Yolo

The self-consistency of behavior and ideas is the freest state.

This article attempts to start from the mechanism of dopamine and the erroneous tendencies in the historical attribution of VC. It aims to discuss group tendencies and individual pursuits.

Positive incentives form behavioral habits, behavioral habits shape personal identity, and personal identity determines discourse patterns.
Positive incentives form best practices, best practices shape institutional identity, and institutional identity determines behavioral patterns.

Views#

• Do not be hijacked by gamblers. From a certain perspective, this industry has been hijacked by dopamine, to the extent that VCs, representing the core values of the industry, have begun to waver, “Will he cause trouble?” “How to do GTM?” The underlying implication of the analytical framework is, can he capture the traffic pool? Moreover, it is evident that the billboard of this industry is the top gainer, and the top gainer of large firms is the Super Bowl halftime. This allows one to stir up huge waves with just a puffed-up chest on a calm, dark night. This successful habit has been established. Interestingly, if founders practice according to the VC framework, they may find that memes are the best GTM among all projects, with native private traffic and traditional Times Square billboards. If you closely observe those token funds that are extremely focused on GTM, you can conclude that they actually just want to invest in a meme. What do we call such funds? “Consumer funds?” “Subculture funds?” “Trend funds?” But it is certain that they are definitely not Crypto funds.
• Break free from the overall inertia and return to the original intention. What kind of soil breeds what kind of project? In the face of the knee-jerk reaction of positive feedback in a cyclical manner, it is generally difficult to break out of the existing framework. However, it is worth noting that only by breaking out of the existing framework can one capture opportunities in other cycles. Our ultimate career achievements are the result of multiple cycles overlapping, but each way of survival will bloom in a specific cycle. Therefore, hold on to your frequency and resonate at the right time. Do not seek a different-frequency LP for the sake of scale, do not seek a different-frequency VC for the sake of funding gaps, and do not crave a new technology/new trend that can solve all problems in one go due to so-called internal competition. If you cannot construct a healthy source of dopamine for yourself, then every unexpected joy will come with a price.
• Do not be hijacked by users, capital, or LPs. Because real investors and real users have not yet become users. Most participants just want to turn you into a meme for consumption. Be very cautious about ideas, because if the idea is wrong, the strategy will be wrong; if the strategy is wrong, the people will also be wrong. We ask the wrong questions of talent, set the wrong KPIs, and then, due to the amplification of management levels, it becomes a reinforced version of carving a boat to seek a sword. The sword is actually on the shore, not in the river. But the people on the boat desperately carve the boat to exert their influence on it, desperately trying to leave their mark on the boat, but is that important? Not important. Because the boat can disappear at any time.
• Just like every cigarette contributes two or three bullets to the country, we can say that safety comes from dopamine. From the perspective of Crypto, gamblers in Crypto are equivalent to cigarettes in national security. On a personal level, I sincerely hope that people can enjoy freedom with self-discipline; on a broader level, how can the collective inertia that so many motivational books cannot cure suddenly heal? We are leveraging gamblers rather than serving them, leveraging dopamine rather than serving it. By leveraging dopamine, we can cultivate personal habits, and by leveraging dopamine, we can also establish collective beliefs. Belief is neutral; it helps us reduce pain and regain courage when facing major crises.

Pump traffic-nomics#

Society's recognition of a concept is always gradually diluted in a networked manner, as concepts collide and disperse with each individual like Brownian motion. Forming a consensus quickly in the short term is not in line with common sense. Even if one person reads a book, it requires chewing, digesting, and ruminating, combined with practice to truly make a stable long-term evaluation. Concepts need to be stress-tested; they are an adaptive process.

In contrast, Pump & Dump is much more direct; it allows users to quickly receive feedback. This generates a sense of self-achievement, “Look, I’m awesome, 500% in one day!”

“Look, I’m awesome, 500% in one day,” “Look, I’m awesome, 500% in one year,” “Look, I’m awesome, 500% in ten years.” They all belong to the same syndrome.

Pump & Dopamine#

The pump model and the dopamine model are very similar. The dopamine model consists of four parts: “cue-craving-respond-reward.” The initial Cue is the signal (Pump), Craving is placing an order, Respond is (KOL sharing, buy the dip), and the final reward is financial incentives/social recognition.

