi

This is mainly determined by user sunk costs—higher sunk costs require higher credit costs.

4/ Trust Cost Cases

• Mining coins: Often have major backing, top North American institutions lined up (see KAS, HNT, SMH). Root cause: mining rigs are irreversible one-time investments requiring payback period calculations, high trust cost
• L1 ecosystem coins: Need to see who invested in the chain, whether it has funding, or a good community
• DeFi LP/Memecoins: Can skip backing, just check contracts and ape in

5/ Development Cost

Comprehensive production, iteration, and security costs for creating a scheme.

Principle:

• More complex and non-standard products = higher costs
• Must raise funds or partner with ecosystems
• Minimize product complexity to minimize costs

Opportunity Cost:

• Market changes rapidly
• What was hot last month or even last week is forgotten next month
• Development cycle must be as short as possible

6/ How to Streamline Products?

Follow the "Closest to Money" Principle:

Directly related to user deposits/withdrawals = Essential
Everything else = Unnecessary complexity

Borrow external tools when possible, don't build unless absolutely necessary

Case: Pandora and 404

Previous cycle DeFi approach: Build entire NFT fractionalization protocol DAPP, even make your own DEX

Users don't care about fractionalization quality—they care about liquidity. Nothing has more liquidity than Uni.

Solution: Remove the DAPP, use Uniswap, build functionality into the token

Token standards have much higher reusability than entire applications, with lower amortized costs

7/ Functionality in Tokens

Following "functionality in tokens" logic, many DeFi edge protocols—especially liquidity protocols—have no reason to exist.

Cases:

• WHO_ERC404: Sold bonds via NFT at launch, injecting liquidity into Uniswap through taxation for cold start
• YESMONEY420: Built "treasury" and "protocol-owned liquidity" logic into a token

Saved an entire frontend. Most engineering is in frontend; contracts are relatively easy. Less is more, less is secure

Trend: From FT to inscriptions to 404, low-liquidity asset schemes trend toward minimal functionality and security pressure

8/ Acquisition Cost

Scheme's traffic cost per unit of capital inflow. Essentially an audience theory problem.

Traditional ground-pushed schemes: Operations centers + hospitality costs amortized per depositing user

Online push cost structure:

Unlike sales-heavy ground pushing, online pushing is event marketing. When is traffic highest? During launches and events

9/ Memecoin Industrialization

Memecoins essentially are event marketing around launches or early market cap, focused on 2-3 day timeframes.

Memecoin Industrialization = Channel cost amortization
                            + Binding to influential distribution paths
                            + Repeated launches lowering communication trust costs

For ETH memecoins: Deploy token, create pool, start Twitter, build TG, post to alpha groups and KOLs

Mature teams need just 10 minutes. When Elon tweets, Twitter bots monitor keywords and instantly deploy contracts.

10/ L1 Scheme Industrialization

L1s (usually dividend + split) have long cycles, from fundraising to listing might take half a year to a year.

Early audience is VCs, later stage is exchange listings to profit from secondary.

Promotion costs become: Costs of creating data to convince single VC/listing (TVL, address count, weekly active)

Activation cost is largest scale cost:

• Project goal: Spend minimum money triggering longest duration activity
• Points systems are inevitable choice: No commitments and manipulable, fully leveraging expectations

11/ L1 Industrialization Methods

1. Make user triggering continuous, not event-based one-reward-per-event (points only affect reward pool distribution)

2. Use same traffic system to rapidly cold-start split sub-schemes. Like Odyssey or Linea's points system:

   • No matter the project, use same activity system
   • No need for separate planning or channels
   • Greatly reduces promotion operations and channel costs

Schemes need control (no rugs). Infrastructure must be transparent and permissionless for schemes to use (fear of being rugged)

12/ Market Making Cost

Operator costs from pumping to dump:

13/ Chip Acquisition Cost

Except for rare purely community-driven projects, most projects need market control, and control requires 90%+ chips.

Community launch projects:

• Need to address trust cost issues
• Must be 100% pool or airdrop

Exchange listing projects:

• Can't raise funds without data, no data without airdrops
• Major exchange chip management is strict, but insider allocations and rat warehouses must be provided

Specific costs:

Without rat warehouses, market cap can only rely on market turnover, operators can't guide secondary. This is necessary cost

14/ Manipulation Cost

Costs to create market data inducing users to trade in certain directions:

• KOL/media manipulation costs
• Critical level floor-sweeping/chart-painting costs
• Volume wash trading gas costs

15/ Free Mint Case

Free mint has same effect as airdrops, essentially low-cost acquisition creating maximum hype. Enough hype = sufficient buy-side in initial stage.

Problem: Pure on-chain mint is bot warfare

Solution: Centralized mint eligibility control is one of the best low-liquidity asset market-making methods

Better than paid sales (community fears rug)

But pure fair launches with no rat warehouses lead to inability to control market, early stage can only rely on market turnover game, actually exhausting secondary price expectations.

16/ Anti-Sybil Essence

High-fundraising projects complete data and rat warehouse injection through tasks or Points.

Rat warehouses include:

• Stakeholders
• Distribution channels
• Project team itself

Anti-Sybil = Optimizing chip structure method

Because airdrops distribute proportionally, this is a variant way to reduce chip acquisition and manipulation costs.

Fish in troubled waters

17/ Exit Cost

Costs paid to maximize market cap exit profits:

Violent exit costs:

• On-chain anti-tracking costs (mixers or black market)
• Exchange or path freezing risks

Boil the frog slowly better than hitting the wall. Should avoid single exit targets being too large

18/ Industrialization Summary

Five elements of industrialization:

Industrialization tests technical proficiency, team coordination, resource integration, execution planning—requires repeated launches to refine.

Essence of Elitism

Industry elitism doesn't mean participants have higher credentials and better resumes—they're just the facade.

Real backbone:

• Teams professionalized and industrialized in all scheme areas
• Fast delivery, fast launches, fast penetration
• All major ETH memecoins backed by only ~10 teams
• All major viral schemes across chains, except rare US individual degen devs, are basically from Shenzhen, Ho Chi Minh, Kuala Lumpur

Your copycat today, your rat warehouse, your marketing model—one day global retail will realize without you market-making it can't even function

Next: Composability Explained