Yield Farming:Trader Who Gained $1.5 Million Weighs in on “Ponzi”
- There are various types of yield farming protocols based on utility and tokens staked.
- David Malka details the variations and the due diligence investors must do before trying it.
- Enormously high yields, a lack of utility, or a low total value staked are all red flags.
On August 27, 2021, David Malka, who had spent seven years as an equity trader, was playing a game of musical chairs. But instead of risking his seat, it was more like risking the shirt off his back.
He was yield farming, an application of decentralized finance, or DeFi, that pays out yields in exchange for depositing crypto into a shared pool. In this instance, Malka was on a very new and risky protocol called Frost Finance. So he decided to film himself trying it out.
Frost Finance was offering outrageous APRs of 37,000% to 47,000% at the time of his recording. Was it a Ponzi scheme? Definitely, Malka said. In a typical Ponzi, the investor pays out juicy ‘returns’ from a shared pool with all the clients’ deposits.
But why did Malka do it? First, he claimed to have earned about $14,000 worth of tundra, the platform’s native cryptocurrency, in an hour. During the nine-minute video, he made about $1,000 within seven minutes. One tundra was trading just below $7,000 at the time.
Secondly, he’s a gambler — literally. Malka played professional poker online for about seven years,…