Author: Ltrd
Compiled by: Tim, PANews
“Show me the incentives and I’ll show you the results” is a quote from Charlie Munger. Incentives are also visible in the market, and exchanges can indirectly influence spreads and liquidity by creating specific fee models to favor certain market participants. They can also provide corresponding value loans based on the size of liquidity to incentivize market makers to provide more liquidity. The possibilities are endless, but the key is to understand what incentives are needed to attract attention and achieve goals.
After Hiperliquid's massive airdrop, traders were reluctant to miss out, which was particularly evident in the Binance Alpha 2.0 upgrade. As a pre-listing section of the Binance exchange, the platform specializes in incubating emerging tokens that have potential but have not yet reached the main site listing standards. The 2.0 version launched this time introduced a breakthrough auction trading model, providing an unprecedented liquidity entry for early projects.
We are not here to discuss the auction function or other features of Binance Alpha today. What I want to tell you is a little story about how incentive mechanisms, FOMO psychology, and potential future returns have given rise to various anomalies in the market.
Binance Alpha Points, the core element of this article, can be earned by users through trading activities on the Binance Alpha platform. Users can earn points by generating trading volume or holding tokens, but trading volume points seem to play a decisive role. These points can be used to participate in Alpha series events (such as airdrops or TGE). Historical data shows that tokens associated with Binance Launchpad tend to perform well, so the project is quite attractive. Given that the scale of potential gains is still unclear, many traders are scrambling to collect points in the hope of getting rich returns.
Now let’s get to the point. The mechanism is simple, users need to generate trading volume to earn points. As a result, we see a surge in trading volume for most of the currencies associated with Binance Alpha. At the same time, the market also shows abnormal volatility patterns that are extremely rare under normal conditions.
Take Bedrock ($BR) for example, it is currently the most popular token on PancakeSwap, with a trading volume of over $3 billion in the past 24 hours. Its chart shows that both buyers and sellers are actively trading at the same time, resulting in huge trading volume (as shown in the 10-minute rolling trading volume below).
This shows that despite the total trading volume reaching about $3 billion, the net difference in the USDT value of buy and sell transactions is close to zero. This phenomenon shows that there are market participants who execute hedging strategies and their trading activities generate almost no net position risk.
When trying to decipher the truth behind the data, especially in the absence of additional context (on-chain data often provides more clues, while centralized exchanges only disclose information visible to all users), you have to dig deep into every detail: transaction amount, transaction frequency, outliers, market impact distribution, order size, etc. When you can't grasp the complete information that only exchanges have, you need to grasp every detail. Let's focus on order size analysis.
This histogram does not conform to a normal distribution at all. In most cases, we see an exponential distribution of transaction volume, but this is not the case here. Most transactions are concentrated in the 12k-14k range, which is high by conventional standards. This concentration should be a warning sign and requires in-depth analysis. It is recommended to refer to the transaction volume data of other assets on the BASE chain as a comparison benchmark.
Digging deeper into the on-chain data is particularly revealing. Clearly something unusual is going on. It is highly likely that people are trying to quickly earn points to participate in future Binance airdrops. Let’s see if this hypothesis holds up.
How to execute this strategy? Simple, trade both ways, minimize losses, and accumulate as many points as possible. This is actually a smart idea. If this strategy works, then we should see that most wallets show almost the same amount of traded tokens on both the buy and sell sides. Now let's extract a small sample of on-chain data for analysis.
As we can see, the net circulation of most wallets is indeed close to zero. Now let's quantify how many currency units belong to this small range close to zero.
To be honest, this result is more surprising than I expected. More than 95% of the wallets participating in the token trading have a net position close to zero (which means that the amount they bought and sold during the period is roughly the same). It is obvious that the purpose of this operation is to avoid risk exposure while generating points.
I also wonder how many points these wallets are aiming for. They are likely following a strategy, studying Binance Alpha’s documentation, and seeing opportunities to hit a certain points threshold. Let’s analyze the data.
According to my dataset, all wallets except for five outliers generated between 14 and 20 Alpha points, no more, no less. This is likely because there is no "more points = bigger airdrop" rule, traders just need to reach a certain threshold.
I am also curious: how much does it cost to generate an Alpha point? Since they often trade in both directions in the same trading block or in a nearby block, it is likely to cause some losses, but how much is it exactly?
The average cost of an Alpha Point is about 5 to 10 cents, which is not high, but we are not sure what the ultimate return will be.
What I want to say is that people will always try to "hack" the system, they want to get the highest return with the lowest investment. Whether you are building an exchange, a DeFi protocol, or a management team, it is your responsibility to design a reasonable incentive structure. I hope this example can clearly reveal this core point.
