In the cryptocurrency industry, the thing most easily packaged as “infrastructure” is the exchange.
It tells you:
I just provide a market.
I just help you buy and sell.
I just provide liquidity.
I’ll help you keep your assets.
I will give you faster matching, deeper market openings, lower handling fees, higher returns, and more convenient leverage.
It sounds like a securities company.
Like a bank.
Like a neutral institution that stands outside the market and only charges a small service fee.
But if you really take an exchange apart and look at it, you will find a very uncomfortable fact:
Your interests and the interests of the exchange are never completely consistent.
You want to make money.
What the exchange hopes for first is:
You trade.
It’s better to keep trading.
Let’s say you have $100,000.
You buy BTC.
Then withdraw the coins.
Five years without moving.
For the exchange, you are actually not a good customer.
You only contributed one or two handling fees.
The other guy only had $10,000.
But every day he goes long, short, stops losses, chases gains, buys bottoms, increases positions, reduces positions, and closes positions.
Generates $10 million in sales per year.
Who does the exchange like?
The answer is self-evident.
This is the most fundamental contradiction in the exchange business model:
What you need is the right deal.
What it needs is more transactions.
You better feel like BTC is going to go up today.
I think BTC is going to fall tomorrow.
Go long in the morning.
Short selling in the afternoon.
Stop loss at night.
I saw a big positive line in the middle of the night and chased it.
In the end, whether you make money or not does not affect the platform’s preference for trading volume.
As long as your hand is still pointing:
Buy.
Sell.
Long.
Short.
The machine is still running.
This is one of the most ridiculous things about the crypto trading industry in my opinion.
In the world of traditional finance, truly dangerous products are usually not rolled out to everyone.
Of course, ordinary stocks can open an account with a low threshold.
But once inside:
Margin and securities lending.
futures.
options.
Highly leveraged derivatives.
Suddenly the rules start to get complicated.
Why?
Because the regulatory system at least recognizes one basic fact:
A person new to the financial markets should not have exactly the same dangerous authority as a professional trader.
For example, in China’s margin trading, opening a credit account does not end with just clicking “I have read the risk warning”.
It has trading experience requirements.
There are asset requirements.
Brokerages need to understand their clients’ income, assets, investment experience and risk tolerance.
Why?
It’s not that financial institutions have suddenly become kind.
But decades of financial market history have long proven that:
Leverage is not a toy that should be handed over to ordinary people.
But what did Web3 do?
Register.
KYC.
Recharge.
Then:
Welcome to Futures.
2x.
5x.
10x.
20x.
50x.
100x.
You may not even know what maintenance margin is yesterday.
Today the app has started to teach you how to make perpetual contracts.
What you may not know:
What is Mark Price.
What is the Funding Rate?
What is Maintenance Margin?
What is ADL.
What is the difference between Cross Margin and Isolated Margin.
Why did Liquidation Price suddenly move?
But it doesn’t matter.
The interface has done everything for you.
You just need to answer:
Up or down?
This is a very amazing dimensionality reduction for financial products.
A tool that for decades has been heavily accessible only to professional traders, futures traders, and high-risk investors,
Repackaged into a red and green button.
Even easier than ordering takeout.
The really scary thing is not that Web3 invented leverage.
Leverage has been around for a long time.
Futures weren’t invented by Web3 either.
Options are not.
Lending is not.
Market making is not.
Arbitrage is not.
Traditional finance has been playing with these things for a hundred years.
The real revolution of Web3 is:
Put these things into a mobile phone.
Then pushed it to everyone.
In the past, if a person wanted to come into contact with complex financial derivatives, he had to go through at least several psychological steps:
I want to open an account.
I want to apply for permission.
I need to understand the rules.
I want to make sure I can afford the risk.
What about today?
The phone vibrates:
BTC +8.7%.
You open the exchange.
Here it is:
Trade Futures.
100x.
Go long with one click.
The most complex and dangerous type of financial instrument in human history,
It was finally compressed into:
a button.
What is this about financial democratization?
Or the democratization of risk?
These are two completely different issues.
0.1%.
0.05%.
0.02%.
When people see these numbers, they have no feeling at all.
Too cheap.
A few bucks for a $10,000 deal.
So you gradually form an illusion:
Transactions are virtually free.
But here’s the smartest thing about the exchange.
It’s not taking 30% from you all at once.
It only takes a little at a time.
Buy, take a little.
Sell, take a little.
Cut your losses and take a little.
Reopen the position and take a little more.
After adding leverage, the same US$10,000 principal can produce a cumulative transaction volume of US$100,000, US$500,000 or even greater.
