Why is the 'reverse (3,3)' pattern experiencing another wave of rug pulls? A retrospective on the bloody history of rug pulls in the (3,3) pattern.

Recently, the "reverse (3,3)" project represented by EggsCare has become very popular. This is not only because of the significant increase in token value, but also because of its "one-day wonder" price performance. According to incomplete statistics from BlockBeats, the token prices of most reverse (3,3) projects, including EggsCare, have risen several times in one day and then quickly dropped by 80%. Many projects are blatantly rug pulling.

近乎一致的历史表现与 (3,3) 使我们不得不思考，为什么 Rug 总是出现在 (3,3) 模式中？它的本质是什么？

What new tricks have been played in the reverse (3,3) game?

The reverse (3,3) pattern refers to Camelot and OHM, both of which reward token stakers and LP stakers through inflation, while using treasury funds to buy back tokens and raise their prices. On the other hand, reverse (3,3) projects such as Carrot and Eggs punish holders who do not stake their tokens through deflation.

Using EggsCare as an example, the number of tokens held by the holder will automatically decrease. Therefore, in order to ensure their own holdings, participants must lock their tokens in the Vault. The supply of EGGS tokens decreases at a rate of 0.001% per block, which is approximately 7% per day. In order to avoid the deflation of holdings, holders must place their tokens in three types of Vaults:

1. Full Protec Vault, with a lock-in period of 7 days, allows users to deposit EGGS and withdraw them without any loss after 7 days.

2. Big Protec Vault, the lock-up period for this method is 24 hours, but it requires depositing EGGS/ETH. ETH will not be affected, while EGGS will still incur a daily loss of 7%. The difference is that users will receive a 90% reward, which is 10 million EGGS per block.

3. Smol Protec Vault, with a lock-up period of 24 hours, also requires depositing EGGS, which will still incur a daily loss of 7%. Users will receive Big Protec Vault rewards (10% of the standard 100 million EGGS per block).

At the initial stage, EggsCare also received good evaluations from participants, and the market has also seen the emergence of EggsCare imitation projects. Yesterday, the EGGS price rose sharply, and the community showed a high level of FOMO sentiment, shouting everywhere about the "new experiment that changes the (3,3) pattern." However, in less than a day, these reverse (3,3) Tokens plummeted sharply like rugs, and projects such as Bird Finance and Golden Cow Farm even cut off their own official websites.

(3,3) Blood and Tears History, Rug Destiny Engraved in Genes

In the second half of 2021, OHM, whose price has been rising all the way, has made everyone remember the meme "(3, 3)" with a return rate of nearly a thousand times. Since then, Olympus DAO has raised the banner of "protocol ownership of liquidity", claiming to bring DeFi into the 2.0 era. And thus, the story of (3, 3) begins.

OHM and its forks

At that time in the cryptocurrency industry, an APY annual yield of 7,000% was not easy to come by, but since the birth of OHM's (3,3), APYs in the thousands have become insignificant. For a while, OHM forks with APYs of 70,000%, 7,000,000%, and even 7,000,000,000% were popping up on various public chains (mostly in the Avalanche ecosystem), and DeFi ushered in the "(3,3) Summer".

Regarding the specific mechanism of (3, 3), BlockBeats has detailed explanations in "APY 70,000%, DeFi 2.0 Dominated by OHM Forks". Simply put, it is a game theory where token holders can obtain more tokens by locking them up, arbitrageurs can buy these "air coins" at a low price using bonds, and the protocol obtains real money and guarantees token prices through repurchases.

By sacrificing some of their savings returns, the forks of OHM continue to raise their APY, attracting the attention of retail investors in this way. "3, 3" has become "4, 4" or even "9, 9", taking OHM's concept to a daunting level. For example, the fork called LF Staking provides investors with countless multiples of APY, which was only average at the time. Many protocols even offered APY that could double a user's token amount in just two days...

Of course, higher APY also means faster capital rotation. Those early participants (mostly team members) withdrew their funds immediately after receiving the "tuition fees" paid by later participants, causing the token to enter a death spiral and the price to quickly drop to zero. This is actually the reason why the (3,3) pattern ultimately failed: some speculators found this fastest, purest, and most attractive fundraising model and maximized its effectiveness.

Let's briefly summarize the "harvesting process" of the (3, 3) project:

1. The team forked the OHM contract, made some modifications to the parameters, and then started promoting and advertising on Twitter.

2. Some Degen users saw the project and started participating in the public offering, locking up and earning more tokens, gradually becoming big holders like the team.

3. The team uses public funds to raise the Token price and attract more retail investors. Some of them buy through Bonds, while others buy Tokens directly.

4. The team earned enough funds, stopped repurchasing, and ran away. The big players were the first to start selling when they heard the news, while some retail investors kept shouting "buy the dip" and continued to enter the market.

