Forward the original title: Three Ponzi Problem - The Ultimate Guide to Building a Ponzi Scheme (Anniversary Comprehensive Edition)

“Matter is conserved at every moment—until humanity invented money.”

TL;DR: Whether you admit it or not, much of human civilization’s progress comes from unfounded but optimistic assumptions, and money is the prime example—a blind optimism about the “equivalent return” ability of other entities.

Our ancestors unquestioningly accepted money as a substitute for food, used to exchange the value they created. However, the truth is that money is merely a ledger symbol, recording the social relationship between creditors and debtors, never needing to have any intrinsic value.”

Today, we have a more fitting name for this phenomenon—“Ponzi.” Next, I will explain my theory on how to identify, understand, design, and ultimately control Ponzi mechanisms in cryptocurrency and other fields to maximize profits—this is what I call “The Three Ponzi Problem.”

What is a Ponzi?

Simply put, a Ponzi is an economic system where the mismatch between funding demand and expected returns creates a “gap” that can only be filled through further mismatches. (This definition is my original creation, hereby noted.)

Is every Ponzi a “man-made” system? Yes.

But it’s not necessarily a scam.

It depends on whether the audience perceives this “gap” as reasonable and acceptable. Historically, such “gaps” have often been glorified and repackaged under other terms, such as “sovereign credit,” “legitimacy,” or “market consensus.”

A Ponzi is not an absolute concept. Its true nature often requires a macro-level perspective to discern, as many Ponzis do not exhibit typical characteristics at the micro level.

In fact, Ponzi’s are more common in everyday life than you might think, and they often seem reasonable. Take the residential real estate market, which has existed since 3000 BC and is considered a “productive” store of value. However, in fact, if it were not for the rapid and continuously growing inflation caused by modern fiat currency printing, this value logic would not be sustainable at all.

What is the Three Ponzi Problem?

Every Ponzi must inevitably be built upon one or more of the following three basic forms: Dividend Plate (Mining), Mutual Aid Plate (Pooling), and Splitting Plate (Splitting).

This may sound absurd, but the Three Ponzi Problem can serve as a guiding framework for designing and operating nearly any Ponzi system—whether on a macro level or a micro level.

Three Ponzi Problem - Dividend Plate

The Dividend Plate is a system where users must bear initial sunk costs, expecting to gradually receive promised fixed returns over a period of time.

Types of Dividend Plates

A. Capital-based Sunk Costs
Users need to invest capital (including liquidity opportunity costs) to start receiving returns. Examples include the mining ecosystems of Bitcoin/KASPA/FIL (excluding Bitcoin itself), PoS staking/re-staking on L1, DePIN, and dividend plates like Plustoken.

B. Time/Energy-based Sunk Costs
Users invest significant time or effort in hopes of gaining returns. Examples include Pi Network, Galxe badge activities, meaningless Discord role battles, and Telegram mini-programs like DOGS.

Key Metrics for Evaluating Dividend Plates

• Fixed Sunk Costs: One-time, non-recoverable investments (e.g., Bitcoin mining rigs).
• Incremental Sunk Costs: Periodic, non-recoverable costs incurred to acquire each unit of incremental returns (e.g., electricity and maintenance costs).
• Withdrawable Returns: Earnings that can be freely withdrawn and liquidated.
• Reinvestment Cycle: The cycle after which sunk costs need to be reinvested.
• External Liquidity: The available liquidity of the dividend token in external trading platforms.

Collapse Model

Conditions for the collapse of a Dividend Plate:

Actual incremental sunk costs + external liquidity < withdrawable returns

At this point, the system creator can profit by stopping dividends and “running away.”

How to Delay Collapse (using BTC mining as an example)

Activate the flywheel effect：

• High coin price → Higher demand for mining rigs → Higher mining rig prices → Manufacturers earn more cash → Manufacturers further push up coin price.

Increase total sunk costs：

• Continuously raise the minimum total sunk costs required to acquire additional tokens, pushing for higher “shutdown prices.”