Exchanges don’t just care about how much money you have.
What it cares more about is:
How many times has your money gone around?
Principal amount $10,000.
The deal could be $1 million.
$10 million.
Even more.
So the user sees:
The handling fee is only a few ten thousandths.
The exchange sees:
Annual Trading Volume.
These are two completely different worlds.
Why big crypto trading platforms almost always go to:
Sustainable.
contract.
Leverage.
Borrow currency.
options.
Trading Bot.
Copy Trading.
Because a person who only buys spot goods has limited commercial value.
A person buys 1 BTC.
Mentioning cold wallets.
I won’t come back for five years.
How much more money can the platform make from him?
Then leverage appeared.
You obviously only have $1,000.
But it works:
$10,000.
$50,000.
Or even a $100,000 position.
The industry likes to call it:
Capital Efficiency.
Capital efficiency.
This word sounds very advanced.
But describe it in another language:
A person with only $1,000 in capital can now generate fees on a position size of tens of thousands of dollars.
Leverage certainly magnifies returns.
Of course it also amplifies losses.
But for the platform, it also amplifies a third thing:
Turnover.
The transaction volume is the food of the exchange.
The most ruthless point of the entire trading system is:
Your pain doesn’t stop the machine.
You made a mistake.
You lose money.
Insufficient security deposit.
The system starts to liquidate.
Around forced liquidation, there are liquidations, risk pools, insurance funds and various fee mechanisms.
Your account page is all red.
All you see in the background is:
Liquidation.
You feel like you’ve been met with a disaster.
For the platform:
This is just normal business flow.
Even more noteworthy is:
The exchange does not need to be your direct opponent at all to benefit from your failure.
You profit:
You pay the handling fee.
You lose:
You also pay a handling fee.
Your stop loss:
Handling fee.
Reopen a position:
Handling fee.
Borrow money:
interest.
High frequency trading:
More fees.
Forced:
Enter the liquidation process.
You don’t even need to believe the conspiracy theory that the exchange is deliberately betting against you.
Because a colder business model is enough:
It doesn’t necessarily need to make you lose money.
It just requires the process of making money as you keep trying to make it back.
What do professional traders look at when looking at perpetual contracts?
Basis.
Funding rate.
Liquidity.
Position structure.
Margin utilization.
Tail risk.
Volatility.
Liquidation Distribution.
Market Depth.
What do ordinary people see?
BTC:
+12%.
Button:
LONG 20X.
This is the information gap.
The same financial instrument,
In the hands of professional traders is a complete set of risk models.
In the hands of ordinary users, it becomes:
Guess the rise or fall.
Then the platform continues to optimize this process:
Simpler UI.
Order faster.
Default lever.
Follow orders with one click.
One click strategy.
Trading Bot.
Copy Trader.
The so-called product experience is getting better and better.
Excellent till the end:
You don’t even need to know what you’re doing to take huge financial risks.
This is a very special scene in Web3.
Traditional finance has spent decades building appropriateness systems.
The crypto industry has spent a decade studying:
How to make the most dangerous thing as simple as a mobile game.
If the contract market still retains at least a layer of financial transaction veneer,
Prediction markets even tear away this last layer.
Will the Fed cut interest rates?
Will BTC exceed a certain price today?
Will someone get elected?
Who wins a game?
Will a product be released?
Will a certain news event happen?
YES.
NO.
Place your bet.
Wait for the results.
Win:
$1.
Lose:
The mechanism can of course be explained as:
Information aggregation.
Probabilistic discovery.
Market forecast.
Moreover, in some jurisdictions, some event contracts are indeed regulated derivatives and are not equivalent to casinos in the legal sense.
But judging from the behavioral experience of ordinary users, it is infinitely close to the oldest entertainment of mankind:
Bet on whether something will happen.
What’s even more remarkable is that trading platforms haven’t moved away from it.
Quite the opposite.
They are increasingly turning prediction markets into an integral part of trading apps.
Binance Wallet has integrated the third-party on-chain prediction market directly into the Binance App: users can directly trade the YES/NO results of real-life events. The winning share is ultimately settled at $1, and the losing party is reset to zero.
Coinbase also already offers Prediction Markets, with event contracts operated by Kalshi.
Crypto.com even provides Prediction Trading directly in the App.
So what’s in this app now?
In stock.
Leverage.
Sustainable.
options.
Loans.
Financial management.
Copy Trading.
Trading Bot.
Memecoin.
Plus:
Prediction markets.
A person originally just wanted to buy some Bitcoin.
The final result is a complete financial entertainment city.