When the Cue occurs, the user's dopamine spikes rapidly; seeing a 50% return makes them very excited. From the project operator's perspective, when there are very few real participants in the early stages, the transaction volume and price are likely created by left hand to right hand. As the Pump ceases, the user's dopamine will decrease, entering the Craving state.

In this state, the dopamine trough will attract users to place orders, subconsciously thinking, “I must do something, right?” At this time, the project side needs to focus on the natural transaction volume after the Pump, which is an important indicator of user inclination.

After users place orders, the market enters a natural state, and some users lack motivation, giving rise to behaviors such as profit-taking. At this time, further encouragement of user behavior is needed, through small actions to get users to sign a pledge, such as “encouraging sharing,” “encouraging interaction,” “encouraging meme-making activities,” similar to the Rat_Press_Button in the image. Since users are already on board, adding marginal incentives can easily prompt users to spread the word again. Users often hope to use actual behavior (Craving) to pursue the returns implied by the earlier Cue (stimulus).

Next, in the respond phase, by observing user onboarding and behavioral recognition, one can choose to Pump (stimulate core contributors) or Dump (take profits and recoup chips). The indicators of concern are FOMO transactions/liquidity pools, core contributors/first-time enthusiasts. If there are many new users and many Craving behaviors, then Pump can reinforce their actions; conversely, if there are many old users, then one can choose to Dump to take profits. This is because appropriate Dumping will not affect the psychological feelings of old users; instead, it can further hone their trust in the project at the bottom. Through Pump & Dump, we can continuously accumulate core supporters throughout the lifecycle of the meme (by constantly providing these supporters with positive stimuli), ensuring they fully accept our project vision, which is also the saying “to let users make money.”

Some may question, “Why can something as coreless as a meme be effective?” A gentleman can share hardships but cannot share comfort; the opposite is true for a petty person, who can share comfort but cannot share hardships. A scholar's rebellion fails after three years; the internal contradictions of the left are far more than those of the right, and the difficulty of unity is much greater. Interests are the simplest mechanism for establishing cooperation; the repetition of interests can drive people insane. As long as interests continue to flow, people's cooperation can be very close. As long as the market makers are strong enough, there will always be immature users joining this farce.

The rise of memes is fundamentally about satisfying the psychological needs of retail users: high expectations of returns (“500% increase”), high identity recognition (“we are all PEPE, we are all Ben”), high participation (“group chat topics”), high social value (“meme research experts, profit-sharing”), and high presence (“I bought memes early”). Investing in memes is equivalent to cheaply participating in a collective event, gaining organizational recognition, and obtaining social status. Essentially, it is a consumption behavior.

The project side can use Pump & Dump to produce cheap dopamine for users in bulk, equivalent to psychological massage. How can this massage be smoother? More diverse rewards, more universal cues, and easier participation in actions.

Variable Reward--How to Produce Psychological Dopamine?#

According to our previous “Cue-Craving-Respond” model, we can productize the dopamine model as “Cue (Trigger) - Craving (Action) - Respond (Variable Reward).” Variable rewards are worth mentioning; B. F. Skinner divided rewards into three categories fifty years ago:

• the tribe. Social incentives
• the hunt. Interest stimulation
• the self. Achievement-driven

In memes, we can see that Pump has two significant impacts: one is the traffic effect, and the other is shaping investor behavior. Specifically, when MM pumps quickly, if the community's concept is consistent with little selling pressure, a small amount of chips from investors can provide a massive incentive, firstly through billboard dissemination, and secondly by encouraging vested users to share. For users, this is both a hunt reward and a tribe reward. Encourage sharing (“especially because the project changed lives”). On one hand, it consolidates the basic version of existing investors, while on the other hand, it expands exposure to new investors through the profit effect of existing investors.

Some say that on-chain gambling is fairer, but do groups want fairness? No, they want dopamine. They want recognition, they want respect, they want infinite presence. Pumped: “Look at how much profit I made in a day!” Bottomed: “Look, I bottomed out, I found a value opportunity,” Consolidated: “Look, I share honor and disgrace with the community; I firmly believe in this project.”

