The Three Disc Theory is a cognitive model about Ponzi schemes proposed by @thecryptoskanda. This article explores the reasons for the three bull markets based on this theory: MEME coins are mutual aid schemes, DeFi is dividend schemes, and ICOs are split schemes.
What is the Three Disc Theory#
According to @thecryptoskanda, one of the greatest values of Crypto is the first realization of Ponzi democratization and tradability.
Everyone can issue and trade tokens. Setting aside external factors, each bull market in Crypto is driven by fundamental Ponzi innovations. By studying Ponzi innovations, you can find major trend-level alpha in the market.
Although Ponzi schemes may seem complex, they ultimately boil down to three models: dividend schemes, mutual aid schemes, and split schemes. All Ponzi schemes are combinations of these three models. Based on this logical analysis method, he calls it the "Three Disc Model". The three schemes can appear individually or in combination, each with its own advantages and disadvantages, corresponding to the logic of starting, operating, and collapsing.
- Dividend schemes: One-time investment of a lump sum of money, earning profits through linear dividends over time.
- Mutual aid schemes: A gives money to B, B gives money to C, and C gives money to A, forming a mismatch of funds and settling profits on a per-transaction basis.
- Split schemes: Continuously splitting an asset target into new targets. Attract incremental funds through low-priced targets. Profits are realized through the appreciation of the targets.
In terms of logical design, the characteristics of the three schemes are as follows:
MEME is a Mutual Aid Scheme#
The core of traditional mutual aid schemes lies in the mismatch of funds. This model usually involves multiple participants transferring money to each other in sequence, forming a fund cycle. Generally, a user receives more money from the next participant than they give to the previous participant, thus earning more money than their original investment. The project usually earns returns through transaction fees.
This type of Ponzi model is the most decentralized among the three models because once the rules are established, there is no need for "management parties" to intervene, as transaction fees are essentially taxes.
Traditional mutual aid schemes involve fund mismatches on a spatial scale, so they do not need to form a fund pool, and most of them cannot freely enter or withdraw funds, but they must promise high returns. So why is MEME coin considered a mutual aid scheme?
We generally believe that MEME coins have two most important attributes:
- Fair launch: Everyone can participate (everyone can help each other)
- Full circulation: No need for project reserves
The so-called "cultural attributes" and "large total supply" are not necessary.
In fact, MEME coins are a form of fund mismatch on a time scale. Let's assume that in a certain bull market context, a MEME coin is consistently rising in value. In reality, those who buy coins at a high price today are transferring money to those who bought coins yesterday, and those who bought coins yesterday are transferring money to those who bought coins at the lowest price the day before. And because of the uniqueness of time itself, it creates a "passive lock-up" (people cannot cross the same river forever). So we have the following comparison:
DeFi is a Dividend Scheme#
DeFi was the core narrative of the previous bull market (2020). Technically, it means writing financial rules into smart contracts (a way of combining blockchain technology with a specific field). From the perspective of token economics, it distributes protocol tokens through liquidity mining: depositing money into protocols to obtain tokens.
For example, the two most important aspects in the financial field are trading and lending, which gave rise to Uniswap and Compound. In Uniswap, users provide liquidity by depositing token A and token B into a trading pair LP to earn profits. In Compound, users need to deposit tokens available for lending into a fund pool to earn profits. Most of the profits are in the form of protocol tokens, with a small amount in stablecoins.
DeFi is a typical dividend scheme because the basic logic of dividend schemes is "one-time investment of a lump sum of money, earning profits through linear dividends over time". Isn't it exactly the same as the above approach? We also have the following comparison:
ICO is a Split Scheme#
ICO was the core narrative of the previous bull market (2017). The general idea was to write a white paper about an idea in any field, then raise funds and issue tokens, leading most people to mistakenly believe that the only application of blockchain is "issuing tokens" (another way of combining blockchain technology with a specific field). So during that period, many strange tokens appeared, such as "issuing tokens for environmental protection", "issuing tokens for computers", "issuing tokens for charity", and so on.
As we know, split schemes involve continuously splitting an asset target into new targets. Incremental funds are attracted through low-priced targets, and profits are realized through the appreciation of the targets. Isn't this exactly what ICOs did? If we consider the cryptocurrency race at that time as a fund pool, the emergence of various ICOs continuously split the cryptocurrency asset target into new investment targets (new ICO tokens) through "new stories" to attract incremental funds. Thus, we still have the following comparison:
The Crypto Circle is the Ponzi Circle#
If we ignore the specific technological evolution and only consider it from the perspective of token economics, it seems that the past decade has indeed represented the evolution of Ponzi patterns. We can even consider Bitcoin mining as a form of dividend scheme (staking machines generate BTC profits).
So, is the evolutionary sequence: dividend scheme (BTC mining) - split scheme (ICO) - dividend scheme (DeFi) - mutual aid scheme (MEME)? At the same time, projects have become increasingly decentralized.
On the other hand, if we consider MEME as a race, with more and more MEME coins appearing, it is actually a manifestation of the split scheme. Therefore, MEME can be considered as a combination of mutual aid and split schemes.
Mutual aid schemes may be the true answer to "no one wants to take over" in this bull market (Restaking is a dividend scheme, DePin is a dividend scheme, Layer2 is a split scheme, obviously retail investors in this bull market only want to play mutual aid schemes).