Why are there always high-leverage "gamblers"? An analysis of trading psychology and market dynamics under the PVP model.

In junior high school chemistry, it is mentioned that to make the bubbles blown out more stable and longer-lasting, polyvinylpyrrolidone (PVP) should be added to the solvent—this is a thickening agent and foam stabilizer that provides structure and durability to the foam, allowing it to maintain its shape and resist external pressure.

Similarly, maintaining the sustainable liquidity and defensible market share of Perpdex is not achieved through passive farming, pumping, or wash trading, but through actively constructing an extremely competitive psychological environment. Here, "PVP" is not only an abbreviation for chemical stabilizers but also stands for Player-vs-Player.

Through a well-designed mechanism, traders are pitted against each other, and the protocol's mechanism should be used to stimulate humanity's most powerful intrinsic motivations—greed and discontent—to create a self-sustaining trading activity flywheel, thereby breaking free from excessive reliance on the release of inflationary tokens, ultimately achieving true market stability.

1. The Great Game: Deconstructing the Zero-Sum Reality of Trading

The essence of trading is a zero-sum game; it's either you lose or I gain. There's no need to be evasive or to cover up the reality.

Meme: The Original PvP Arena

The trading ecosystem of Meme is the purest and most unadulterated embodiment of the PvP principle. Unlike assets that claim to have potential utility or cash flow, the value of Meme almost entirely comes from its cultural relevance, community hype, and the viral spread on social media, which is attention itself. In such a market, trading resembles a form of "cultural arbitrage": predicting or getting ahead of the market to find the next hot topic. This makes the Meme market a stark zero-sum game: a trader's gain directly comes from another trader's loss. On low-fee, high-throughput public chains like Solana, this PvP environment is pushed to the extreme. Trading bots run rampant, with median holding times measured in seconds, and the market evolves into a "super PvP" ecosystem where new retail traders find it nearly impossible to achieve substantial profits. This brutal environment precisely reveals the essence of speculative markets — it is not a collaboratively built community but an arena where participants devour each other.

Since it is a place where people eat each other, claiming to be a Bodhisattva descended to the world and illuminating the earth seems a bit unnecessary.

The Illusion of Positive Growth

The mainstream narrative in the cryptocurrency industry often emphasizes its "positive-sum" side: the continuously growing total market capitalization, new application scenarios brought about by technological innovations, and the continuous influx of new users. This macro narrative is real and important, but it is fundamentally disconnected from the micro level—specifically, the daily experiences of traders on Perpdex. For a user engaging in high-frequency trading on Perpdex, their goal is not to "build a whole new financial system," but to seize capital from other market participants amidst the fluctuations of prices. What is displayed on their profit and loss (P&L) interface is a brutal zero-sum reality. Any successful PvP protocol must be built on this basic understanding, ceasing to package itself as an inclusive "public utility," and instead embracing its true identity as an "arena." The positioning of the protocol should shift from "trading market" to "defeating other traders," and this repositioning aligns its product characteristics with the real motivations of users.

Leverage: The Great Amplifier

High leverage is a core feature of Perpdex, playing the role of both a catalyst and an amplifier in the PvP dynamics. Leverage not only amplifies financial gains and losses, but more importantly, it greatly intensifies the emotional intensity in PvP conflicts. The euphoria of a profit and the devastating blow of a loss are disproportionately magnified. This amplification of emotions is crucial for hooking traders into the psychological loop we will discuss in the next chapter.

Traditional incentive models assume that trading volume is a function of liquidity and incentives, while trading volume is a function of conflicts. By designing mechanisms that can create continuous and quantifiable conflicts (such as leaderboards and tournaments), the protocol can generate a stable base trading volume driven by intrinsic competition, without relying on direct token rewards.

2. Participating Dogma: Weaponizing Greed and Resentment

The core of PVP is to bring out the two hearts of a person - greed and dissatisfaction.

Winner's Curse: Cultivating Greed and Overconfidence

For winning traders, the platform's goal is to systematically cultivate their greed and overconfidence, prompting them to make bolder, more frequent, and more reckless trades.

• Psychological Mechanism: Successful trades trigger a series of cognitive biases. First is the Overconfidence Bias, where traders tend to attribute success to their superior skills rather than luck, thereby underestimating the risks of future trades. Next is the Confirmation Bias, where they actively seek information that can confirm the effectiveness of their "winning strategy" while ignoring contradictory evidence. This psychological state is known in trading psychology as the "Winner's Curse," where the largest profit often signals the largest loss to come. From a neuroscience perspective, profits stimulate the brain to release dopamine, creating a powerful reward loop that reinforces trading behavior and encourages traders to take on greater risks in pursuit of stronger stimulation.