This is a very subtle psychological change.
The casino asks you:
Do you want to bet?
Many people will be wary.
Prediction Market asks you:
What do you think is the probability of this happening?
Suddenly advanced.
You are not gambling.
You are making a point.
You are not placing a bet.
You are “discovering prices.”
You are not betting on the US election.
You are predicting political events.
You are not betting on whether BTC will rise tomorrow.
You are trading market expectations.
After the language changes,
The same person’s psychological defenses will be completely different.
Because “gambling” makes people think of:
risk.
Lose money.
Addicted.
But “prediction markets” bring to mind:
Smart.
Probability.
analysis.
Information advantage.
So people begin to feel:
I’m not betting.
I’m making money with my knowledge.
And this is precisely the most dangerous moment for all speculation:
When gamblers begin to believe,
I am not a gambler.
Commission rebate.
How nice it sounds.
You trade.
The platform will return money to you.
As a result, users will have a very comfortable feeling:
I picked up the wool on the exchange.
Invite friends and get commissions back.
Become a KOL and get commission rebates.
The trading volume is high and there are commission rebates.
Handling fee discount.
VIP discounts.
Handling fee coupon.
Maker Rebate.
You start calculating:
This platform gives 20% back.
That platform gives 30% back.
This invitation code gives you 40% back.
In the end, they even kept looking for higher rebate channels in order to “save handling fees”.
But there is one simplest question that few people ask:
Whose money was returned to you?
Many times,
It’s the money you hand over yourself.
Suppose you pay a handling fee of 100 yuan first.
The platform will give you 30 yuan back.
You are happy:
I made 30.
No.
You didn’t make 30.
You just lost 30 less.
The platform first obtains income from transaction activities,
Cut off another part,
Packaged as rewards,
Return it to you.
Then you will actually have an illusion:
The platform is giving me money.
What is the essential difference between this and the 100 yuan coupon for spending 1,000 yuan in the mall?
The real way to make money is not:
“How to get the highest commission?”
The real way to reduce costs should first be:
Why do I have to incur so many fees?
The rebate is one step further,
It becomes an invitation.
Affiliate.
Referral.
KOL.
agent.
As a result, the system completed a very elegant closed loop.
Ordinary users lose money.
The exchange charges handling fees.
The exchange takes part of the handling fee,
Give it to the one who brought him in.
The person who pulled the person found:
The more others trade, the more
The more you earn.
So he started producing:
Market analysis.
Trading signals.
Get rich story.
Contract teaching.
High leverage tutorial.
“You can go long at this position today.”
“This coin will take off immediately.”
“Brothers, seize the opportunity.”
Do you see what’s really dangerous here?
financial interests of the recommender,
Bound to the recommended transaction frequency.
It’s not that the more you earn,
He must be making more money.
Instead:
The more you trade, the more he is likely to make.
As a result, a huge content machine emerged in the entire industry.
On the surface everyone is:
Teach you to make money.
In fact, the underlying cash flow may be:
Let you trade.
Then pay the handling fee you paid,
Give a little to the person who brought you in.
Handling fee 100.
Rebate 30.
You said:
This exchange is really good.
Contract experience fee 20.
You said:
The exchange sent money.
Handling fee coupon 50.
You said:
The platform benefits are good.
VIP fee reduction.
You said:
I am a valued customer.
But if you look further back:
In order to obtain these “discounts”,
How many transactions were generated?
How much risk was taken?
How much handling fee did you contribute?
This is something the casino industry has known for hundreds of years.
Free drinks.
Free hotel.
Free buffet.
VIP room.
Private car transfer.
It’s certainly not because the casino loves you.
It’s because:
As long as you keep sitting at the table, all freebies can eventually be covered by the business model.
The exchange just digitized this logic.
Take a look at a modern crypto trading app:
Increase list.
Decline list.
Popular coins.
New currency is online.
Market changes.
contract.
Funding rate.
Copy Trading.
Trading Bot.
Prediction markets.
task.
reward.
Airdrop.
Ranking list.
VIP.
Commission rebate.
Invite friends.
These functions are taken out individually, and each has a reasonable explanation.
But put them all together,
You’ll see a very clear common direction:
action.
Buy.
sell.
Open a position.
Close position.
Follow orders.
Forecast.
participate.
Earn points.
Increase your level.
Invite others.
Continue trading.
A calm person is the most difficult user to make money on the platform.
He opens the exchange.
Buy BTC.
Lift away.
Exit the app.
Not coming back for a year.
A perfect user is completely different:
Opened twenty times a day.
Look at the increase list.
