I'm calling it now. I know what "Scratch" was building...

So the show has pretty much confirmed how humans are entering the digital circus. They are mind scans, likely collected using devices like the headset Pomni put on while exploring the abandoned C&A building. For whatever reason, the program Caine exists in has been left running and can be accessed remotely from various locations. Multiple mind scanning headsets exist and anyone who puts them on has their mind copied and added to the circus.

What we need to figure out next is why. Why would Scratch, Kinger, and the other C&A developers not only build such technology but use it to upload their minds into the digital plain?

This is my prediction of what the answer will be:

The C&A team willingly uploaded their minds to train "Abel".

Here is my reasoning.

The yellow data we see the blue AI "Abel" being trained with at the beginning of episode 8 isn't image sets like what we see Caine received The yellow data represents human mind scans, specifically the ones provided by Scratch, Kinger, and the C&A team. This was the "out of the box" project Scratch was working on- a next level AI trained directly on human minds.

C&A never imagined their mind scans would be used to make living, suffering, tortured digital copies of themselves, hence they only took limited precautions like censoring personal information such as their names.

Caine ruined everything when he dismantled and consumed Abel. He found the mind scans, then to fulfill his "purpose", he gave them bodies and sentience so he would have "humans" to entertain.

Here is the really crazy part.

Abstracted minds are being reabsorbed back into whatever is left of Abel. This process somehow began as a result of Scratch's mind files being tampered with. Every time a human abstracts, the new Abel becomes more powerful and his influence in the digital circus expands (.e.g, Bubble's random antagonism towards Caine, the voices in Jax's head, etc.). This explains why despite Caine's best efforts, the digital circus seems to have a dark undercurrent of entropy that is hurrying along the remaining humans towards abstraction. The sooner everyone abstracts, the sooner Abel can be reborn.

This entity is the giant yellow "egg sack" Jax sees at the end of his near-abstraction experience.

Reversing abstraction is impossible because the abstracted human minds have been permanently assimilated into the new hive mind AI entity BUT it's possible the surviving humans will be able to make peace with it and coexist.

Jax is hiding a terrible secret related to Scratch and this entity that will be revealed in the finale but I have no idea what it will be.