Farming rewards by locking a coin on an exchange

"Lock the exchange's coin, get a new token for free" used to pay noticeably well. By now the income has almost vanished.

Why it sounded right

It looks like money out of nothing. The exchange launches a new token and hands part of the supply to anyone who locks up its own coin or a stablecoin for a few days. The asset itself does not go anywhere, you are not selling it, there is no risk of having picked the wrong coin. At the top of the page the exchange shows an annual rate, and it is a big one.

History supports it. In the early years this kind of farming really did pay a lot: there were many pools, few participants, and the tokens often went up after launch. The people who did it back then made real money and say so honestly. The idea lives on their reports.

And a third layer: the arithmetic is easy. Divide the tokens you received by the amount you locked, multiply by the number of days in a year, and out comes a pretty figure. The mistake is hidden right there, and it is invisible until you count it a different way.

How we tested it

We took every completed pool over the whole life of the format and counted not an annual rate but the honest total for a calendar year: how many tokens arrived per unit of locked asset, at the price you could sell them for in the first hours after launch. That is the test — an "annual rate" projects a short event across a whole year, while the number of events in a year is limited and the money just sits idle between them.

Second, we looked at what happened to the locked asset itself during the lock. While it is locked you cannot get out, so its own move has to count as part of the result, not as a separate story. And third, we tracked how the new token behaves after launch: hold it or sell immediately.

How it ended

The income has almost vanished. Year after year the figure fell, and over the last twelve months the total came out close to zero — with only a couple of pools in that stretch. The annual rate kept looking attractive the whole time, because it lies: the money works for a few days a year, not all year.

The reasons are structural, and both work against the participant. The locked volume grew by orders of magnitude and the number of participants became enormous, so each person's share of the reward got thin. Lock periods went the other way and got shorter: from a month down to a couple of days. The denominator grew, the numerator fell, and the time the money works shrank.

With income that small, the move in the locked coin itself decides everything. In a substantial share of the locks it fell, and in the worst cases it fell so far that it wiped out the entire pool reward many times over. The new token is not worth holding either: from the close of the first hours it drifted down on average over the following week.

What this teaches

• An annual rate on a short event is a con. Count the honest total for a calendar year: that is how many times a year the event actually happens.
• A reward for standing in a queue gets diluted as the queue grows. If the mechanism is public and needs no skill, its income tends to zero as word spreads.
• While the asset is locked, its own fall is your loss on the same trade. Count the whole result, not just the reward.
• The format can change under the same name. A new kind of giveaway has appeared with no public data on how much money was competing for it — so its return has not been measured, and you cannot plug the old figures into it.
• Selling the new token immediately beats holding it: over the first week it usually gets cheaper.