Yield Farm offering one million percent APY turns out to be a scam

Yield Farm offering 1 million percent APY turns out to be a scam – Photo: Shutterstock

In early April, MaxAPY claimed that it was transforming the decentralized finance sector with a yield farming protocol aimed at providing holders with the highest fixed and most sustainable APY. Instead, it was a carpet train.

As a strategy, yield farming is not dissimilar to forex trading, where investors aim to lend currencies with the highest yields and borrow those with the lowest interest rates.

Yield farming is typically done through stablecoins like USDT, DAI, and USDC, or protocols linked to the Ethereum blockchain. MaxAPY backers did not specify which token they use for their project.

DAI to US Dollars (DAI/USD)

In search of maximum annualized return, or APY, farmers typically move their cryptos from one liquidity pool or lending platform to another, often requiring flirting with riskier pools.

MaxAPY aimed to achieve this by using a “unique automatic staking and auto-compounding mechanism” through which token holders would earn rebase rewards as interest payments straight to their wallet as their tokens surge every three seconds.

MaxAPY holders were told they would earn 960,000% annual compound interest for Year 1 without having to remove their tokens from their wallets.

But although the developers said they had ensured investor safety by subjecting the entire team to extensive know-your-customer verification on both Cyberscope and Pinksale, it was reported in less than three weeks that the project had been dragged onto the carpet.

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Ethereum to US Dollar (ETH/USD)

According to Grayson, head of business development at automated yield farming protocol Weave, inflated APYs are a key indicator of risk for prospective yield farmers, helping to make any project claiming returns in the triple digits or higher a potential risk represents.

MaxAPY’s backers said its returns are a function of: “The Auto-Stake feature is a simple yet cutting-edge feature called Buy-Stake-Hold-Earn that offers $MaxAPY holders the ultimate ease of use. By simply purchasing a $MaxAPY token and storing it in your wallet, you will receive rebase rewards as interest payments straight to your wallet as your tokens increase every 3 seconds.”

But instead of being based on cutting-edge tokenomics, MaxAPY simply recycled the millennia-old tactic of using greed to trick the unwary.

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