How to Make Cues Ubiquitous?--The Traffic Pool Model of Crypto#

Friends who watch Douyin a lot should be familiar with some common phrases: “Fans, remember to light up the fan badge in the upper left corner,” “If you think the host's point is great, please send a 666,” “Everyone, give the host a thumbs up; if we reach 5000 in popularity, we will launch another car.” The existence of these phrases caters to Douyin's rules, pushing the live room towards a larger traffic pool. In other words, satisfying a series of indicators such as “like heat,” “interaction heat,” and “fan badges” can gain greater exposure and more sales opportunities.

In Crypto, there is also such a traffic pool model; meeting specific conditions will lead to upgrades. Generally, there are several upgrade logics: TX “transaction volume,” “gas consumption,” “Top Gainer,” “Liquidity Pool,” “TVL,” “Cex,” “Community,” “investors.” When specific conditions are met, you can leverage the traffic pool. Imagine a champagne tower model: the first layer is the CEX banner, the second layer is the DEX billboard, and the third layer is KOL/Community.

Suppose a small meme project starts from the bottom; how should it create momentum? Focus on the second layer and negotiate the third layer.

Suppose Alice has created a meme project called $Normal. On a calm morning in the market, if she suddenly pumps and successfully surprises everyone, landing on the Top Gainer list of various dashboards. Coincidentally, an influencer named Ben sees this project and is amazed. At this point, we say Alice has achieved a phased success; she has successfully opened a gap on the traffic front.

After that, Alice continuously engages with the community/MM/Venture, where she might encounter the question: “Which came first, the chicken or the egg?”

MM will ask, “How many users does your community have?” The community will ask, “What investments have you secured?” Investors will ask, “How do you do GTM?” Here, Alice just needs to maintain a steady mindset and rhythm, using the project concept to conduct A/B testing across different channels.

In an ideal situation, some enthusiasts may start helping Alice spread the word. At this time, the traffic ambush strategy cannot stop; appropriately pumping gives core supporters confidence. After every AMM, there should be a wave, and after AMM, timely behavior molding and incentives should be given to new users. AMM has two meanings: first, you can directly judge the quality of narrative expression and community channels from the order volume. Second, you need to mobilize community enthusiasm, allowing the community to promote while onboarding.

After several rounds, we can filter out some of our users.

Some friends question: “What value was created in this process?” The business model is not a creator's model but a filtering/matching model. Any transaction is GDP, indicating it worked. This is like a knee-jerk reaction of positive feedback; the rocket launch is very controllable step by step. As long as there are a steady stream of new users, this method can continue indefinitely.

Dog poop attracts flies until there are no flies left; this is the logic of business. In a place that encourages competition, logically, there will be no Easy Ball, but in a place that is tender towards the weak, there will always be Easy Balls, evolving into a supply system based on incomplete personality groups. We scold the sickle because there are still retail investors; when the retail investors are all cut, the sickle will be sharpened to engage in technology. I am not justifying the sickle; I hope the sickle has higher pursuits, but the overall culture does not encourage productivity but encourages morality. The cost of being tender towards the weak is that the strong face constant changes. We can say that a sickle with pursuits has no sense of security; choosing to cut first and talk later is understandable. It is also difficult for the sickle to have pursuits; if the sickle has pursuits, then who plays the villain? Who can be capable and kind? How can the remaining drama unfold? The environment becomes an environment because the members couple to form an ecology, making it difficult for everyone to break free from their roles.

What Are We Really Investing In?#

Story:
“Why come to Crypto?”
“Because it's easy to raise money.”
“Do you know what the cost of easy money is?”

Memes encompass broader psychological needs than just gambling demands; most of our products fall into the meme category, lacking fundamentals and more mature users. The influx of a large number of investors in the early stages is merely due to lowered investment thresholds, with small and medium investors being more emotional and exiting faster.

