Three Misunderstandings About Binance Alpha Points
➤ Misunderstanding One: 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 had high points previously but does not trade or hold any assets in the next 15 days, the total points will gradually decrease, and after 15 days, the points will return to zero.
If a user has low points but starts to work hard to increase points from today, for example, if others gain 11 points per day and the user gains 12 points per day, after 15 days
they will definitely be able to catch up. (If the gap is small, it may not take 15 days to catch up.)
➤ Misunderstanding Two: Friendly to Big Players
In fact, Binance Alpha points are not friendly to big players. In static points, i.e., points based on holdings, holding assets below $100 and having a capital of $100,000 only accumulates 4 points.
In terms of dynamic points, i.e., trading volume points, every additional point requires the trading volume to double. If the trading volume is $1024, it accumulates 10 points, and to gain an additional point, another $1024 must be traded.
We treat points as the dependent variable and trading volume as the independent variable to create a function.
It is essentially a logarithmic function with base 2, rounded to the nearest whole number, represented by the red line on the graph. The blue line is the logarithmic function without rounding. (It is speculated that designing it as integer points is for easier calculation and to differentiate between genuine and manipulated points.)
It is clear that as trading volume increases, points increase very little. Especially after rounding, adding more trading volume hardly increases the points.
Whether for static points or dynamic points, it is not a linear model; the increase in points from increasing capital or trading volume slows down significantly. Therefore, 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, for example, those with only a few hundred dollars, it is easy to find that with more trades, their capital decreases, making it harder to accumulate points.
Thus, Binance Alpha points are actually more friendly to medium-sized players.
➤ Misunderstanding Three: Points Will Keep Increasing
First, the current threshold for points is getting higher because we are at the initial stage of the points system.
The points system started on April 25, and everyone's points were relatively low at the beginning, so they will continue to increase.
Starting from May 10, on the 16th day of the points system launch, unless the airdrop rewards are particularly attractive, the growth of points will start to slow down.
Second, the marginal cost of accumulating points increases.
As previously mentioned, points are not linearly related to holdings or trading volume. As trading volume increases, the increase in points slows down.
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 is essentially y = 2^x. x is the trading volume points, and y is the trading volume required for those points. As points increase, the required trading volume accelerates, which means the marginal cost of acquiring points also accelerates. Above the curve, significant increases in trading volume will only result in a small increase in points.
Therefore, points will not increase indefinitely.
Third, consider the balance between returns and costs.
Unless the frequency and value of airdrops increase significantly, players will balance the returns and costs rather than blindly increasing points due to the costs associated with trading volume.
Fourth, the time cost of accumulating points.
In addition to trading costs, accumulating points also requires time investment, 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 earn a lot just by trading small amounts.
As the points increase, gradually some will stop accumulating points.
➤ Final Thoughts
The reason Binance did not use a linear point model but instead used a logarithmic/exponential model is to prevent everyone from overly competing.
In the future, unless the frequency and value of airdrops increase significantly, points will tend to stabilize. Based on this, there will be some fluctuations depending on the size and frequency of airdrop values.