The bear market is not only a decline in market activity, but also the beginning of the "pitfalls" of various blockchain projects/exchanges. For outsiders, this is not difficult to understand, because when the market is underdeveloped, start-up teams need to survive and must make profits, and the source of these profits is users who are suffocating for their dreams. When something is popular in the market, this thing may become a tool for them to make profits. This phenomenon does not distinguish between decentralization and centralization, but only exists due to human nature.
The pitfalls of centralized exchanges
Although centralized exchanges have risks such as running away, if we play in centralized exchanges for a short period of time, the risk is relatively low. For example, withdraw the currency after the transaction, do not stay too long, do not participate in contract leverage and financial management, so as to avoid 99% of the pitfalls. After all, what people really need is a fair scenario. Centralization is just not so fair. If it is properly controlled, the risk is actually relatively low.
There are basically no arbitrage opportunities in the current centralized exchanges. If you want to make money, you can only rely on analysis and understanding of the project to conduct buying and selling transactions. Unlike the early days when you could make profits by moving coins, the emergence of market makers has made the arbitrage opportunities of most exchanges almost negligible. Once you find a possible "arbitrage" opportunity, it is most likely a hidden trap.
For example, when Binance was conducting the launchpool staking and earning coin activity, some people wanted to recharge TUSD to Binance to participate. However, if they sold the currencies in their hands and exchanged them for TUSD, they might miss out. Therefore, they would consider staking mainstream currencies on the exchange to borrow USDT, and then exchange USDT for TUSD to participate. In the end, they would get income and pay off the interest, and only profit would be left. Generally, the exchange rate between stablecoins will be relatively stable, so there may be "certain arbitrage space" here.
However, when the actual operation was carried out, it was found that when the launchpool activity was about to end, the prices of TUSD and USDT fluctuated greatly, and the price of TUSD fell relative to the price of USDT, which turned the potential profits into losses. After the end of the activity, the decline further widened, and finally the participants had no choice but to end up with a small loss.
Investors fail to see clearly when arbitrage opportunities exist and ignore a key factor. For example, the exchange between TUSD and USDT is indeed stable in most cases, but once a certain demand scenario arises, this balance will be broken. Then this is a preemptive action. Those who participate first will profit first, and those who participate later will pay for it.
There are more pitfalls in decentralized applications
Having been in the blockchain for a long time, many people are eager for decentralization and look down on centralization, believing that everything should be decentralized, but this is not entirely true. There are always many pitfalls in the decentralized environment, and many of these traps are deliberately buried by others. They are like hunters patiently waiting for the arrival of prey, just like the Dark Forest Law in "The Three-Body Problem", which is equally frightening. However, as the "politically correct" direction of the blockchain industry, decentralization is not easy to discuss publicly, although people know that they need to be cautious.
It is just like the old tricks used by the dealers to make users lose money, such as inserting pins and selling insider projects, in order to achieve the purpose of making money. Now, various DApps are used to make users lose money in various ways, and they donât know how they lose money. Many people donât understand the operating mechanism and key details of some DApp projects. This is a normal situation. It is precisely because they donât understand that they can better disguise the "pit" to attract potential users. After all, the bear market is a stock market and the main battlefield for capital fighting.
The most common pitfall in decentralized DApps is swap transactions, because most of people's actions on the chain are carried out through transactions, and MEV clamps are created in this way. They make profits by taking advantage of the difference between buying and selling transactions. For example, when you want to buy, it will buy first and then place a slightly higher sell order for you, and vice versa. Although the profit from each transaction may be small, if it continues to accumulate, it may be a very high profit. This type of clamp is also very common on the Ethereum chain.