The validated core demand of the Crypto market: gambler demand. From the current services that users are paying for, trading fees are the primary cash flow. CEX/DEX/NFT Marketplace are the cash cows in the industry. In addition, there are some information service demands, including dashboards/newsletters/communities, etc., as well as chain-end infrastructure surrounding gambling services. Data Source

The main profile of users: gamblers as users, with three typical characteristics: 1. Nihilistic self. For example, “showing profit orders,” proving one's excellent judgment through sharing, filling the sense of existence. 2. Following the strong. Following the strong is also a typical feature that brings systemic cyclical trends to the entire market. From the perspective of the dissemination network, if nodes in the network have a following effect, the momentum of the entire network will be very strong. Imagine a net with a taut outline; once the nodes move, the entire net will float. 3. Passive superficiality. Due to the user's nihilistic self and following the strong characteristics, “micro-business strategies” are very effective, with exaggerated self-labels and reaffirmation of “I have made money.”

The main demand and user profile lead to several current situations: 1. Non-gambler native cash flow is scarce, leading to survival issues for native projects. 2. Heavy reliance on external funding, insufficient self-sustaining ability. 3. Profit-making methods are short-term reliant on capital markets, serving capital markets. This results in a high overlap between VCs, users, and project parties, leading to several synthetic problems.

Problem 1: Hijacked by gambler users. Can “have” but “not be.” Eth can have gamblers, but it is not a gambling service tool. From a certain perspective, this industry has been hijacked by gambler dopamine, with the VC judgment framework giving high weight to “causing trouble,” “Will he cause trouble?” “How to do GTM?” The underlying implication of the analytical framework is, can he capture gambler users by grabbing the traffic pool? If we believe in the logic that “users determine demand,” then based on the current situation, we can only develop the infrastructure that gamblers need. In fact, existing users do not determine the future demand of the industry; early investors are not product users.

Customizing projects according to the existing VC framework may reveal that memes are the best GTM among all projects, with native private traffic and traditional Times Square billboards. If the VC analytical framework is extremely focused on GTM “quick exit, many users, high multiples,” you can conclude that they actually just want to invest in a meme. Fast food users determine fast food projects, determine fast food VCs, and then come to the conclusion that we want Mass Adoption, in other words, to continue to suck blood from the outside.

The question VCs need to establish is, where does the source of excess returns come from? If it’s tokens, exit quickly, with many retail investors. That utilizes the low threshold and high retail investor content of token investments. If it’s decentralization and anti-censorship, then it is the foundational infrastructure of the network world emerging under the dramatic changes in the world. The world is complex; you can cut or invest, but please do not deceive yourself. The latter will have no cash flow for a long time, no story to let you exit; would you still invest?

If you do not serve gamblers, who do you think the Crypto infrastructure can serve? Finding the first user source outside of gamblers is the iPhone moment of this industry. Users are more steadfast supporters of the industry than VCs.

Problem 2: Correctly handling the relationship between gambler users and future vision. From the perspective of Crypto, gamblers in Crypto are equivalent to cigarettes in national security. On a personal level, I sincerely hope that people can enjoy freedom with self-discipline; on a broader level, how can the collective inertia that so many motivational books cannot cure suddenly heal? We are leveraging gamblers rather than serving them, leveraging dopamine rather than serving it. By leveraging dopamine, we can cultivate personal habits, and by leveraging dopamine, we can also establish collective beliefs. Belief is neutral; it helps us reduce pain and regain courage when facing major crises.

How to Find a Self-Consistent Investment Theme?#

The vision of a networked nation: institutional power + economic foundation enables DAOs to have the power to negotiate with sovereign states. Under the construction of virtual infrastructure, possessing production factors that sovereign states do not have can export products and services that sovereign states lack, forming an economic foundation and cultural consensus, and seeking opportunities for negotiation with sovereign states through institutions.

In seeking this vision: 1. What services are difficult for sovereign states to construct? 2. Why is globalization still needed in extreme times? 3. Who are the most steadfast supporters of building infrastructure? 4. Who will be the core users of Crypto in the next three years? Are they still gamblers?

So what is the self-consistent investment field for Crypto funds?