Pricing sunk costs in fiat currency：

• Avoid using token pricing, as this gives early participants an unfair advantage, weakening the goal of pushing for higher shutdown prices by increasing sunk costs.

Control liquidity in early stages：

• Minimize external liquidity in the early stages to prevent premature sell-offs and maintain control over token holdings.

Case Study: Bitcoin Mining Ecosystem

Let’s review the Bitcoin mining ecosystem—one of the most classic and well-functioning cryptocurrency Ponzi systems—and Bitcoin ($BTC) itself. Many historical mysteries can be explained through this lens.

Why did BTC surge dramatically in 2013 ($10 → $1000)?

2013 was the year ASIC mining rigs were introduced, allowing mining rig manufacturers to dominate in profits and sales, making them some of the first “market makers” for Bitcoin. At the same time, there were no high-efficiency and liquid trading venues and liquidity models, and low external liquidity made price manipulation easier, triggering the flywheel effect.

How did Bitcoin rise during the miner-led cycles before 2021?

• Miner costs (electricity and facilities) were priced in fiat.
• Incremental costs were much higher than electricity, especially in China, where from 2019, the Chinese Communist Party’s policy crackdown led many miners to face complete losses in their pursuit of lower electricity prices.
• Due to these policies, total sunk costs and “shutdown prices” were much higher than what appeared on paper, objectively pushing Bitcoin’s price higher.

Three Ponzi Problem - Mutual Aid Plate

The Mutual Aid Plate is a system where users provide liquidity in exchange for a fixed return on each unit of contribution.

Unlike the Dividend Plate, the Mutual Aid Plate does not require asset locking but relies on high trading volume to operate, much like a casino, which does not profit directly from individual wins or losses, but instead takes a percentage from the total trading volume.

Types of Mutual Aid Plates

Pure Pyramid Scheme-Type

• Users earn dividends by attracting more participants, relying solely on capital inflow (e.g., Forsage.io, 1040 Sunshine Project).

Quasi option type

• Funds circulate among participants, with new funds used to pay returns to old participants (e.g., A transfers money to B, B transfers to C, C transfers to A). This typically includes liquidation or restart clauses to address situations where funding targets are not met (e.g., FOMO3D, 3M, and the overall meme coin market).

Liquidity mining type

• Users earn returns by providing liquidity, often sacrificing exit opportunities in exchange for higher returns.

DeFi users are no strangers to Mutual Aid Plates, as most DeFi tools are essentially part of a “macro L1 mutual aid plate,” such as lending protocols, where speculative token dynamics in these systems are the core source of mismatch.

Collapse Model

Conditions for the collapse of a Mutual Aid Plate: \
Systemic debt > Liquidatable assets + external liquidity \
Ponzi designers typically earn profits through transaction fees or frontrunning. \
How to Delay Collapse

Set Clear Liquidation Thresholds

• Define a maximum profit limit or enforce stop-loss/restart mechanisms.

Prohibit Arbitrage

• Eliminate arbitrage opportunities that could disrupt the systemic debt rules and deplete liquidity.

Prevent Runs

• Allow for orderly exits to avoid destructive impacts on the remaining assets in the pool.

Case Study: The Evolution of AMMs and Mutual Aid Plates

AMMs (Automated Market Makers) made a significant breakthrough in mutual aid plate infrastructure, comparable to the emergence of commercial banks.

Why did LP liquidity mining collapse after DeFi Summer?

Why do new types of yield mutual aid plates tend to adopt Uni V3-like models, such as @MeteoraAG‘s LP Army?

Uni V2 Liquidity Mining:

In Uni V2, users could provide liquidity indefinitely and earn rewards in the same token through high annual percentage yields (APY).

Why the Collapse:

No Liquidation Threshold

• Rewards were distributed to the entire liquidity pool, even if only a small portion was actually being used. As long as liquidity was provided in the pool, unlimited native token output could be earned.

Arbitrage Loopholes

• The “mine-sell-withdraw” strategy allowed early participants to quickly break even, effectively creating risk-free arbitrage, and by selling off native tokens, depleted the liquidity of remaining LPs.

