Original title: "Metaverse Cognition and Practice Notes - Starting from Arbitrage + Leverage Thinking"
Original author: @Mirro1225
Original source: X Research DAO
拝启: This is Mirro, and I will reflect on the past behavior logic behind the past in this series of articles "Metaverse Cognition and Practice" The methodology and thinking of the summary; all the cases are my personal experience, as to whether this note is beneficial to you, whether it can bring interesting thinking, depends on the current stage of the reader. I personally think that the unity of knowledge and action, and doing what you think, is an extremely critical ability in this circle.
At this point, I think readers above VP or A8 level can save precious time and skip, I don't want this longer article to take up your little spare time (such as my leader). This notebook may seem boring and obscure, you can directly communicate with me on Twitter or other social media, and also introduce my partners @X researchDAO @321DAO @@Beenetworkintl, welcome everyone to pay attention.
Secondly, I think the "metaverse" is always a shell, the entity under this advanced packaging It is transformed from what we can learn from our past practice; that is, it is always the same. At present, most of the products we can interact with cannot be separated from the foundation of Internet engineering. After removing the fancy appearance, the rest is code, UI , mathematical financial model and its product culture narrative. As a practitioner, the author never introduces to laymen what social environment this industry can change, how much employment or GDP it can bring. I only care about where there are benefits that can be captured in the industry, and that is enough. I believe that even if we don't know how to code, algorithm and AI learning, we can still find advantages and find our own prey.
In the first issue of this series of notes, I will introduce "arbitrage thinking" and "leverage Use "two methodological thinking that I personally find valuable at present; expand on the basis of these two, summarize some existing past cases, and summarize the experience and lessons to complete this first note. This time, we will focus on the series of behaviors of "airdropping/whitelisting/moving bricks", and reflect on the high-frequency interactive behaviors from the perspective of users, the perspective of the studio team, and the perspective of currency listing. magic weapon.
Users who interact with each other for a long time, swipe their hair, and make white orders have more or less experienced being stolen and reversed , Even if you harvest the embarrassing situation that you can't pay back. There is also the dilemma of spending a lot of energy, material and manpower, and finally just getting back the money. What can we learn from these past experiences?
"Arbitrage" trading is a word often mentioned by the author's mentor, that is, arbitrage; What I communicated with is cross-trading platform arbitrage, that is, for example, recharging the same amount of Bitcoin from a trading platform in the United States to a Korean trading platform with a different marked price for selling at a higher price, thus forming a simple space arbitrage. The interest rate difference earned in the middle minus transaction fees and labor costs is the total profit of this arbitrage action. The well-known arbitrage opportunity this year is that after the de-anchoring of UST, LUNA was hit hard, and there was a huge difference in marked price on different trading platforms, and there was a high degree of asymmetric information in the deposit & withdraw channel. In the night of mainland time that day, even if you don’t know how to code, as long as you spend time repeating the above actions, you can realize high-value luna on the OKX trading platform and luna on the binance trading platform. The gala event that appeared in July; maybe the contract can let you get A9 overnight, but this interest seems to be less risky and the odds are not bad!
Image Sourced from https://algotrading101.com/learn/crypto-arbitrage-guide/ Classic Triangular Arbitrage
In May 2020, Uniswap V2 was officially launched on Ethereum. Uniswap V2 allows users to create trading pools between any pair of cryptocurrencies without requiring ETH as an intermediate currency. Uniswap V2 introduces new arbitrage opportunities: traders can now trade cryptocurrencies cyclically: traders can exchange currency A for B, then B for C, and finally C for A through different trading pools. The three floating rates are almost certainly not in perfect sync, which opens up the possibility of arbitrage for revolving trades. On the other hand, arbitrage strategies are easier to implement in a DEX than in a centralized exchange (CEX).
Okay, since we mentioned the words risk and odds at the same time, here I think Focus on the understanding of "arbitrage thinking".
All arbitrage behaviors, low-risk operations to obtain excess returns, require a lot of assumptions , to control variables and reduce the local black swan risk caused by poor information.
