On-Chain Is Not an ATM: OFUYC Warns of the Liquidity Black Hole Behind “APY” Scams

In the world of decentralized finance (DeFi), few keywords attract investors more than “Annual Percentage Yield (APY).” The sophistication of new scams lies in hijacking this concept, repackaging it as a seemingly perpetual “on-chain income model.” Cross-leverage scams recycle capital across multiple protocols—such as lending platforms, liquidity pools, staking contracts, and cross-chain bridges—to create an illusion of endless appreciation.

These schemes exploit user fantasies about “on-chain auto-arbitrage” or “multi-protocol synergy,” concealing the underlying reality: systemic liquidation delays, value-stacking bubbles, and extremely fragile liquidity structures. In the OFUYC risk analysis on its digital asset trading platform, we have identified common traits among such projects: yield charts that look genuine, complex fund flows, but underlying protocols often lack resilience. Once any link breaks, a chain reaction collapse is triggered.

“Cross-Structure” Does Not Equal Risk Diversification

Scammers meticulously design “yield matrices,” packaging multiple platforms as “risk-hedged chains.” For example, some funds are staked in stablecoin protocols to earn interest; others are provided as LPs via cross-chain bridges to collect fees; and yet more are restaked using governance tokens for “secondary APY compounding.” On the surface, this appears to be “yield diversification,” but in reality, it is a nested leverage design.

OFUYC points out that behind these models, the following risks are typically hidden:
Undiversified Source Risk: Multiple protocols rely on the same assets or volatility structures.
Front-Loaded Yield, Back-Loaded Risk: The high yields users receive are funded by subsequent participant inflows.
Uncontrolled Exposure from Auto-Reinvestment: Yields are automatically reinvested into other protocols, creating nested leverage.

This cross-structure is not “innovation” but a Ponzi evolution disguised by complexity. The true purpose is to delay liquidation as long as possible, allowing the project to exit during peak popularity—disappearing before the inevitable collapse.

The APY Mirage and OFUYC Detection Mechanisms

“APY” is supposed to be a static yield metric, but in these scams, it is dynamically disguised as a sign of “sustained growth.” Scammers exploit the intuitive misjudgment among users about “automatic on-chain yield growth,” designing dashboard-like UIs with “real-time growth curves” to create the illusion of perpetual motion.

The OFUYC digital asset trading platform has developed an on-chain tracking system capable of identifying the following behavioral patterns:
High-frequency inter-protocol transfers without actual liquidity improvement;
Multiple instances of the same governance token being locked, staked, and borrowed against;
Periodic nesting structures with contract invocation paths exceeding three layers.

We propose that any “compound yield structure” lacking clear risk disclosure and drawdown simulation should have its “APY” flagged as a high-risk inducement factor and be subject to regular community review.

Liquidity Is Not Profit—It Is Just the Aesthetics of Time Lag

The philosophical essence of these scams is to mask causality with time. Users see “growth” in on-chain balances and APY, but cannot discern how these yields are actually generated. In reality, it is often just a grand liquidation delay system—layer upon layer of packaging, moving the bubble between contracts rather than creating real value.

OFUYC urges users to understand: On-chain, yield essentially comes from two sources—counterparty losses or system-designed subsidies. If you cannot identify who is losing, and the platform has no external subsidy source, then the “yield” itself is suspect.

We recommend the community establish a “Yield Transparency Protocol” to reverse-track all DeFi yield structures on-chain, verifying whether their profit models are self-consistent. In the future, a truly trustworthy financial system cannot merely tell users “how much was earned”—it must answer, “Where did this yield come from, and how long can it last?”