Three Misunderstandings About Binance Alpha Points

➤ Misunderstanding 1: Points Can Never Catch Up

Binance Alpha points are calculated based on the holdings and trading volume over the past 15 days. Therefore, if a user previously had a high score but does not trade or hold any assets in the following 15 days, the total points over those 15 days will gradually decrease, and the points will reset to zero after 15 days.

If a user has low points but starts working hard to increase their points from today, for example, if others gain 11 points daily and the user gains 12 points daily, they will surely catch up after 15 days. (If the gap is small, it may not even take 15 days to catch up).

➤ Misunderstanding 2: Friendly to Big Players

In fact, Binance Alpha points are not friendly to big players. In terms of static points, i.e., points for holding assets, holding assets under $100 and having holdings of $100,000 only accumulates 4 points.

In terms of dynamic points, i.e., points based on trading volume, every additional point requires doubling the trading volume. For a trading volume of $1024, you gain 10 points, and to gain one more point, you need to trade another $1024.

We treat points as the dependent variable and trading volume as the independent variable, forming a function.

It is essentially a logarithmic function with a base of 2, then rounded, represented by the red line in the chart. The blue line represents the logarithmic function without rounding. (It is speculated that the design is for integer points, partly for ease of calculation and partly to distinguish between legitimate point accumulation and point manipulation).

It is evident that with the increase in trading volume, points hardly increase. Especially after rounding, further increasing trading volume results in almost no increase in points.

Whether it is static points or dynamic points, they do not follow a linear model; the increase in points due to an increase in capital holdings or trading volume slows down increasingly. Thus, Binance Alpha points are not friendly to big players.

Of course, Binance Alpha points are also not very beneficial for small players, as trading incurs costs. For small players with just a few hundred dollars, it is easy to find that the more they trade, the less capital they have, making it harder to accumulate points.

Therefore, Binance Alpha points are actually more friendly to medium-sized players.

➤ Misunderstanding 3: Points Will Keep Increasing

First, the current point threshold is rising because we are at the early stage of the points system.

The points system started on April 25, and everyone began with relatively low points that will continue to increase.

Starting from May 10, on the 16th day of the points system, unless the airdrop rewards are particularly enticing, the growth of points will begin to slow.

Second, the marginal cost of accumulating points increases.

As mentioned earlier, points are not linearly related to holdings or trading volume. As trading volume increases, the increase in points becomes slower.

This time, we use points as the independent variable and trading volume as the dependent variable. Trading volume is generally positively correlated with trading costs; the larger the trading volume, the higher the cost of accumulating points.

It essentially follows the equation y = 2^x. Here, x is the trading volume points, and y is the trading volume needed to correspond to the points. As points increase, the required trading volume rises exponentially, meaning the marginal cost increases rapidly. On the upper part of the curve, only by significantly increasing trading volume can one gain a small amount of points. Therefore, points will not keep increasing infinitely.

Third, consider the balance between benefits and costs.

Unless the frequency of airdrops increases and their value grows, players will balance the benefits and costs rather than simply increasing points.

Fourth, the time cost of accumulating points.

In addition to trading costs, accumulating points also requires time, and not all users are interested in this. For example, big players with hundreds of thousands or millions of dollars may not be interested in airdrops; they can easily make substantial profits with small amounts of money.

As the accumulation of points becomes more intense, some people will gradually withdraw from accumulating points.

➤ Final Note

The reason Binance did not use a linear point model but opted for a logarithmic/exponential model is to prevent everyone from excessively competing for points.

In the future, unless the frequency of airdrops increases and their value becomes larger, points will tend to stabilize. On this basis, there will be some fluctuations based on the value and frequency of airdrops.