What are the risks behind the surge in locked assets as "land mines" occupy the Arbitrum chain?

Source: Hive Tech

Original Title: "The 'Desert Highway' Arbitrum On-chain 'Soil Mine' Occupation"

Author: Jasmine

The Arbitrum mainnet has been open to the public for 2 weeks, and its on-chain TVL has reached $1.5 billion, accounting for 68% of the total TVL in the entire Layer 2 sector. However, there are currently only 6 applications deployed on this chain. Unusually, a significant amount of assets locked on-chain comes from an anonymous protocol called ArbiNYAN, with $1.35 billion of the mainnet's over $1.5 billion TVL locked in this "yield-generating application" from an undisclosed team, lacking security audits and with a rough official website.

The public test version of Arbitrum One opened to all users just 2 weeks ago, and this Ethereum Layer 2 scaling network has attracted over $1.5 billion worth of crypto assets on-chain, while the total locked value (TVL) of the entire Layer 2 sector is only $2.2 billion.

Arbitrum's official statement clarifies that no governance tokens have been issued. DeFi veterans believed that after Arbitrum was mentioned by Ethereum's official channels, established applications would collaborate to "stir things up," boosting user interest and interaction rates with this Layer 2 network.

However, the script did not unfold as expected. Currently, there are only 6 applications deployed on the Arbitrum chain, and a significant portion of the assets locked comes from the anonymous protocol ArbiNYAN, with $1.35 billion of the mainnet's TVL locked in this "yield-generating application" from an undisclosed team, lacking security audits and with a rough official website.

Some KOLs in the DeFi market have warned users that ArbiNYAN is a "shitcoin," cautioning against the risks of mining "soil mines" that could lead to capital losses. The mindset of those rushing to the soil mine includes both the desire to make quick profits and the hope to interact quickly and cost-effectively with Arbitrum, leaving traces for potential airdrops before this new chain issues tokens.

The "ArbiNYAN phenomenon" poses multiple risks but also reflects the scarcity of native applications on Arbitrum. The core development team behind the chain, Offchain Labs, has posted job openings on their website, including positions for software engineers.

Arbitrum Reaches $1.5 Billion TVL in Two Weeks

September 13 marks exactly 14 days since the official launch of the Arbitrum mainnet public test version, Arbitrum One. In just 2 weeks, Arbitrum has attracted over $1.5 billion worth of crypto assets locked on-chain.

What does this mean? According to third-party data platform L2BEAT, the total TVL for Layer 2 is $2.2 billion. This means that Arbitrum's TVL accounts for 68% of the Layer 2 sector. It's worth noting that the current total locked value (TVL) on-chain is second only to Ethereum's BSC chain, which took nearly 5 months to reach a "capital absorption" of $1.5 billion.

Arbitrum Reaches $1.5 Billion TVL in Two Weeks

As a Layer 2 scaling network for Ethereum, Arbitrum is fully compatible with the Ethereum Virtual Machine (EVM). It was developed by Offchain Labs and employs Optimistic Rollups technology to enhance the scalability, speed, and privacy of on-chain contracts.

Using this network requires transferring assets under the Ethereum standard to the Arbitrum chain via an asset bridge supported by compatible wallets. It is important to note that once a user's assets enter Arbitrum through the asset bridge, returning to Ethereum requires at least a 7-day waiting period, as determined by the technical foundation of the chain.

Users have tested that the transaction fees for single-chain operations on Arbitrum are significantly lower, with each transaction costing around $1. However, cross-chain fees are relatively high. For example, transferring USDC under the ERC-20 standard from an Ethereum wallet to the Arbitrum network incurs a fee of at least $30, including cross-chain and conversion processes.

According to data from Arbiscan.io, as of September 11, the daily transaction count on the Arbitrum chain was 106,839; the number of unique addresses was 41,437, an increase of 17,107 from the previous day; and over 660 token contracts have been deployed on the chain.

After the full opening of the Arbitrum mainnet, decentralized applications on Ethereum such as Uniswap and Balancer, as well as the cross-chain payment protocol cBridge on the Celer network, and the DeFi lending protocol WePiggy, have all indicated plans to launch on Arbitrum.

However, third-party data from Defi Llama shows that there are only 6 applications actually attracting crypto assets locked on the Arbitrum chain, including Balancer and WePiggy, but their TVLs are only $18.4 million and $3.882 million, respectively. The application with the strongest "capital absorption" capability is not a well-known market project but rather an application called "ArbiNYAN," with a TVL of $1.35 billion, accounting for 90% of the TVL on the Arbitrum chain.