1. The necessity of Crypto exists solely for security/strength/stability. Decentralization/anti-censorship/anti-regulation is an existence that transcends ideology and interests. Invest in the “second base” (Asimov). Stock up on disaster preparedness supplies at home, and then you tell me it must also be delicious. The characteristics of disaster preparedness are primary; deliciousness is secondary. From a total perspective, investment returns depend on large beta. The source of returns from compressed biscuits depends on external conditions, not on deliciousness.
2. The development of Crypto must rely on the community, not on capital (capital oriented towards clear returns). Crypto is not a commercially measurable solution; it inherently carries a huge β assumption. It is necessary to find the most interested and most profit-driven people to invest. Dollar funds are not, and token funds may not be either. Crypto may resemble a public welfare organization more, needing to consider public good.
3. The mass adoption of Crypto is a very fragile assumption. All decentralized infrastructures that establish trust must exist on the basis of a complete collapse of centralized trust. Using an extreme thinking model, the peak state of trustless is the stage where everyone is wary of everyone, leading to a complete bankruptcy of trust. In other words, the mass adoption of Crypto is a passive state, and it is highly likely that it cannot be mass; trust between people still exists. In other words, we must believe that people are still trustworthy (after all, communism under 100 people can be realized; trustless has its limits and cannot achieve mass adoption). For projects, there are two choices: one, dilute security to gain efficiency and capture existing users (mostly gamblers). Two, maintain security, enhance purity, and occupy the total mental space (expecting the future).
4. Investing in projects is not investing in gambler communities, vertical gambler communities? Stacked horsemen aaS?; investing in projects is not investing in trendy subculture memes, “I use XXsocial, I am trendy, please follow me”; if you admit you are a consumer fund, you can invest in the first two.
5. If LPs cannot maintain patience, continue to seek suitable LPs.

Who are the core users of Crypto in the future?

1. Those who are harmed in the context of de-globalization.
2. Globalization is the premise of survival for these subjects and also provides assistance for their development. It is not only a basic question but also a bonus question.

What is a typical Crypto founder?

1. Stay hungry, stay patient. For a considerable period, it will be difficult for the industry to capture cash flow without gamblers. Without cash flow, it is impossible to stabilize and nurture the team; DAO must be used to disperse risks and consolidate consensus. The users of the industry will grow rapidly with the bankruptcy of external credit; we are the backup state of the world, we are the second base. This means that external demand changes drastically, and once pressure testing arrives, it will inevitably be overwhelming.
2. Always occupy the mental space. How to establish a clear brand recognition with a relatively small user base is the second problem to solve. Maintaining “purity” can ensure the future.
3. Founders face the situation of stabilizing internal employee expectations and cultivating the capabilities of the internal team (community). The team (community) is the basic plate; pumping is not.

Postscript#

This article introduces the relationship between dopamine and Pump & Dump, as well as the traffic pool strategy of Crypto, sorting out some of the core issues and phenomena in the current industry, and discussing the investment themes of Crypto in my eyes.

Positive feedback forms behavioral habits, behavioral habits shape personal identity, and personal identity determines discourse patterns.
Positive feedback forms best practices, best practices shape institutional identity, and institutional identity determines behavioral patterns.

An egg opened from the inside is life; opened from the outside, it is broken. It is time to return to Jinggangshan, back to the days without money, without people, and without guns. If you want to be the Nuwa of the online world, wanting to make the online world as real as the physical world, then ask yourself if you can delay gratification, after all, Nuwa will not ask “When will I break even?”

Being hungry is valuable; at least it lets you know what you are doing. How much do you want to do this? Investing in a self-consistent fund is much more important than investing in a profitable fund.