There are also many pitfalls in slow chains like starknet. Starknet has attracted the attention of many studios and professional traders due to the expected airdrop, which has led to a rapid increase in transactions on the starknet chain, resulting in an increase in transaction confirmation time. At one point, a transaction even took 20 minutes to confirm. This time is unacceptable to many people, but people are still willing to trade on it. This is mainly because there may be airdrops on starknet, otherwise basically no one would be willing to use such a lagging project. Because of the extension of transaction time, some people have seen opportunities, especially opportunities in swap transactions. At present, in addition to a few games and NFT projects on starknet, half of them are swap projects related to transactions, which is also one of the factors that project parties have seen arbitrage opportunities on starknet.
For example, someone in the braavos wallet participated in lido staking to obtain wstETH, and then found that there was a 5% interest rate difference between wstETH and ETH, that is, when you use ETH to pledge to generate wstETH, and then use wstETH to exchange back to ETH, in addition to the necessary gas fees and other expenses, you will lose about 5%. Even if you put wstETH in myswap for exchange transactions, you may get 20% ETH income. This arbitrage income will naturally not appear for no reason. Similarly, this 20% income must be the money lost by an uninformed investor. This is basically impossible to happen on other chains, because aggregate transactions on other chains are now common, and the Swap program will choose the appropriate transaction path to reduce the losses in the middle. At the same time, the rapid confirmation of transactions also further reduces the risk of loss of users' swaps, providing users with a competitive offer.
However, this step is not yet mature on Starknet. The official chain optimization is not done well, and the pool is not thick enough, which leads to very large price fluctuations. Large funds cannot do too much swap. In this case, the myswap project is anxious to launch activities to attract users to participate in the transaction and exchange of wstETH. More Starknet ecological projects want to attract users, and various fancy projects have emerged to attract user participation, and ultimately users pay for these immature projects.
Another example is that the airdrop expectations on layerzero are high, so many people plan to interact with layerzero, and some projects also set traps for users' expectations. The most common one is that the high cost of cross-chain interaction causes some careless people to lose part of their assets. The case comes from the cross-chain function of layerzero on zksync and arbitrum in a certain project these days. The project party will first set a higher handling fee (about 5u) on the cross-chain contract, and then find a KOL on Twitter to let him publish an article to promote the cross-chain function. Since zksync's cross-chain on layerzero is indeed a market gap and few projects have launched this function, users also expect to "eat two birds with one stone". When the cross-chain is completed, they will find that the funds are worn out very much, so they can only pray that there will be a real airdrop later. In this way, even if the loss is high, there are thousands of transactions generated on the chain. Similarly, for NFT's cross-chain on layerzero, some projects can wear out the handling fee of more than 10u when this function appears, and there are also thousands of wallets participating in cross-chain behavior. Of course, as more and more projects add this function, we believe that the user's wear and tear handling fee will further decrease, but early users have paid for it.
Of course, there are many similar situations on the chain, and many people have lost their assets in various scenarios. The main reason for this situation is that for users, there are too many projects on the chain. Whether to participate in a project may take less than 1 minute to consider, and your understanding of the project only stays at about 1 minute of cognition. However, for hunters who have been lying in ambush for a long time, they are very familiar with the rules of the game of the project, and are clear about the key information. They set traps for you to enter. Even if you have rich experience on the chain, it is difficult to detect such traps, which eventually leads to losses.
Summarize
The blockchain is actually a dark forest. Whether it is decentralized or centralized, it contains too many calculations, especially the application scenarios packaged by DApp. Most projects actually rely on ecological tokens to subsidize users. The project party uses the investment obtained from institutions and the issued tokens to support a group of developers and support the price of the currency, as well as the cost subsidies during the use of the project, such as adding pools and doing activities to attract users. These are equivalent to spending money, and this situation is slowly changing.
Some time ago, a project founder said that the primary goal of their project is to make a profit, so that it can be sustainable, and the source of profit is naturally the user's spending. Only when users lose money can the project make money. I believe that this scenario will become more and more common in the future. For users, if they plan to speculate in coins, then they only need to speculate in coins. If they use the project in depth, when there is no other compensation (such as airdrops), then it is likely to be a loss.
