Incentive Misalignment: Can Traders Escape the "Suicide Squad" Predicament?

Original Author: @0xuberM

Original Compilation: Saoirse, Foresight News

Editor's Note: This article analyzes the survival status of Launchpad, creators, and traders from the perspective of incentive mechanisms, pointing out that Launchpad focuses on trading volume, creators lack price support motivation, and traders have become "suicide squads," forming a vicious cycle. Currently, only VCs and insiders have the motivation to drive up token prices, while ordinary traders are in a predicament. The article objectively presents the market situation, and although it does not provide solutions, it offers an important perspective for understanding the operational logic of the crypto market. The following is the compiled content:

Incentive Mechanisms

Incentive mechanisms are the core driving force behind the functioning of the world. If you want someone to do something, you just need to create an environment or scenario where they can receive rewards for completing that task ------ this is a basic principle of human nature.

However, currently, on-chain tokens (especially those issued through Launchpad) lack incentive mechanisms to drive up prices, and this issue urgently needs attention.

The Operational Logic of Launchpad

Yesterday, I made a sarcastic tweet related to this topic, and now I want to emphasize one point: token issuance platforms (Launchpad) have no motivation to raise the price of any specific token, except in certain special circumstances (which we will discuss later).

The operational model of these platforms is essentially similar to that of a casino; for them, the only important metric is "trading volume."

This is precisely why "permissionless issuance" and "bonding curves" (a mechanism that adjusts the relationship between asset supply, demand, and price through algorithms) have become mainstream today ------ just as casinos continuously introduce lottery games, platforms also hope to provide as many speculative opportunities as possible, attracting more participants by allowing a few to "hit the jackpot."

So, how do token issuance platforms profit?

It's actually quite simple: they can earn revenue just by "existing." On one hand, they provide ordinary people with permissionless token issuance channels; on the other hand, they offer speculative tools to investors through bonding curves. To further scale, platforms must compete for market share, and there are two common methods:

1. Conduct marketing activities: either spread negative news about competitors (FUD) or emphasize their own "differentiation," even if their actual business is not fundamentally different from their competitors;
2. Drive up the prices of certain tokens: this is seen as "the best marketing method," quickly attracting user attention.

I've observed a pattern: token issuance platforms and their teams will only fiercely compete for market share in two situations: first, when market share has been taken by competitors and needs to be reclaimed; second, when they want to deliberately suppress competitors and damage their reputation.

Interestingly, whenever these two situations occur, a few tokens on the platform always start to rise in price, sometimes reaching high valuations. They will first slow down the pace of large-scale token issuance, using "green candlesticks" (symbolizing price increases) and marketing tactics to attract users; once users firmly believe "they can make money here," they will restart large-scale token deployments, significantly increasing trading volume ------ this is not a critique, just an objective observation.

To be honest, if I were a team member of a token issuance platform, I might adopt the same strategy. After all, the platform is essentially a commercial entity, and the core goal of business is to maximize profits.

Creator Behavior Tendencies

Like token issuance platforms, creators (such as streamers) also have no motivation to raise the price of the tokens they issue. Currently, the revenue mechanism for creators is highly similar to the "permissionless issuance" model ------ this model benefits creators directly, just as it benefits "frequent token issuers."

You might often hear creators say, "Look, I can earn so much money just by turning on my camera!" They attract more creators to join in this way, and more creators mean more token issuances, leading to more speculative opportunities.

For creators, the logic of profit is equally simple: just "exist" ------ turn on the camera, issue a token for speculation, and they can earn revenue. Of course, if they want to make big money, they do need to persist long-term, but even so, there is no guarantee of long-term success.

After all, in the cryptocurrency field, user attention is fleeting, and long-term success is inherently uncertain. In this environment, creators can easily develop the idea of "making a quick buck and leaving," which is actually an inevitable result of the incentive mechanism.

Traders: The "Trench" and "Suicide Squad" of the Crypto Market

So what about us traders? What is our incentive mechanism? What drives us to do what we do?

The answer is harsh: we are incentivized to "undermine each other." After all, the "trench" of the crypto market was dug by us (never forget this). The meanings of "trench" and "suicide squad" are also clear ------ ordinary traders like you and me are essentially "expendable cannon fodder," the soldiers standing at the forefront of the market.