For example, the arbitrage of the LUNA event, we need the following assumptions when operating (not all, just do For example):
The time difference caused by the congestion between the OKX withdrawal channel and the binance recharge channel is insufficient In order to smooth out the price difference between bilateral trading pairs
Both trading platforms are not disconnected
We can use the largest amount of liquidity in our hands to conduct cross-exchange transactions every time, that is, the transaction increases There is no upper limit for coins
After binance is sold, you can withdraw U back to OKX and continue to operate repeatedly
We know the approximate opening and closing times of the two exchanges, which determine our time Window
The transaction fee can be ignored
When all the above assumptions are met Then we can start to calculate the profit margin, and other costs, and finally calculate our capacity efficiency. (Insufficient assumptions that lead to black swan losses will make us fail miserably, so every assumption is very important)
For example, the current spot market price of okx is 0.00001 one, and binance is 0.0001 one, then the profit margin of our repeated operation is 1000%. After becoming 10 lunas, the above operations can be repeated. After we repeat the above operations once, assuming that the marked price of okx does not change significantly, then our initial investment amount profit margin is 10000%, that is, even if you only invest $100 , if the transaction depth is sufficient, you may get 10,000 US dollars by doing a round of the above operation; of course, as the amount of repeated withdrawals like us increases, the price difference between okx and binance will smooth out, or trade The platform directly closes the redemption and withdrawal channel. The longer the time window brought by these, the greater our profit margin.
Then after we set up these assumptions that can probably predict the risks, we need to The most important thing is to find variables that require us to change our strategy at any time or stop or even stop losses.
Here are a few variables that we think will throw us completely out of control.
If we use bot, write code, code has loopholes, and do the reverse operation. Or charge to the wrong address, chain, etc.
If you buy spot from okx in advance, okx will close the withdrawal channel
If you mentioned that it took a lot of time on the road to Binance, the transaction at this time There is no profit for the pair
If binance delists the trading pair
If binance closes the withdrawal channel of U
If there are trading platforms such as mexc or huobi Is it possible for similar arbitrage opportunities to have better spreads on DEX?
There may be many more, of course it is obvious that we can Except for the risk variables that we control, other things seem to be out of our control. If we need to solve other hidden risks, maybe we should find the person in charge of the spot of binance&okx to know the situation, or an engineer who knows the trading platform can help us build a private bridge to withdraw Token? In short, we call this series of similar information asymmetric information, which requires the accumulation of contacts and cooperation, to blow up the trading platform (?)
If the above risk conditions appear, we will immediately discuss the use of planB or stop loss, stop profit, such a closed-loop overall idea is for risk-neutral or averse investors A must for participants. That's why I didn't mention some messy definitions at the beginning, to talk about how to make money, how to make airdrops and other very concrete arguments; Important thinking, the essence of playing in this circle is still the financial market, either open or partial, but its essence remains the same.
Arbitrage thinking cannot determine how high our return on investment is, but it can have a higher probability of obtaining better returns than the market when the market rate of return is flat or high income.
Similarly, after the FTX thunderstorm this time, cross-exchange arbitrage and price difference also exist Yes, but many people are unable to withdraw cash after charging, and the result is very uncomfortable, especially the behavior of players who lost a lot of money after recharging seems to be insufficient in awareness and control of risks.
Secondly added: Regarding the odds, the author understands that for a market item, the information we have The more, the more accurate its expected return, on this basis, the lower our fixed cost, the greater the odds. That is to say, if a project has an expected income of 5eth and a fixed cost of 0.5eth, this expected income ratio is our odds. In arbitrage, it is not necessary to look for projects with high odds. High odds mean that there is a high degree of poor information. Even if the fixed cost of a project is 4.8eth, as long as we have fewer uncontrollable factors and a longer window period, the value brought by this arbitrage cannot be underestimated.
Let's go back to the beginning, now there seems to be some dilemmas mentioned in the beginning A better countermeasure has been found, but this is not a panacea. If you choose arbitrage thinking, you must give up the opportunity for high-frequency speculation, and you will lose a lot of opportunities to realize big things with small gains, or even risky free cash.
Next, the author will use the recent experience of leading a group of friends to conduct a fusionist whitelist review A practical thought.
(Paste the project income)
Project address: https://twitter.com/fusionistio
Let's first talk about why this project was launched?
"Information difference advantage" is my current naive idea of the early estimate of the value of NFT in the market , this idea stems from a large number of project parties contacted in the past year, and also helped many projects to do some incubation work, such as user drainage cold start, which is mainly done by @Beenetworkintl (the same as Twitter).
More and more projects will always emphasize during the cooperation period that "do not use mainland KYC users, I hope that there will be real user retention and transformation in North America and other regions of East Asia, Europe and other regions”; regardless of what this “geographical discrimination” can bring, at least it shows that a considerable number of projects will choose overseas markets for promotion and launch in the early stage, which means The sooner people in mainland China know this kind of news, the easier it is to make money by participating in the project. Thinking about the projects of Rafeitian in the past, few of them came out of the Chinese context.