For example, with a few mainstream CEX/protocols:

• Platform Amplification Strategy: The design of the protocol should aim to amplify the pleasure of victory and transform it into a symbol of public social status.
• Prominent profit and loss display: Show high floating profit and loss (PNL) in the most eye-catching position on the interface, using positive colors like green.
• Achievement System: Establish "Winning Streak" badges, "Hundredfold Profit" medals, etc., transforming trading achievements into boastful virtual identities.
• Public leaderboard: The real-time updated leaderboard is a core tool for creating social pressure, turning individual profit into a public competition.
• Social sharing feature: One-click share of profit screenshots to social media, turning winners into the platform's "walking billboards" while instilling feelings of FOMO, jealousy, and anxiety in other users.

The Loser's Game: Creating "Discontent"

For failing traders, the platform's goal is to prevent them from rationally exiting due to losses, but rather to stimulate their feeling of "unwillingness" and prompt them to immediately invest in the next trade to "make back their money." This is a more powerful and critical link in the entire psychological cycle.

• Psychological Mechanism: The core of it is the theory of Loss Aversion. Pioneering research by Daniel Kahneman and Amos Tversky has shown that the psychological pain of losses is twice as strong as the pleasure derived from equivalent gains. This intense negative emotion can lead to a series of irrational behaviors, such as holding onto a continuously declining position to avoid acknowledging losses (sunk cost fallacy), or more importantly—Revenge Trading. Revenge Trading is an impulsive, high-risk trading behavior conducted out of anger, frustration, and a sense of "unwillingness" after experiencing significant losses, with the sole purpose of quickly recovering those losses. This feeling of "unwillingness" is the key driver in retaining losing users and encouraging them to continue contributing trading volume.

Taking a few mainstream CEX/protocols as examples:

• Platform Amplification Strategy: Every detail of the interface should be designed to maximize users' "frustration," preventing them from conducting calm reviews and risk assessments.
• Visualization of "almost": When users are forcibly liquidated, the interface can show how "close" the price is to their stop-loss line or profit target, suggesting that this was just a stroke of bad luck rather than a strategic error.
• Loss framing effect: Describing losses as temporary "paper losses" or "pullbacks" rather than permanent capital losses, and immediately pushing new "market opportunities".
• Instant Re-entry Incentive: After the user closes their position or is liquidated, immediately prompt with "One-click Reverse Position" or "Receive Trading Fee Discount Coupon to Fight Again" and other tips, shortening the decision-making time for users from loss to the next trade, leveraging the emotional window period to facilitate impulsive trading.

From the perspective of protocol operation, the most valuable users are not those "smart money" who consistently profit and withdraw regularly. On the contrary, the ideal users are those traders who are trapped in a cycle of profits and losses. Regardless of their net gains or losses, they continuously generate a large volume of trades and fees. The maximization of the protocol's revenue comes from the intense movement of capital between winners and losers.

Therefore, every element designed by the platform—from the color of profit and loss figures, to the animations after transactions, and to the default leverage ratios and social features—is no longer merely an aesthetic choice but a tool used to manipulate traders' psychology, guiding them towards the two high trading volume behavioral patterns of greed and "unwillingness."

Three, Liquidity Spiral: From Psychological Cycle to Protocol Flywheel

Once a sufficient number of traders are captured through a carefully designed psychological mechanism, the protocol can initiate a self-reinforcing positive feedback loop, known as the "liquidity spiral". This process transforms individual irrational behaviors into a sustainable, structural competitive advantage at the protocol level.

Stage One: The Core Engine Comprised of "Hooked" Traders

The starting point of this spiral is the core user group driven by greed and dissatisfaction, which has been detailed in the previous text. These winners and losers are locked in a continuous trading loop. Their trading behavior is, in a sense, "organic," as it is more driven by internal psychological needs (seeking pleasure, recovering losses, proving oneself) rather than external token incentives. This core group creates a stable and predictable base trading volume and fee income stream for the protocol. This is the first step for the protocol to break free from its dependence on speculative capital/“mercenary capital.”

