DEFI PEOPLE

Arbitrum, a hot project on the blockchain, how does it relate to Dogecoin mining?

2023/2/21

This article is authorized and reproduced from Josh Lu Zijian

Arbitrum can be said to be the leader in Layer2 scaling solutions, aimed at addressing congestion and high fees on Ethereum, improving blockchain scalability and efficiency. It has recently garnered attention due to the Shanghai upgrade on Ethereum. It has set a record with a total value locked (TVL) of up to $1.79 billion within half a year. The entire ecosystem is flourishing, leading to the emergence of many copycat projects, some of which have made significant profits. While Bitcoin did not see a significant surge in February, these copycat projects have seen gains ranging from tens to hundreds of times. This has sparked a wave of copycat projects, with developers rushing to build new projects on Arbitrum, while investors are seeking opportunities to get rich quick. Josh is here today to share more about this topic!

Table of Contents

What is "Tu Gou" and Why is it So Attractive?

The so-called "Tu Gou" is a term used within the cryptocurrency community. In 2020, during the decentralized finance (DeFi) boom, many forked projects emerged. A fork refers to directly copying the code of an existing well-known project, making modifications, and launching it. In the cryptocurrency community, this situation is referred to as a fork. In the early days, many impressive projects were developed by foreign teams, while China created many "Tu Gou" projects. "Tu" refers to domestically produced, and "Tu Gou" typically refers to anonymous replica projects. These projects may not be audited and often offer extremely high Annual Percentage Rates (APRs) as rewards. Therefore, after the issuance of these "Tu Gou" projects, there may occasionally be instances where they skyrocket in value, but more than 90% of such projects end up being scams, leading to rapid declines after investors enter the market. Although this is the case, many are still willing to try due to the irresistibly high profits, making it a very high-risk operation. Not all "Tu Gou" projects end in failure; there are also rare cases where "Tu Gou" projects succeed in transforming, but such instances are extremely scarce.

Arbitrum Tu Gou Trend - Everyone Dreams of Getting Rich

Currently, the ecosystem on Arbitrum is bustling, and everyone wants to launch projects, ushering in a wave of "Tu Gou" season. Recently, several cases have become popular, such as Zyberswap and SolidLizard, both of which have seen over a hundredfold increase from their lows. But is it really that simple? These well-known projects that have been forked to become "Tu Gou" also require some research before investing. It is necessary to study the current popular trends and if forking from less popular projects, it may not attract many participants. Furthermore, since high rewards are offered to attract users, there may be some Ponzi scheme elements present. Observing whether the design incentives are enough to keep users engaged is crucial.

How to Play SolidLizard? Choose Between Getting Rich or Going Bust

SolidLizard, also known as "Lizard," is a standard fork of the ve3,3 project. In addition to regular staking rewards, it also allows increasing the Annual Percentage Rate (APR) by locking the platform's token SLIZ. Currently, in the fluctuation pool, which is the 2 pool, the APR is 1800%. The 2 pool involves providing the platform's token SLIZ to form an LP to provide liquidity. Due to the high volatility of the platform token, the risk is relatively high, but the profits are also considerably high, with nearly 5% profit per day being very enticing.

Note: ve3,3 is a new form of DeFi category created by Andre Cronje, combining elements from the projects Ohm and Curve. "ve" is derived from Curve's staking feature, while 3,3 represents Ohm's core spirit.

To add LP, select Liquidity -> ADD LIQUIDITY

After adding LP, staking is required to earn rewards; otherwise, only transaction fees will be earned. The transaction fees are negligible compared to the rewards. On the same screen, click on the right side "I have LP token," select your LP, then enter the desired percentage to stake, and click Stake LP at the bottom of the screen.

High Rewards with Risks to Consider

While the rewards may seem enticing, do you know where the risks lie? The value of the LP I staked is approximately $702, and the daily rewards I can earn are around $34.5. However, there is a possibility of the following scenario: as people are attracted by high profits to mine and continuously buy the platform token for high rewards, once those early users who profit start selling, a sharp decline will begin. During good times, an upward spiral of coin prices can continuously rise, which is why some can earn hundreds of times their investment. However, when people start to take profits, a death spiral will also occur, where everyone starts selling the platform token, resulting in a real case of nearly a 50% decline in a single day on February 19th.

Key Points and Mindset Adjustments for "Tu Gou" Rush

Be mentally prepared for funds to evaporate at any time.
Stablecoin pools guarantee returns, while 2 pools with platform token pools have high volatility and high profits.
When buying platform tokens, pay attention to the trading depth. If buying only 500U affects the depth by more than 1%, it indicates low liquidity, leading to significant slippage when selling.
A daily trading volume exceeding 100K is better, with liquidity over 100K having better depth. Liquidity below 100K will have significant volatility.
Intense fluctuations in the early stages are inevitable, so adjust your mindset well and do not let it affect your daily life.
Hundredfold coins do have opportunities, but due to insufficient initial pool depth, it may not be possible to buy too much. Therefore, do not envy those who profit a hundredfold, as their initial investment may be very small.
During the uptrend, prioritize withdrawing your initial investment first.
Advanced strategies involve high risks, such as locking for 4 years for super high APR rewards, mining all the way, and selling.
During the death spiral, unlock LP at a relatively low point to ensure you receive many platform tokens. Wait until the second uptrend to earn from the price difference. Some projects may not have a second uptrend and may die directly after the first.

It is important to reiterate that while "Tu Gou" mining is indeed enticing, and there are successful projects that have emerged from it, it is not something to rush into. It is crucial to do your homework and not succumb to FOMO. When investing in "Tu Gou" projects, there may be instances where out of four mines, only one is profitable. The returns from one may offset the losses from the other three, but the failure rate is still very high. If you are not researching regularly and hastily dive into mining or invest in just one "Tu Gou" project, it can be quite risky!