Fusionist was mentioned occasionally in October by my trading platform friend in Japan and brother of Binance A project of , after they announced a series of activity rules, I drew attention and studied their rules.
So taking Fusionist as an example, for NFT projects, in order to determine whether to sell, we first assume:
The product manager of the project side is not a fool (if the product manager is a fool, there is no need to interact)
The project already has financing (Small Rong is also considered Rong)
There is asymmetric information in the project
The project party has no obvious rug history (even rumors need to be paid attention to, Will affect the price)
The project party does not have crisis public relations, or there is discrimination/variousism, etc.
... more to be added
If the above assumptions are not established, the subsequent theories are not applicable, or the loss should be stopped
Based on these premises, the variables we found in this project are:
Giant whales are more friendly (this determines our competition input cost)
The entry threshold is fixed
The minimum investment time is still Not calculated clearly
The minimum cost of capital brought in is floating
The degree of decentralization of interaction rules is low (That is, whether it is basically based on the data on the chain, and whether there is more manual intervention)
The speed of popularity (this determines how long the information gap window period is)
For Fusionist, the above variables can basically be used as a reference, so now let’s look at the rules of Fusionist:
Just to list a few core ones:
There are only 500 places in total
Only 200 top-ranked winners will be selected until Nov 3
Alpha Prestige winners have 7 days in 2022 Claim their Alpha Prestige from Website > User Account after 09:00 PT on November 12th.
Wallet assets must be worth at least 1 USDT to complete user registration
Only ETH, USDT, USDC, and DAI will be counted as assets
Only from MoonBirds, Azuki, Bored NFTs from Ape Yacht Club, CryptoPunks, Clonex, Doodles, and Meebits will count toward the number of NFTs held by each wallet
Fusionist reserves the right to immediately cancel the participation of any participant showing signs of fraudulent activity.
In short, there must be WL in the first 200, and after the end of the first batch Randomly draw 300 out of the 5000 people. According to the author’s personal experience, there is a high probability that 300 will not be drawn. If the top 200 people are excluded from the 5000 people, the probability of being drawn is less than 6% for 300/4800. For 200 accounts with a score of 880 (explained below), the expectation of being drawn into WL is only about 10 accounts. If it is not a traditional studio, buy email + Twitter + DC + register a new wallet and deposit about 2U of assets, the cost of an 880 initial novice account is about 10U, 100 accounts are 1000U, 500 accounts are 5000U, for WL As far as masturbation is concerned, it takes a part of the price and time.
On the other hand, we can clearly feel that this rule is actually good for giant whales For blue-chip users, I made a table here to record the point-to-income ratio brought by different asset accounting methods:
< img src="https://image.theblockbeats.info/upload/2022-11-17/a0b02f972545171464a780be0b5b73026d80fc78.png?x-oss-process=image/quality,q_50/format,webp">
*First of all, from the perspective of the entire gradient, this is not a linear growth input-output ratio, so according to our The liquidity held in hand can calculate a reasonable optimal asset portfolio to maximize fractional efficiency. It is obvious that from the perspective of capital utilization, 1000U, 3000U and 10000U are all good asset allocation options. Then we need to further analyze the value of points brought by other assets.
*From Looking at the entire gradient, this is not a linear growth input-output ratio. First of all, we can simply see from all target assets that Meebits is the cheapest, and all Bluechips have the same score weight, even if you have two BAYC , which is equivalent to my two meebits scores; it can be seen from the table that the cost performance of holding 1/2 or 4 NFTs is not bad.
What do you mean? For example, I invited ten accounts from A to J, and each account has a blue-chip NFT, then I will add 1200 points correspondingly, if each account has 10000U, There are still 900 points, plus 800 points for invitations and 320 for task forwarding, and I have 3000+ points without any assets.
Okay, let’s imagine a scenario here:
How many good buddies do you have
Everyone is so poor, a group of people can make up 50,000 U (no In terms of money, I have also thought about this issue, so the notes are in the next part, so let’s add leverage), can I participate in this kind of activity under this situation?