No Run Prevention Measures

• Lack of exit restrictions led to panic selling when APY decreased, ultimately collapsing the entire pool.

How Uni V3 fixes the problem:

Liquidation Threshold

• Only liquidity within a specific price range qualifies for reward distribution.

Run Prevention

• Liquidity withdrawals from one price range do not affect rewards or liquidity in other ranges.

Fixing Arbitrage Loopholes

• Most projects removed immediate token rewards, replacing them with an积分 (points) mechanism (Post-DeFi Summer), although this mechanism triggered new issues in the splitting plate design.

Three Ponzi Problem - Splitting Plate

The Splitting Plate is a Ponzi system where the total capital remains constant at a specific point in time, but the number of rights or assets corresponding to each unit of capital is multiplied, while the price of newly generated rights or assets is proportionally reduced to attract subsequent capital inflows. This is very similar to stock splits in traditional finance.

In my view, the Splitting Plate is the most complex and difficult-to-control Ponzi system. It typically does not exist on its own but is embedded as a “de-bubbling” mechanism within one or two other types of Ponzi systems.

Splitting Plate in Crypto

In Crypto, all L1/L2 systems are essentially dividend plates. As long as they need to establish an “ecosystem,” they are simultaneously also splitting plates. For example:

• BTC inscriptions/runes/L2 related to BTC
• PumpdotFun related to Solana
• aixbt/Luna/Game related to Virtual

The ultimate goal of the splitting plate is to transform a certain token into as many assets as possible, just like the US dollar with US stocks. \
Why? \
Because both the US dollar and L1 tokens are essentially created out of nothing. By providing higher nominal ROI, they achieve alchemy—“fake money for real money.”

Collapse Model

Conditions for the Collapse of a Splitting Plate:

ROI Below Market Benchmark Beta

• Competing splitting systems with higher ROI and similar risks will attract user defections.

Too High or Too Low Splitting Rate

• High splitting rates will dilute liquidity, while low splitting rates will fail to maintain ROI.

Capital Outflow

• New capital inflows dry up, and existing holders quickly exit, using it as exit liquidity.

The main profit point for Ponzi designers comes from front-running behavior.

Case Study: Ethereum, ICO, and Solana

Ethereum is a classic dividend plate, but it became the most important splitting mechanism in history through the ICO era.

Why does Ethereum need an ICO?

• Mining Equals Inflation: The rising “shutdown price” would naturally prevent new participants from entering.
• Splitting Mechanism Attracts Capital: ICOs attracted participants to hold $ETH, and these participants needed to purchase ICO tokens, turning $ETH into a pricing unit and achieving de-bubbling.

Why ICOs Succeeded/Failed?

• High ROI: ICOs offered returns far exceeding those of holding $BTC or other outdated tokens. Many ICOs had nearly 100% circulating supply and low FDV, creating explosive ROI in low liquidity environments.
• High Splitting Rate: Excessive and rapid ICOs diluted overall liquidity.
• Capital Outflow: At the time, most ICO tokens lacked liquidity, and participants could not recover their funds, while $ETH did not face this issue. Developers sold ETH faster than capital inflows, turning ICO participants into liquidity exiters, eventually causing the ROI collapse.

Thus, $ETH experienced the “Davis Double Click” at that time.

Ethereum’s Dilemma in 2024

• Capital Outflow: LSD, restaking, and PointFi lock funds, reducing effective circulating supply (the volume of trade available for speculation).
• Slow Splitting Rate: New projects are mainly led by insiders, using “alignment with Ethereum Foundation and Vitalik’s legitimacy” as a guise for V-entrepreneurship.
• Low ROI: Compared to Solana, which restored the ETH-era ICO model (e.g., Pump.fun), Ethereum’s ROI competitiveness is weaker.

Why Did Solana’s 2024 Splitting Succeed?

