FOMO, Involution, and the Prisoner's Dilemma: A Psychological Battle in an On-Chain Trading Competition

Author: CryptoBrand

The Web3 market in 2025 is quietly undergoing a narrative shift. In addition to the enduring appeal of memes, more solid tracks are beginning to emerge, such as the wave of RWA tokenization. Data shows that the trading volume of tokenized Pokémon cards reached approximately $124 million in August 2025. At the same time, the Web3 infrastructure sector is maturing rapidly due to the influx of institutional funds and improvements in technical indicators.

In this context, liquidity is the lifeline. Whether it’s emerging protocols or established platforms, trading volume is directly related to market attention, token prices, and even survival space. Trading competitions have been given new life as a powerful tool in the Web3 world.

Trading Competitions: Catalysts for Project Growth and Engines for Multi-Party Win-Win

A trading competition is essentially a carefully designed incentive game, where participants take what they need, collectively forming a delicate ecosystem.

1. CEX's Moat: Binance Alpha Trading Competition

Binance's Alpha program is a typical CEX approach. The "Alpha Points," "Ecosystem Competition Rewards," and "Designated Trading Pair Rewards" create a triple incentive, achieving "one fish, three eats." A massive amount of "flow" is mediated through the trading competition, enhancing the platform's trading activity and user stickiness, while also bringing valuable initial liquidity attention to ecosystem projects.

2. DEX's Liquidity Engine: PancakeSwap's Trading Competition

Trading competitions can incentivize LPs, attracting users to inject assets into liquidity pools through rewards, thereby increasing the protocol's TVL and trading depth, reducing users' trading slippage, and forming a positive cycle.

3. The Clever Bridge of Task Platforms: TaskOn's Trading Race

Task platforms connect project parties with a vast number of users in the Web3 ecosystem, helping projects achieve cold starts through diversified tasks. TaskOn's Trading Race leverages a lower reward budget to stimulate astonishing trading volumes. By activating participants' competitive spirit through Leaderboard and real-time reward distribution, simple trading actions are transformed into a passionate competition.

Nash Equilibrium and the Prisoner's Dilemma in On-Chain Trading Competitions

Why can trading competitions become a golden key to activating trading volume? Why does rational analysis ultimately lead to collective "involution"? When numerous participants are placed in the same arena, a set of addictive game mechanics is hidden behind the micro-game.

Trading competitions are a perfect embodiment of the prisoner's dilemma. Each participant faces a choice: to restrain themselves or to increase trading? If everyone restrains, the collective benefit is optimal, but as long as one person 'betrays' and increases their trading, they can easily surpass others. Risk aversion and FOMO emotions drive everyone to continue to involute until the prize is diluted by transaction fees. Ultimately, the market tends toward Nash equilibrium—where all participants' inputs bring their net gains close to the overall minimum, at which point no one is willing to unilaterally change their strategy. This 'zero-sum equilibrium' is precisely the state that project parties are pleased to see, maximizing incentive efficiency.

Practical Simulation: The "Wear and Tear" Game of Binance Alpha Trading Competition

Recently, Binance Alpha launched a trading competition on the BNB Smart Chain, where participants will compete for a prize pool equivalent to $3.1 million by trading in five independent trading volume pools: AKE, ARIA, TAKE, BOT, and RICE.

Participants are fiercely competing for rankings. Heisenberg, a frequent participant in Binance Alpha, showed me his trading strategy: "'Buy at the lowest rate, set sell orders at 2%-5%, and earn small price differences while increasing volume." But beside him, Kai immediately rebutted, "Buying and selling immediately, I lost 1.6U."

As the competition neared its end, the game intensified. "The last day of the previous competition was very competitive; some people lost dozens of U," Heisenberg vividly described why they fell into the prisoner's dilemma: "We are all betting on each other's abandonment points, with hundreds of U advantages alternating in rankings, and in the end, all the gains are lost. You can only make money if you don't get too emotional, but unfortunately, you can't persuade others, nor can you persuade yourself to take a loss."

He also reminded traders to carefully calculate trading friction and conduct background research on tokens, as making money is the original intention of participating in trading competitions.

Efficiency and Capital: The Efficiency of TaskOn Trading Race

On the TaskOn platform, a competition for QLS liquidity and trading sprint, with a prize of $1,155, drove over $300,000 in trading volume.

The Trading Race page displays real-time information on trading volume, total prize pool, participants, etc., and does not enlarge the Swap entry but instead places the Leaderboard in the most prominent position. By providing a public, real-time updated ranking through changes in rankings and real-time rewards, the competitive psychology and desire to win among participants fluctuate as users' rankings rise or fall, serving as the biggest source of adrenaline and stimulating trading enthusiasm.