What exactly is this capital-absorbing application?

"Soil Mine" Absorbs $1.35 Billion with Multiple Risks

Opening the ArbiNYAN (NYAN) official website, a pixelated rainbow cat flashes on the homepage, which only displays the token distribution plan for NYAN, the farm page, contract address, community channels, and a guide on "how to transition to Arbitrum." The simple and crude page does not provide any information about the application development team, and multiple third-party data platforms have indicated that this application lacks a security audit report.

In the words of DeFi veterans, this is a "shitcoin," and the farming it offers is a "soil mine," playing a game of "running fast."

The ArbiNYAN official website shows that the total supply of NYAN is 100 million tokens, with the development team holding 5 million NYAN, and 4.5 million NYAN being released linearly over a period of 3 months. Users can stake ETH, stake NYAN, and provide liquidity for NYAN-ETH to earn NYAN rewards. Among these, the ETH staking pool releases 7 million NYAN within a week; the total rewards for providing liquidity for the NYAN-ETH staking pool over three months amount to 49 million NYAN; and the single-token staking of NYAN releases 39 million NYAN over three months.

In simple terms, this is a "yield-generating application" that allows users to stake ETH to mine new tokens, with users depositing real Ethereum and receiving NYAN, a new token from an unknown team, lacking security audits and with a crude website.

"There are risks; the program lacks security and has no audits." On September 11, the day after ArbiNYAN went live, a player warned on Weibo that although the application's contract does not have obvious backdoors, it lacks time locks and multi-signatures. The APY (annual percentage yield) for the ETH single-token staking pool reaches 740%, producing 1 million NYAN daily; the APY for the NYAN single-token staking pool is as high as 4298%, producing 430,000 NYAN daily; and the APY for the ETH-NYAN LP second pool is the highest, reaching 10,000%, producing 540,000 NYAN daily. "The second pool has risks of impermanent loss and price volatility."

Selling pressure has become the biggest hidden crisis for NYAN. The blogger who warned about the risks stated that NYAN had already dropped from $4.9 to $3.2 in less than an hour.

In response to the risk warnings, some users inquired about the project's details, asking where they could buy it; others expressed that they only wanted to "interact a bit, get familiar, and wait for the ARB airdrop."

Arbitrum Has Not Announced Token Issuance Plans

On September 12, Arbitrum's official Twitter account warned that there are currently no tokens on the mainnet, and any claims of official tokens are scams.

Despite this, waiting for the Arbitrum governance token airdrop is indeed one of the reasons many users are rushing to the ArbiNYAN "soil mine." Under the high APY, this soil mine has become a cost-effective way to interact with Arbitrum.

Although the Arbitrum chain reached the TVL metric that took the BSC chain 5 months to achieve in just 2 weeks, the ecosystems of the two are not comparable. The BSC chain already has hundreds of applications covering popular blockchain application sectors such as DeFi, NFT, and GameFi, while there are only 6 applications deployed on Arbitrum, most of which are migrated versions of native applications from the Ethereum chain.

The current awkward situation for Arbitrum is that users have no applications to interact with on-chain. Although transaction speeds have improved and the network is not congested, Arbitrum resembles a desert highway—people want to come, but there are no good vehicles running on it. Users can only ride on the "shitcoin," pulling its fur while leaving traces of "I was here" on the road, hoping that Arbitrum can provide users with governance token airdrops like other blockchain networks or projects.

The developers of Arbitrum, Offchain Labs, seem to have noticed the issue of ecological scarcity, as the team has begun recruiting for development engineer positions, including senior software engineers and software engineers.

Well-known KOL Wan Hui reminds that the "golden 48 hours" for the Arbitrum mine has passed; this time limit is purely her experiential judgment. "Generally, I observe for the first 8 hours, then 48 hours is relatively safe (combined with observing large holder behavior), and after 48 hours, it becomes high risk." She believes it is not appropriate for users to rush into the LP pool.

For users rushing to the "soil mine," risk awareness remains a necessary lesson. Some users have a sense of luck, thinking that there is a 7-day "waiting period" for Arbitrum. In response, DeFi players warn that the project's 7-day timeframe is always ahead of users; once funds are withdrawn or the mine collapses, the principal authorized by users to deposit into the application will face the risk of loss.