Balancing Splitting Rate with Dilution via Pump: Meme coins are Solana’s splitting assets, using $SOL as the pricing unit and accelerating through the Pump mechanism. The Pump itself operates as a pooling mechanism, with liquidity turnover so fast that it nearly simulates a quasi-option cycle. This effectively mitigates the liquidity dilution issue caused by high splitting rates, keeps capital participating in speculation within the ecosystem, and maintains opportunities for new users to enter with a low barrier.

Boosting ROI Through Marketing Machines

Solana is the only L1 with its own dedicated “marketing machine,” ranging from Colosseum/Superteam communities to major video bloggers and KOL networks (e.g., Jakey, Nick O’Neil, Banger, Threadguy, etc.).

By leveraging core influencers like Toly, Mert, and Raj, Solana intentionally directs liquidity into emerging low liquidity meme coins and projects, offering super-exponential ROI (beyond market benchmarks) and driving the $SOL-meme coin flywheel effect.

Similar strategies have been mimicked by Sui and Virtual (e.g., Luna and aiXBT).

The Art of Three-Ponzi Design and Integration

Each Ponzi operates under the assumptions of its closed system, constrained by its inherent collapse model. These limitations can be mitigated by integrating the characteristics of Mining (Dividends), Pooling (Mutual Aid), and Splitting (Subdividing), with each type playing a distinct role:

• Dividends: Lock assets to maximize the management of asset size (AUM).
• Mutual Aid: Draw liquidity through high transaction volume.
• Splitting: Use price fluctuations in sub-systems to deflate the main system’s bubble.

When designing a Ponzi system, start with the following foundational questions:

• How does the designer make money in this system?
• In what way can the designer accept the system’s collapse?

From here, you’ll know which type of Ponzi to choose.

Choose Your Conspiracy Group, Understand Your Target Audience

Ponzi is a zero-sum game, where profits and losses are derived from the same source. The key question is: Who are your allies, and who are your “prey”?

First, understand the capabilities of your conspiracy group:

• a. People who have a direct influence and can be persuaded
• b. People who can be reached but may not be fully persuaded
• c. People who are completely unreachable

An effective conspiracy group should:

• Maximize the coverage of a + b
• Align interests highly
• Assign clear roles to each member
• Keep the number of members under 7 to ensure smooth collaboration

This also explains why some “highly popular” advisors appear in multiple teams, or why some venture capital firms are replaced by exchange VCs in early funding rounds.

Next, understand your audience and their characteristics. Key indicators include:

• Age group: Are they from the 80s, 90s, or 00s? How free was their upbringing?
• Information sources: Do they use Twitter, Telegram, TikTok, or WeChat?
• Financial views: How do they view freelancing, financial freedom, and time autonomy?
• Knowledge level: Do they understand the basics of cryptocurrency?
• Risk tolerance: Are they more inclined towards passive returns (interest) or active returns (trading)?

Typical “destined to enter the crypto circle” profile:

• At least from the 80s, 90s, or 00s
• Use Twitter, TikTok, or Telegram
• Tend to be freelancers, rejecting the corporate system
• Prefer active financial activities, value trading

TikTok users are somewhat different — they tend to lean towards a PVP model, as most of them grew up in an era with limited macro growth opportunities.

These are the “new humans” (the kind Gary Vaynerchuk refers to), who accept a hyper-financialized worldview. Sell them narratives like “fair launches,” “anti-institutional,” and “anti-political correctness.”

If the above profile doesn’t match your audience:

Borrow or fabricate authoritative endorsements they blindly trust. They are more like obedient subjects under authoritarian rules.

First Principles of Ponzi Design: Never Violate Human Nature

History has proven one thing: the beliefs of developers don’t matter. For any crypto project (not just Ponzi schemes), sustainability often takes a backseat to hype (first, you need to survive), and hype depends on aligning with human nature:

• Nothing lasts forever: Don’t expect your project to be the exception.
• Perception is more important than reality: The core of a Ponzi scheme is the art of manipulating people’s hearts. Your project doesn’t need to be what you claim; it just needs to align with your audience’s perception and make them believe it’s true.
• Let them gamble: Don’t make decisions for your users by sacrificing their opportunity for security. Your audience enjoys taking risks, or they wouldn’t be involved in crypto.
• Calmly say “Thank you for participating”: Be rational. Your primary goal is profit, not emotional investment in the project. When the trend ends, retreat decisively.