During the heated phase of the game, the endowment effect and sunk cost provide deeper psychological interference. Once users achieve a certain ranking through trading, they view this "temporary ownership" as theirs. As their ranking drops, risk aversion and sunk costs drive them to 'give it another shot,' attempting to recover their "losses." Sometimes, this competition is not even about rewards but about honor.

In TaskOn's Discord community, I saw a user asking the admin if they could introduce related medals for the Trading Race. I privately messaged this user named "Bella," and she said, "The journey of large transactions often reflects a kind of on-chain honor; sharing this medal on Twitter feels more natural than just posting transaction screenshots."

Thus, TaskOn also maintains a balance in rule design, with all trading information—user trading volume, expected earnings—being transparent and easily verifiable, making it easier to calculate overall costs and achieve Nash equilibrium—when the common balance trading point is calculated and set as the trading bottom line, retail investors can more controllably maximize their benefits.

As the Fogg Behavior Model states: when strong motivation, simplified operational capability, and ubiquitous leaderboards trigger, all three together lead to users' trading behavior flowing like mercury, unstoppable.

How to Successfully Organize a Trading Competition?

To successfully create a trading competition's underlying logic, one must effectively utilize the hook model—creating a cycle that makes users "addicted."

Just like we analyzed with TaskOn Trading Race, through the four stages of the hook model, users transition from passive participation to active engagement:

Trigger: Activity announcements, community pushes (external triggers), and FOMO anxiety (internal triggers) initiate the cycle;

TaskOn's Trading Race activity will be promoted on the homepage and widely announced through channels like Twitter. Public dynamic earnings make it easier for FOMO emotions to drive the flywheel to start;

Action: Users perform the simplest trading operations;

Variable Rewards: The most ingenious aspect of the hook model: the fluctuations in leaderboard rankings and the uncertainty of rewards create variable rewards that continuously stimulate users' dopamine secretion;

The sliding of the Leaderboard, with expected earnings dropping directly by $100, makes the intuitive "loss" more likely to drive users' trading emotions.

Investment: The time, gas fees, and even emotions that users invest increase their sunk costs;

Ultimately, a positive flywheel is formed. Once the flywheel reaches its limit, project parties can build a standardized competition brand around the path of "rules ------ rewards ------ competitive atmosphere (leaderboard) ------ branding," creating a cycle of positive growth.

The Deep Value of Trading Competitions and Future Evolution

In addition to the independent operation of single project parties, joint trading competitions among projects within the same ecosystem can achieve ecological empowerment and scale effects in trading volume. As the dimensions of trading increase, the gameplay also becomes more diversified, making users' trading strategies themselves the main characters in the competition.

Case Advancement: TaskOn and FourMeme's "Onchain Playground"

The Meme trading competition "Onchain Playground," jointly launched by TaskOn and FourMeme, is a prime example of this thinking. It brings together five popular meme coins, including $EGL1 and $Janitor, and designs a sophisticated "three-dimensional" flywheel gameplay, elevating competition from mere involution to a strategic dimension:

FCFS Pool: Users complete trading tasks for their preferred projects to share a $4,000 basic prize pool and receive platform GEMs rewards.

Share Pool: Users need to consider multiple "Task Collections" to impact the total trading volume leaderboard and share a $5,300 prize pool. This prize pool will dynamically grow with the total trading volume, breaking the earnings cap and incentivizing core players to continue investing.

Sprint Pool: Activating the gameplay value of GEMs, users can share the final $1,700 sprint pool based on the number of GEMs they have. At this point, GEMs become the only metric for measuring earnings.

The brilliance of this mechanism lies in successfully implanting the core strategic question of "how to efficiently acquire GEMs" among users. Users not only compete with each other in trading volume but also need to weigh their energy distribution among different tasks, thinking of optimal strategies to maximize benefits from the three prize pools. It also showcases the potential of joint competitions—through the three-dimensional design of basic game layers, strategic competition layers, and resource allocation layers, elevating competition from mere trading volume comparison to strategic game dimensions. Ultimately, the total trading volume exceeded $3 million, with over 1,000 users competing in trading.

For project parties, trading competitions are a lever for initiating growth; for users, they are an excellent testing ground for trading. Future trading competition models can be more diversified.

In fact, future trading competitions can evolve towards Hold Token competitions, integrating veToken models, ve(3,3) models, etc., transforming short-term incentives into long-term protocol binding, profit sharing, and weight amplification. This aligns more closely with the needs of the Web3 ecosystem.

On-chain trading competitions are a micro-experimental field that perfectly combines human game theory, economic incentives, and cryptographic technology. It clearly demonstrates that under reasonable rule design, while individual rational decisions may fall into the "prisoner's dilemma," they can ultimately drive the entire ecosystem toward an active, stable, and prosperous direction in "Nash equilibrium."