There are 800
50,000 U split into a 10000U+8 NFT, almost just right, large 800+600 (cash points)+600 (2 NFT points)+720 (one 1NFT for each of the remaining numbers)=2720
According to the ranking list of the day, this score can basically be ranked in the top 10, even if the final list has a ranking before 100
The key point is that 50,000 U can be used as a top-level account, and you can probably get one WL. Then imagine that 500,000 U can make almost ten accounts. At this time, you have to Ask yourself, I have more than 3 million fucking, and I still want to come here to flirt? Then why don't you think about those OGs who are A9 and A10 and don't let go of some opportunities that seem to have low returns. And I mentioned before that this project was voted by BinanceLab, and the total number of disks is only 500. It is not ruled out that it is an OG disk. There are many people from the project side. Last time I also recorded another gamefi voted by BinanceLab——Ultiverse
The total amount of NFT is nearly 10,000, and it has not been broken. Although the transaction volume is average, it has not been broken, and there are profits. The plate is 20 times smaller. In fact, there is room for imagination .
The last risk lies in:
Project RUG, link the wallet, right? It’s all rolled up for you, and the blue chips and cash will be taken away
Hacker attack, take all away
As for the performance after that , Let's wait and see after the market opens, I personally think it should be no worse than projects like Halo or Ultiverse.
The author believes that familiarity with leverage and rational use of leverage are compulsory courses, not everyone can rely on a few Thousands of U principal bought SHIB or DOGE, a spaceship that takes off with 0 leverage.
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Especially in the bear market, currently in November 2022, there is no deep bear, and the problem of FTX involves a large number of interest groups , this wave of bear market should go longer than before. So in such an environment, do we have to give up leverage tools and turn to "stable investment"?
I think leverage and high risk are not equal, the degree of risk management and the formulation of strategies It is closely related to the completeness of due diligence; in the state of being kept in the dark, once the strategy is wrong, even if there is no leverage, it will hurt the principal. If you are more familiar with the strategy and have a reasonable strategy, leverage will significantly magnify the income, which is also a win-win for the lender.
Whether a strategy is reliable or reasonable is sometimes unpredictable in the game, we You can try to communicate with the lender, treat yourself as a VC or HFT, and try to tell the whole thinking strategy. What loopholes and potential risks can the other party find? After communicating with multiple lenders, everyone agrees on the general direction, the logic is closed, and the stop loss and profit are very clear, so you can use leverage and you're done.
From the perspective of arbitrage, this is different from our prep with high multiples or spot stock Whether it is the above-mentioned masturbation or moving bricks, it is a repeated step until the end of the window period or an emergency situation occurs, or even a stop loss is required; generally speaking, the possibility of losing the principal comes from the The information is not complete, the strategy is wrong, or the emergency risk situation. Therefore, in theory, the less risks we can’t see and the more we consider, the more assured this leverage will be.
On the other hand, I think since you are in finance, you should embrace and understand leverage Otherwise, every time there are so many book value explosions in the bull market, how come the projects with sky-high valuations come from? It can’t be all real money. I’m against some KOL rhetoric, such as borrowing money is a gambler, and blowing bubbles is cutting leeks; Don't be too humble.
It may be more extreme, but I currently think that credit, debt, or packaged into other products Debt is a turbine that promotes the wealth effect. Whether it can make us earn money depends on how we use it.
About the advantage of information gap, feel free to add here, record it
For a specific example, let's take this fusionist as an example
The conclusion is: the more significant the asymmetric effect, the smaller the audience for user promotion in mainland China, the larger the amount of project financing, the richer the product manager’s experience in production and research, and the cleaner the background, then the project The greater the "expected return on investment"
In addition to the amount of financing, project issuance and In addition to project experience, a very important one, and what I value more is WCP (weight of Chinese mainland Penetration)
Explain the approximate caliber used, it is not precise, mainly there is an expectation
weight of Chinese mainland Penetration(WCP) with @SKARKS3 @iamyourchaos @liangfenxiaodao Take @liangfenxiaodao @nine_DeFi as an example, if none of the following operations are done, then its weight is 0 (the following is just an example)
We If you do enough statistics, you can roughly calculate the WCP under this caliber: maybe you can do a monitoring in the future? Assume penetration is P, and the total sample size is n
Generally speaking, the lower the penetration rate, the better, unless it is a mainland native project , Old IP modification and the like need to be looked at from another perspective, and it is not entangled to make money.
In short, this method can be used as a reference for selecting projects after verification, but it is also very likely to lose some projects with high odds
After these benchmarks are established, comparative analysis can be carried out according to the track where the project is located, and the specific methods will be recorded later.