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WAGMI is bullshit — in fact, very few are “gunna make it” & here’s why 🧵👇🏽

Sneak peak:
- the house always wins, but who’s the “house”? 🎰
- insider trading, rug pulls, scam, exploitation
- how “winner takes most” is only amplified here

You don’t wanna miss this 🍿⤵️
This 🧵 is the opposite of the (sometimes toxic?) positivity that we’ve come to love about Web3 & for that I apologize

But reality checks are important

I’ll cover:
- capitalism, ponzinomics, etc.
- leeches/liquidity drains in the ecosystem
- potential solutions

Let’s dig in👇🏽
The wealth gap has been increasing

⬆️ digitization & globalization is only adding to that gap

Let’s say u’re a hyper talented athlete or musician

Bcuz ur games are available on TV or albums available on the internet, ppl around the 🌏 consume them over their local alternatives
This is why ppl like Messi, LeBron, Adele, etc. are worth 100s of million$ when there are local athletes & musicians who can’t even make ends meet

Since “the best of the best” are able to scale (via enabling platforms), they accrue bulk of the 💰 in exchange for their services
Some even argue that in the future, the best teachers in the 🌎 will be paid in the million$ because no one will choose mediocre math lessons over watching the world’s best math teacher on the internet at a cheaper cost…

That is precisely what Ed Tech is working on
The same is also true for why the world uses Microsoft Office products over some locally created software

It’s a vicious cycle:
- capital/funding accrues to best ppl/ideas/businesses
- they get further competitive advantages (due to the investments)
- barriers of entry increase
Why is all of this relevant to web3?

Because the same exact thing is happening / will happen. You can see this as VCs enter the space

The leading product/project in each vertical will continue to pull away due to “the vicious cycle” mentioned above thx to economies of scale
All of this happens over NFT Cycles

What do I mean by that? check out embedded 🧵

Money flows from less sophisticated investors & projects to more sophisticated...

Each cycle, the leaders pull away further & further via this "consolidation" in the market, & so do investors

Now that we've established capitalism / evolutionary forces are at play in NFT markets

I'm going to argue that these forces are on steroids

Why?
- zero regulation
- HIGH information asymmetry
- large variance in sophistication of participants
- hyper-sensitivity to social media
Now to the fun stuff:

🎰 “THE HOUSE ALWAYS WINS”

In a casino, all gambling is designed so that the house (i.e. the casino owners) will always net a profit, regardless of the successes of the patrons 🎲

This is because of “the law of large numbers” (google what that means)
Let’s take the game of roulette for example: there are red numbers & black numbers, which SHOULD have fair 50/50 payout odds

BUT the house is DESIGNED to win via the green 0 & 00s ⤵️

Real odds of red/black: 47.4% (Even though payout odds are 50/50)

Hidden odds of 0 or 00: 5.2%
… as a result, over time, the house ALWAYS wins🥇

So who is “the house” 🏠 in NFTs? 👇🏽

I’m going to define “the house” as anyone who performs ACTIVITIES in the ecosystem which has ONLY upside and no (or very limited) down-side, I.e. no skin in the game.
GOOD 🏠 vs. BAD 🏠

GOOD house examples: OpenSea, ethereum miners, builders, devs, artists; anyone who's adding legit value to the space and in turn realizing "mostly upside only" returns in exchange

BAD house examples: leeches in the ecosystem (lot more on this coming up 👇🏽🍿)
GOOD 🏠 specific example:

OpenSea takes a cut out of every transaction no matter loss / gain. But since they provide a service, it is acceptable for them to take their "house cut"

I won't dive into the other examples but they all can be agreed as value-add to the ecosystem
BAD 🏠 specific examples:

1️⃣ Marketers / influencers —

Influencers get DMs/calls to pump NFT projects

Sometimes they get paid in NFTs, other times in ETH. Given the mint amount for a project is only 10k, those with a large following have a sizeable impact on mint success
… there’s an ecosystem of accounts being bought & sold (often verified ✅) in the “Twitter black market”

Many of these accounts are the kardashians & blac chynas of influencers: famous for being famous (no one remembers how)

yet ppl are taking investment advice from them 🤦🏽‍♂️
…many accounts use bots to build a following:

Scheduled:

- automatic likes on every post
- automatic RTs
- ‘follow & then unfollow’ farming
- DMs asking you to follow a "friend's account"

any of these ring a bell?

These ppl are also often made aware of “insider information”
2️⃣ Insider traders —

The inner circles (of project teams) have a massively unfair & illegal advantage.