Timing

“With the right time, the heavens and earth work together; when the time is gone, even heroes cannot be free.”

The success you can achieve depends on resources, but whether you can succeed completely depends on timing.

Many Ponzi schemes only take off because they launched at the right moment, while other projects with comprehensive products struggle just to break even.

How to evaluate timing?

For cryptocurrency users, the primary consideration is the risk-to-reward ratio—the balance between perceived risk and expected return.

Two expected considerations:

Liquidity expectations relative to the market

Users will be influenced by their typical daily trading volume habits. For example, during a bull market, the daily trading volume of $SOL may be $1 billion, while during a bear market, most cryptocurrencies may only have $500,000 in daily trading volume on Binance.

• Why it matters: Liquidity determines how easily users can convert their book value into cash, which is a key factor in decision-making.

• How to measure: Analyzing 30-day trading volumes on both DEX and CEX platforms provides a clear indicator.

• Expected market Beta ROI under similar risk conditions

In a bull market, even a 100% APY might struggle to attract $1 million in TVL, whereas in a bear market, users may lean towards safer 10% mining yields.

• • Why it matters: Users compare returns based on current market conditions and adjust their risk preferences accordingly.

Specific to the type of system:

• Liquidity: Mining-type (early stage) < Splitting-type < Pool-type < Mining-type (mature stage)
• Expected returns: Mining-type (mature stage) < Mining-type (early stage) < Pool-type ≤ Splitting-type

Quick tests:

• Liquidity test: If the liquidity of a Ponzi is below the current market expectations, it’s not a good time to launch.
• Return rate test: If the Ponzi’s return rate is lower than the market Beta return rate, it’s also not a good time to launch.

Do not be overconfident; opportunities are fleeting

Timing is like flowing water, constantly changing. If your resources are not sufficient to alter the trend, focus on speed: quick delivery and rapid market entry. In this case, leveraging industrialized, replicable, and cost-effective product frameworks may become crucial.

Can a Ponzi scheme ultimately be rationalized?

Dear, isn’t this exactly what we’ve been doing for thousands of years—rationalizing and integrating predatory systems into societal norms? This process is so efficient that people no longer chase predictable returns but instead shift toward seeking “a chance,” blaming their losses on their own “technical issues.”

So, what is the endgame for the three types of Ponzi schemes?

• Mining type: Evolving into a mutual fund-like form (through locking TVL for dividends, such as mining pools, JITO model).
• Pooling type: Evolving into a casino (e.g., PumpdotFun, Crash Games, JLP/GLP pools).
• Splitting type: Evolving into an alternative asset market (e.g., Pop Mart, BTC inscriptions, NFTs, ICOs).

Before we finish

Thank you for taking the time to read through this long piece. I aimed to be concise yet comprehensive. The Three Ponzi Theory was first introduced last year as part of my “Open Rug” project in the Chinese crypto community, which serves as a teaching tool for operators. This series of articles is based on my experiences accumulated over the past 8 years, including both successes and failures. Some of the Ponzi projects I worked on had a peak funding volume of over $1 billion, with exits in the tens of millions.

The post is no longer available.
Today, the Three Ponzi Theory has become one of the most frequently cited analytical frameworks among degens and developers in the Asian crypto space. From a relatively moderate perspective, the Three Ponzi Theory is a highly effective growth-hacking methodology.

The true purpose of the Three Ponzi Theory is to deconstruct and demystify the overly complex and hypocritical narratives spun in the Western crypto space. It redirects developers’ attention to what truly matters: using the omnipresent Ponzi economics to create a world where everything can be priced, traded, and frictionlessly financialized.

Of course, the main goal is—making big money.

I hope this was helpful, in whatever way it may be.

Disclaimer:

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2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute investment advice.
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