Watch for changes.
Look at the K-line.
Chase hot spots.
Make a contract.
See Prediction.
Attend events.
Get points.
Receive commission rebate.
Copy Trader.
Stop loss.
Open again.
So he slowly turned into a machine:
Fee Generation Machine.
Fee generating machine.
At first,
You’re just here to buy BTC.
Later:
USDT is inside.
BTC is in it.
ETH is in it.
The contract margin is inside.
Financial management is in there.
Lending is in it.
Quantitative strategies are in there.
Finally you started saying:
“I still have $50,000 in Binance.”
Pay attention to this language.
Mine.
Over time,
People no longer understand trading as:
A service provider.
Instead:
my account.
But assets on centralized exchanges,
And you own the on-chain assets with the private key,
Not the same security model.
most of the time,
This difference is invisible.
Really encountered:
Freeze.
run.
Bankruptcy.
Withdrawals are suspended.
regulatory events.
Liquidity crisis.
The difference will suddenly become apparent.
That’s when you realize:
numbers on the screen,
and the assets that you can truly control,
It turns out it’s not the same thing.
Open your transaction history.
Don’t look at how much you earned that time first.
Statistics first:
Spot Fee.
Futures Fee.
Borrow Interest.
Funding.
Liquidation Loss.
various transaction costs.
Then add up the five years.
Calculate again:
How much did you lose chasing the rise and killing the fall?
How much did you lose from high-frequency position swaps?
How much did you lose when you liquidated your position?
How much money did you lose buying junk coins?
Predict how much the market will lose.
Many people will remember:
One day in 2024,
I made $8,000 in one day.
This memory will last for many years.
But few people will remember:
After two years,
I make $20, $100, $300 a day,
I lost money little by little.
This is the most fascinating part of trading.
Profit memory is discrete.
The loss process is continuous.
So people will always feel:
I have proven myself.
next time,
I can still make it back.
And as long as you still believe in the next time,
The exchange will still have the next handling fee.
Spotify charges you tens of dollars.
Netflix charges you dozens of dollars.
ChatGPT charges you tens or hundreds of dollars.
You know very well:
This is consumption.
Hand over the money.
Get the service back.
Exchanges are completely different.
You top up with $10,000.
You won’t feel like you spent a penny.
Because the screen shows:
Balance:
$10,000.
The psychological defense line disappears.
Lost 200 today.
It doesn’t matter.
Fluctuations.
Lose 500 tomorrow.
Normal.
Handling fee 30.
No feeling.
Funding 20.
No feeling.
Liquidation 3000.
The market is too extreme.
Top up another 5000.
Start over.
So the most terrifying thing about the trading industry is:
It allows consumption to disguise itself as investment.
Let the fees disguise themselves as costs.
Let gambling disguise itself as judgment.
Let frequent action disguise itself as effort.
Let losses disguise themselves as temporary retracements.
Even let rebates be disguised as income.
Finally, a person who keeps losing money can still tell himself:
I’m not spending money.
I’m on the way to making money.
Not Bitcoin.
Not Ethereum.
Not even a deal.
What it really sells is a feeling:
You can change your financial destiny at any time.
Click.
Long.
Short.
20x.
100x.
YES.
NO.
Next candle.
Next game.
Next rate cut.
Next election.
Next Memecoin.
Life can change.
This is the most expensive hope in the world.
Because as long as you always believe:
There may be a comeback next time,
You won’t leave the table.
The exchange does not need to know at all:
Will BTC rise or fall tomorrow?
The bull market is good.
So does a bear market.
The surge creates FOMO.
Plunges create panic.
Shock creates high-frequency trading.
News generates prediction markets.
Quotes generate contracts.
Loss creates the urge to make money.
Profitability breeds confidence.
It only needs one thing:
You continue to participate.
So when you open the exchange later,
Don’t just ask:
Will BTC rise today?
Let me ask first:
What does each button on this page ultimately want me to do?
If the answer is always:
Transaction.
Trade again.
Add leverage.
Borrow money.
Follow orders.
Forecast.
Chase hot spots.
Earn points.
Get rebates.
Increase transaction volume.
Invite friends to continue trading.
Then you should understand:
You thought you were opening an investment vehicle.
What’s actually running on the other side of the screen,
It is an extremely sophisticated business machine.
its favorite user,
I’ve never been one to leave after making enough money.
What it really likes is this:
I lost money today,
Come back tomorrow.
The position was liquidated today,
Top up tomorrow.
Got the rebate today,
I felt like I was taking advantage.
Then always believe:
With the next payment, you can earn back all the previous money.