Phase Two: Attracting Mature Liquidity Providers

With a stable and significant base trading volume, the protocol becomes highly attractive to second-level market participants—professional liquidity providers. Market Makers are drawn in as they can consistently earn from the bid-ask spreads generated by frequent trades from core traders. Arbitrageurs are attracted by price fluctuations, and their activities help align the protocol's prices with the broader market, thereby enhancing market efficiency. The injection of this professional liquidity greatly deepens the order book thickness and reduces slippage, improving the trading experience for all users. This makes the platform more attractive to new users, further consolidating the core engine.

Stage Three: The Return of "Mercenary Capital" and the Formation of the Liquidity Black Hole

An interesting reversal occurred when the protocol established a deep, active, and efficient market through the first two phases. The "mercenary capital" that those protocols initially tried to shake off would now actively return. But this time, they are not attracted by the tokens airdropped by the protocol, but by the excellent trading conditions (extremely low slippage, huge trading depth, rich arbitrage opportunities). Their arrival completes the last piece of the liquidity spiral puzzle. The influx of massive capital has turned the protocol into a "liquidity black hole"—a market with such immense gravitational pull that competitors find it difficult to shake its position. At this point, the protocol's competitive moat has shifted from temporary incentives to a structurally insurmountable barrier made up of network effects and deep liquidity.

The core of this process is that PVP is a strategy that uses artificially designed mechanisms (gamified incentives, psychological cues) to create a state that looks and feels like an "organic product-market fit". Traditional liquidity mining, such as the vampire attacks of SushiSwap and the wash trading of AsterDex, have addressed the "cold start" problem of liquidity, but have failed to solve the "loyalty" problem of users. The retention rate of users attracted by incentives is very low. The PVP mechanism and model aim to fundamentally solve the retention problem by replacing the economic "incentives" with a behavioral "addiction" (as described by the psychological mechanisms of gambling addiction). An addicted user does not need you to pay them to come and play.

Therefore, most protocols view acquiring liquidity as a primary goal, while the PVP model redefines it as an outcome. The primary goal is to maximize user engagement and trading volume through psychological mechanisms. Deep and stable liquidity is merely a natural byproduct of achieving this primary goal. In the context of fierce competition for liquidity among exchanges, the PVP model offers a path of higher capital efficiency: by investing resources into product features that can create a competitive atmosphere, liquidity will naturally follow trading activities.

4. Catalyst: Designed for "single point breakthrough"

To launch a powerful PvP flywheel, precise and strong catalysts are needed. This requires the protocol to abandon the "inclusive incentive" model and shift to a "breakthrough point" strategy that can create conflicts, filter winners, and inspire losers' fighting spirit.

The broad-based liquidity mining or trading rebate strategy is criticized by users as a "one-size-fits-all" platform strategy. This approach is inefficient because it indiscriminately rewards everyone, including passive liquidity providers, "zombie users" with extremely low trading frequency, and point hunters. This not only dilutes the incentive effect for high-value, highly active traders but also creates significant token inflation pressure, ultimately leading to mercenary capital exiting rapidly after the rewards diminish.

An effective "single-point breakthrough" incentive model should be based on relative performance rather than absolute participation. The core principle is to reward traders who win in PvP competition, rather than all participants in the trading.

A successful PvP incentive program must inherently create a large number of "losers" who gain nothing. This is contrary to the spirit of "inclusiveness" and "community sharing" typically promoted in the Web3 space, but it is crucial for the success of the model. It is precisely the strong sense of "unwillingness" felt by these losers who narrowly missed out on the grand prize that constitutes their core motivation to continue participating in platform trading in the future without direct incentives.

We can't expect a platform that advocates for zero-sum games and winner-takes-all mechanisms to engage in something like "inclusive finance", can we? If you are bound by the moral view of "inclusive finance" or pressured by the anti-exploitation community to treat everyone fairly, then you might not be well-suited to enter this "dog-eat-dog" trench.

Conclusion: Sustainable Bubble

Let's return to the initial chemical analogy. Speculative markets are inherently filled with bubbles, which is an intrinsic property. The goal of PVP is not to eliminate bubbles, but to stabilize them. Just as polyvinylpyrrolidone provides structure, resilience, and durability to bubbles, a well-designed "player versus player" system can also impart a sustainable structure to the market's frenzied activities. It creates stability in trading activity and transaction fee income amidst drastic price fluctuations.

The final strategic recommendation is: in the future competition between Perpdex, the winner will not belong to the protocols that offer the highest APY, but to those that have a profound understanding and mastery of user psychology. Success is no longer just the work of financial architects, but a masterpiece of behavioral psychology architects.

Form the PVP doctrine - like the Chaoshan people, bring the gaming field to your own backyard; without guidance, the water will naturally flow to every value depression.

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