They often know major 🔔 before they’re dropped, & they / their friends & family take advantage

This allows for essentially “risk free” short term bets at honest ppls expense
2️⃣ cont’d — Difference between trad-fi & NFT investing is that you don’t have such blatant acceptable insider trading (often termed “alpha”)

There is a massive information asymmetry at play & unless you’re plugged into the “inner circles” — the odds are very much against you 👎
3️⃣ Scammers —

Another group that has 0 downside & only upside of “milking newbies” for what they’re worth

U can argue that scammers are just “teaching people lessons” & ultimately it makes the space smarter… & u’d be right

But this is another way odds are stacked against ppl
4️⃣ Web3 “Strategists” —

Many give shitty advice based on the stuff that worked in past cycles but no way will work today

They’re “experts” based on their couple months of experience… 🤣

They get paid from the mint money that YOU put into your project (directly or indirectly)
5️⃣ Bots —

These bots (their creators) take advantage of fat finger listings, arbitrage upside momentum, WETH lowball offers, etc.

They monetize momentum & psychology, & take away from the upside that otherwise would’ve gone to “honest flippers” / “investors”
6️⃣ Shitty project founders —

Mint & royalties often raise a lot of money from ecosystem. & when this money doesn’t get reinvested, this leaves the ecosystem in the form of: extravagant parties? Personal 🏡?Lambos? Strippers? Etc.

Basically whatever these ruggers spend money on
7️⃣ alpha groups/ppl that don’t add alpha —

being honest… there are many “alpha platforms” / ppl who do a fraction of what I do for free but charge a shit ton of money

these are additional ways ppl are paying “AUM fees” which are taking away from their returns…
SUMMARY

Imagine ALL these forces that are working against the average investor ON TOP OF CAPITALISM FORCES (as described earlier in the thread 🧵)

Do you still believe in WAGMI?
Let’s now argue that all of this is STILL worth it to the avg. Joe/Jane because the rate of adoption is simply too high via new value-creation & an element of Ponzi:

“A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors”
➡️ Let's add psychology & emotions to the mix:

Let's say even AFTER all of the forces working against you, you came out on top…

Now you have to battle your own emotions & ride out massive 🎢 emotional turbulence

You have to "buy & sell at the right times" battling FOMO & FUD
➡️ Let’s add VCs to the mix:

The fact is: yes they inject capital into the ecosystem… but their goal is to extract much more capital out of the ecosystem than they invested

Now — you may argue whether the value added outweighs their returns, at the expense of OG collectors…
I read a stat that only 5% of accounts are “in profit”. This is worth validating — but it checks out to me

5% of ppl are getting slightly rich to filthy rich. The other 95% are taking small Ls to sizeable L’s…

All because the system is rigged on behalf of the… 🥁 ⤵️

HOUSE🏠
In fact, I did a poll recently of a statistically significant sample & it turns out that — OF THE 🐻 MARKET PEOPLE — only ~1/3 are profitable

Selection bias: the ppl who haven’t stuck around Twitter, or those who participated in prior cycles & left are not even being counted!
How can we fix this?

Well... baby steps 🐾

This thread 🧵 is my small way of contributing to the "awareness & understanding" of all this shit

NFTs have MANY pros… but here are some of the ugly parts of it that folks need to absolutely be aware of

Here goes — action items👇🏽👇🏽
1️⃣ You need to hold these “influencers” accountable

Don’t just fomo into whatever the hell they’re pushing. Once you sense/understand that they have back-door deals that they’re not disclosing, you should unfollow the & spread the word

I know this will make many uncomfortable…
2️⃣ Insider traders need to be placed in Twitter jail… until the SEC steps in

I promise you this is a MAJOR issue

Insider traders have burner accounts. I believe there needs to be vigilantes for this stuff who do an ex-post analysis on wallet funding trails, transfers, etc.
3️⃣ In order to avoid scammers and rug projects, check out my thread on red flags 🚩below

I won't get into all the bullish reasons I'm into NFTs cuz that's not what this 🧵 is about

NFTs don't somehow just guarantee that if u're early enough, u will automatically make it...

It just gives much more ppl the CHANCE at being the very few that DO make it

🔑 difference
BOTTOM LINE:

WAGMI is bull shit

Yes, the communities are great; yes it’s more inclusive; yes overall NFTs are a revolutionary value add

But based on the current structure, this is only web2 capitalism on steroids, until we actively do something about it…

Riddles out 🎤🫳
If you enjoyed this 🧵, the nicest gesture in twitter is an RT. RT'ing the first post (shared below for your convenience) would help tremendously in getting it infront of more ppl like you. Always appreciate our frenship ♥️

You can find all my threads here 👇🏽👇🏽

UPDATE: literally ~12 hours after writing this 🧵, this news on insider trading dropped, linked below 👇🏽
www.justice.gov/usao-sdny/pr/former-employee-nft-marketplace-charged-first-ever-digital-asset-insider...
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