Q&A:#

1. Why can’t primary investors make money?
   Currently, the spread of memes is the largest source of profit, and primary investors lack experience in meme dissemination.
2. Should real Crypto investors make money?
   Stock up on disaster preparedness supplies at home, and then you tell me it must also be delicious. The characteristics of disaster preparedness are primary; deliciousness is secondary. From a total perspective, investment returns depend on large beta. The source of returns from compressed biscuits depends on external conditions, not on deliciousness.
3. Why are founders from VC backgrounds more advantageous in Crypto?
   Most crypto projects lack endogenous cash flow, and the earnings of founding teams mainly come from capital markets. Those who can disseminate narratives better can extract narratives from the complex details and are more likely to succeed. The problems VCs deal with are formal logical, not substantive. When we examine investors, we focus on their abstract abilities and their ability to grasp the key issues. Why? Because the profit source of VCs mainly comes from capital premiums, and the underlying pricing of capital is information pheromones, which are summarized and communicated through widespread investor abstraction. The ability to handle information pheromones is their core. Founders, on the other hand, are responsible for the actual operation of the business, ensuring that the vision is realized; it is a capability of depicting and executing from abstraction to reality. The capability maps are different.
4. Why does Crypto investment often see Pinduoduo? (Low lead investment ratio)
   It is difficult to showcase tangible results in fundamentals; concept-driven + no appropriate investor thresholds + KOL matrix exposure leads to high project elasticity. From the perspective of the investor analysis framework, the win rate is low, and elasticity is high.
5. What is DAO not? A simple Discord is not a DAO, a piecework system is not a DAO, and gambling stones to open blind boxes (investing) is also not a DAO. From the current situation, investing in DAOs is to obtain quotas, while ordinary DAOs are to disperse risks. Contributors are very similar to socialist successors. Why is DAO called a free-riding channel? What is not a DAO? In this special industry of Crypto, as the operating cash flow concentrates on CEX, NFT Marketplace, Staking, MEV, the business services directly or indirectly rely on gamblers, leading to better cash flow for those who are closer to gamblers. Because of this, founders below the waistline have no choice but to join the narrative team, as it is relatively difficult to achieve profitability in fundamentals, and capital premiums become the main source for founders. DAO emerges at this time to solve two problems: 1. No cash flow, so share profits through tokens. 2. Share risks and narrate together. DAO addresses the issue of share arrival. The industry has limited cash flow, and gambling has existed since Day 1.

Reverie#

Story 1
“Why come to Crypto?” “Because it's easy to raise money.” “Do you know what the cost of easy money is?”

Story 2
“What is SocialFi?” “What’s the difference from vertical products in subculture?”
“Can we Earn?” “If they throw money, is it you?”
“They don’t understand the crypto circle.” “Are you referring to continuously throwing money, grabbing the traffic pool, and going for IDO?”

Story 3
“Why do web3 AI?” “To give users a better interface.” “Where does the data come from?” “We will connect various APIs.” “Are you making general AI or proprietary AI?” “General AI.” “Do you have any cases that can help users form the smallest loop? For example, what common questions can you answer well, and these questions are also high-frequency questions for users?” “I think we can help users find.”

Story 4
He said, “This industry cannot thrive on mere showiness.”
The master said, “The characteristic of this industry is distrust; wherever the cost of trust is highest, there will definitely be a replacement.
Showiness will definitely migrate the fastest. Their demands will also be the most stable.
It is very likely that this industry will have to rely on them to sustain itself. Adam Smith said the invisible hand promotes good through self-interest; I see this as the invisible good, where even evil can promote good.”
He said, “The industry will achieve mass adoption in the future, and the future is App Chain.”
The master said, “Safety is the source of this industry; since it is the infrastructure of the metaverse, unparalleled resilience is the foundation. Mass adoption requires support from the larger environment; the external environment must be harsh enough; there must first be no trust to achieve trustlessness.”
He said, “USDT is the iPhone moment of the industry.”
The master said, “Think about who the most steadfast supporters of the industry are, who benefits most from the development of this industry? It is the wandering capital. The nomads with precious stones are the backbone supporting the industry, definitely not dollar funds and big names; they have too many choices.”

Story 5:
There are two ways to evaluate a person:
One is “Did he make money?”
The other is “What is he doing now?”

Story 6: The absurdity of the whole:

Day 1: The ideal first day, decentralization/personal sovereignty/collecting nations/distrust.
Day 2: Tokens are everywhere, black U is flying everywhere.
Day 3: Retail investors are fertile ground; 3M exits. MM opens both sides, VCs raise their banners.
Day 4: Mass adoption of the metaverse, busy building infrastructure.
Day 5: The traffic model is in mind; I am the best top gainer. If you ask how the project is done, it’s the meme community AMM.
Day 6: Retail investors die, and the tears of the whales dry up. If you ask where to find Crypto, there are no heads or wealth.
Day 7: Where to be buried does not require the land of one's hometown; dare to call the sun and moon to change the sky.

Story 7
“Any recent passwords?”
“I told you, would you believe it?”

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