Since no party has the motivation to keep the price of a certain asset rising in the long term, we can only participate in this "game" in a more brutal way. There is no "player versus environment (PVE)," only competition and mutual harvesting.

Because the price increase potential of tokens is limited, we have to adopt some aggressive means to enhance our profit probabilities, such as locking in 10% of a token's supply in advance with multiple wallets (i.e., "multi-wallet pre-staking"). In this market, "timing" is crucial ------ you must be early enough, or you may become someone else's "exit liquidity," ruthlessly harvested.

You might ask: How can traders make a profit? The answer is: we must put in more effort than others. Unlike token issuance platforms and creators that "profit easily," we need to continuously improve our skills, accumulate industry influence, cultivate judgment, expand our networks, and stay updated with information across multiple fields ------ only by doing this can we have a chance to make money in the market.

Even when encountering tokens that surge in the short term (like some recent CCM tokens), we still lack the motivation to hold them long-term, because new "speculative opportunities" (like new lotteries) will soon emerge. The "machine" of this market must continuously produce "lotteries" to keep running.

And with each new opportunity that arises, it is accompanied by significant losses for many traders, just like a trench in reality filled with the bodies of the fallen. For example: for every account that profits through the Axiom platform, there are hundreds of accounts whose portfolios have been wiped out.

It may sound like I'm complaining, but I am also a participant in this "game," so to put it positively, I might be considered a "hypocrite."

Now I have three thoughts: perhaps I should "adapt" to the current market rules? Or perhaps I should completely withdraw from this game? (Unfortunately, I'm not someone who gives up easily.) Or perhaps I should explore other fields? (In fact, I am already doing this.)

Thoughts on Market Cycles and Solutions

Will this "game" continue forever? I don't think so. History has repeatedly proven that this vicious cycle will eventually end in one way: winners continue to profit, and losers are continuously eliminated; until a certain point, when there are no new "losers" in the market, the former winners will become the new losers.

And when everyone is exhausted and chooses to withdraw, those token issuance platforms will reappear, launching a few "premium new lotteries," once again attracting everyone to participate ------ this is like "the snake eating its tail," forming an unbreakable closed loop.

Speaking of this, there is an interesting phenomenon: the tokens that have performed well recently are almost all those that were not issued through bonding curves, but rather projects where "a large number of tokens are locked by insiders" ------ we even jokingly refer to this situation as "violating regulations."

Why is this the case? The core still lies in the incentive mechanism. Currently, in the cryptocurrency field, the only ones motivated to keep token prices rising in the long term are venture capital (VC) teams and project insiders ------ because only with long-term price increases can they sell at higher valuations when the tokens unlock, reaping huge profits.

Ironically: the traders who are currently "winning big" in the market are precisely those who purchase "poor-quality assets bundled by VCs" ------ and this was originally a problem that the bonding curve model aimed to solve.

So, what is the solution? To be honest, I'm not sure. But one thing is clear: if a project team wants their token to succeed, they cannot risk issuing it through a bonding curve ------ otherwise, it could lead to a situation where "a 17-year-old uses Axiom's multi-wallet to seize 10% of the token supply."

As an on-chain trader, I am more aware: the "expected value (EV)" of participating in this "game" is becoming increasingly low. Regardless, the market must change, and the incentive mechanisms must be adjusted ------ otherwise, this cycle will only continue to repeat.

I don't have ready-made solutions, only some preliminary thoughts, and I'm not sure if these ideas are feasible in practice. I don't blame anyone for the current situation; it is merely an inevitable result of the existing incentive mechanisms. Unless some institution or model can completely break the current pattern, it is difficult for the incentive mechanisms to undergo substantial changes.

I am just an active trader and a user of token issuance platforms. I write down these thoughts in the hope that the platform teams can see them (although with each experience of this cycle, my hope diminishes a bit, and I think others may feel the same).

As people often say: everyone looks out for themselves. Before the market truly changes (if it ever does), I wish all the "suicide squads" good luck ------ may the more experienced and professional "soldiers" win in this game.