Weekly update on development process (Jul 18, 2022)
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- 🧠 Explored the impact of virality on the financial assets.
- 🧠 Explored the idea of building a network of accounts to force virality.
- 🤝 Advised another project (stealth mode).
We’re continuing our research on virality. Recently, we have narrowed down the criteria for becoming the primary narrative: it’s the “simplest of believable”. We’ll explain what it means in the following paragraphs.
First of all, the narrative must be believable in order to spread. People will only share what they believe. However, the narrative doesn’t have to be “verifiable”. Often it’s hard to verify specific statements, so people assign a “believability score” based on the reputation of the source.
The reputation depends on ”being right in the past”. Essentially, people estimate the believability of the source by whether its previous statements were true.
Therefore, it’s possible to build up the reputation by sharing true statements, then push a new narrative with a high believability score. Indeed, that’s what the influencers do.
Calculating the believability of a narrative is a non-trivial task. However, there’s a shortcut: instead of checking each narrative for believability, we can sort the narratives by simplicity (simplest first) & take the first one that we deem believable. Which brings us to the discussion of simplicity.
We define simplicity as the time it takes to understand the narrative (and check it for believability). Formally, it depends on the count of logical statements & the count of definitions in the narrative. However, there’s a simple informal rule: a narrative must fit in a single GIF — it must be a meme. Examples: “Money printer go brrr”, “Dogecoin to the moon”, “It ain’t much, but it’s honest work”.
Memes are simple, but most often they are “too simple” — they lack believability. Therefore, they must be supported with additional materials. A hedge fund won’t invest in “magic internet money”, but they will invest in “a peer-to-peer electronic cash system”.
A trading strategy can be formulated as follows:
- Monitor new memes.
- Calculate the current speed of spread (num occurrences in current period / num occurrences in previous period).
- If the meme is spreading “fast enough” (needs better definition), then check the meme for believability.
- If the meme is believable, then check the meme for non-exhaustiveness of reach (there must still be reachable people who have not bought yet).
- If all conditions pass, then buy.
Some narratives are believable despite being logically false. For example, “a shell doesn’t hit the same hole twice” is quite believable despite being mathematically incorrect: the probability of a new hit doesn’t depend on old hits at the hole. However, hiding in that hole provides some protection, so the soldiers believing this false narrative are more likely to survive. Therefore, the narrative will spread even though it’s logically incorrect.
Warning: the false narratives may spread & trigger irrational actions (examples: all religions & ideologies may spread well, which may trigger human sacrifices / witch hunts / government purges).
Out of 2 conflicting narratives, the first one that becomes internalized becomes dominant (reduces the probability of the second one taking hold). This is because people perceive as less believable something that contradicts their existing world view. Even if their world view is flawed, they will still have a hard time replacing it (only in the face of overwhelming evidence).
Next week’s focus
- 🤝 Advise current projects.
- 🤝 Increase our network & strengthen existing connections.
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