5. Finally, large-scale selling by major holders caused the token price to plummet rapidly, leaving retail investors with empty pockets.

And forks like SnowDog DAO are even more direct. The team raised $44 million during a one-week public offering, but just before the opening, they withdrew most of the funds citing a mistake, causing the protocol to lose its buyback ability and the token price to plummet by 99%.

But people are always greedy. They lost money in this project and hope to make it back in the next one. Many people saw the higher APY and rushed back into this fund. As a result, the APY of OHM forked higher and higher, and the project's lifecycle became shorter and shorter. In the end, the lifespan of the majority of forks will not exceed one week.

Sifu self-theft, AC retirement, (3,3) turning point Rug

(3,3) During the heyday of the industry, there was a protocol called Wonderland, which was recognized as the best OHM fork, even surpassing OHM. Wonderland was created by Daniele Sesta, the founder of Abracadabra and known as the "DeFi Frog Leader". It is also built on the Avalanche ecosystem, with a relatively low APY of only 70,000%.

Unlike other forks, Wonderland has not only Daniele's endorsement, but also the ecological support of the Abracadabra platform. Its token TIME can also be staked on the platform, lending more interest-bearing assets to be staked in the Wonderland protocol. The original "3, 3" has thus become "9, 9", and the team claims to launch a Launchpad to empower TIME in practice.

But on a morning in early 22, 0xSifu, a core member of the Wonderland team, was exposed to have been involved in multiple fraud crimes (BlockBeats note, for more information please read "From Frog to F "rug", a billion-dollar panic event triggered by a tweet"). 0xSifu was previously arrested and imprisoned for cybercrime, and later changed his name to Michael Patryn to co-found the notorious Ponzi scheme crypto platform QuadrigaCX with Gerald Cotten. Months later, Cotten died unexpectedly, but 0xSifu escaped with the money.

Frog Nation founder Daniele appointed 0xSifu as CFO to oversee the assets of nearly 800 million US dollars in Wonderland's treasury, despite being aware of the situation. After the news broke, Wonderland underwent a large-scale liquidation, and the TIME Token plummeted. Even Abracadabra was affected, and the stablecoin MIM experienced a brief decoupling.

Some people have also discovered that the trigger for this liquidation is also related to Daniele and 0xSifu. Prior to the large-scale liquidation, team members such as Daniele and 0xSifu used the new token wMEMO from Wonderland as collateral to borrow a large amount of MIM, and then cashed out these stablecoins on the Bitfinex exchange.

With the collapse of Wonderland, the musical chair game of (3, 3) Token also came to an abrupt end. OHM, TIME and other 3, 3 Tokens plummeted, and the once thriving narrative of DeFi 2.0 also fell apart, becoming the subject of criticism.

On the other hand, DeFi pioneer Andre Cronje published three articles in one day, while planning his new project ve(3,3), hoping to combine veToken and protocol to have a liquidity model (BlockBeats note, for more information on the ve(3,3) mechanism, please read "What is AC's heavily promoted ve(3,3)?").

However, the thunderstorm in Wonderland caused Daniele, who was originally collaborating with AC, to withdraw from the development. Despite the high popularity, problems frequently emerged. At the beginning, in order to obtain the initial quota of SOLID Token, various protocols in the Fantom ecosystem engaged in a TVL war with deceit and trickery (BlockBeats note, for more information about the ve(3,3) TVL war, please read "AC's new project is so hot? Vampire War that ignited Fantom overnight"). After the official launch of the Solidly protocol, front-end bugs, fund pool vulnerabilities, and other issues made AC the target of public criticism. Under the project's poor performance and public pressure, AC deleted its Twitter account and chose to leave the DeFi and cryptocurrency industry.

New Tether Cloud

Whether it's (3,3) or reverse (3,3), the evolution of mechanisms cannot change the essence of the game behind them. Running away is also a matter of time, just in different forms. Cats and dogs are all the same in the end.

As explained in BlockBeats' article "APY 70,000%, DeFi 2.0 Dominated by OHM Forks", protocols such as (3,3) are like lassoing clouds, with the cloud representing the value of the token and the true gold and white clouds in the protocol treasury representing the mountain. The only force that can tie this cloud to the mountain is the faith of the participants. Once people lose faith in the protocol, this lassoed cloud will inevitably disappear into the blue sky.

In the DeFi 2.0 era of "protocols with liquidity", high APY brings extreme FOMO emotions and irrational behavior. Users and protocols have swapped positions, and the promises of protocols and the trust between users seem to be the only reliance for investors. Currently, in the context of the warming of the cryptocurrency market, there have been anti (3,3) and ve(3,3) imitations such as Eggs and Carrot. BlockBeats reminds readers to participate cautiously in such "brave games" of passing the buck.

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