Bear Market Approaches, How to Achieve High Returns on Emerging Public Chains?

Recently, uncertainties in the macroeconomic environment have increased, and factors such as tariff policies have impacted technology stocks. With the launch of spot ETFs, Bitcoin has gradually become the focus of traditional finance, and its price trends are increasingly influenced by the macroeconomy.

The current market has been oscillating in the range of 82000-88000 for two months, with the secondary market lacking new narratives and the primary market showing no obvious opportunities. As investors, apart from waiting for market opportunities, using quality assets and stablecoins for mining to earn passive income is a good option.

A certain emerging public chain recently launched a liquidity proof mechanism ( PoL ), with some project yields even exceeding 100% APY. Let's take a look at the operating principles and feasible strategies of this new mining mechanism.

How PoL Forms a Positive Cycle

1. Users provide liquidity: Users inject assets into the dApp's liquidity pool, receive tokens, and stake them to earn rewards, providing initial liquidity for the ecosystem.

2. Validator Allocation: Validators distribute rewards to the pools with the highest returns based on incentives provided by the dApp. As more rewards flow into popular pools, user yield increases, further attracting user participation.

3. dApp Competition: To attract validators and allocate more rewards, dApps enhance incentive measures and deepen liquidity.

4. User Delegation: Users can delegate the rewards they receive to high-performing validators, increasing their block proposal weight, thereby earning more shares and incentivizing validators to continuously optimize their distribution strategies, creating positive feedback.

5. Ecological Expansion: As liquidity and participation increase, trading volume and dApp usage rise, network value increases, attracting more users and developers to join, promoting positive ecological development.

This mechanism fosters a collaborative relationship between dApps, users, and validators, effectively addressing the issues of insufficient liquidity and uneven asset distribution in traditional PoS.

Mining Strategy Analysis

1. A conservative strategy focused on core assets

Core idea: Choose a relatively core, deeply rooted, and moderately volatile asset portfolio in the ecosystem, such as:

• Native Token/Liquidity Staking Derivative ( LSD )
• Mainstream assets ( such as ETH, BTC ) / LSD
• Mainstream Assets/Stables

Advantages:

• Reduce the risk of severe price fluctuations.
• Enjoy better liquidity depth
• Multiple yields can be stacked

Potential sources of income:

• Liquidity Mining ( LP Rewards + PoL Rewards )
• LSD built-in yield
• Additional incentive profit sharing for the protocol

Risks and Cautions:

• There may be a decoupling risk between LSD tokens.
• You need to choose suitable validators to achieve the best returns.
• Need to weigh the scale of funds, annualized returns, and costs

2. Low Volatility Strategy for Stablecoin Pairs

Core idea: Choose trading pairs of stablecoins to reduce the risk of impermanent loss.

Advantage: The asset itself is relatively stable, suitable for users with lower risk tolerance.

Potential sources of income:

• PoL Incentives
• Trading Fee Revenue
• Additional rewards or airdrops from the protocol

Risks and Precautions:

• Need to assess the credit risk of stablecoins.
• The yield may be relatively low
• Protocol incentives may be unstable

3. High-risk emerging token short-term high-yield strategies

Core idea: Choose newly launched or popular altcoins and their trading pairs with mainstream assets, aiming for short-term high returns.

Potential sources of income:

• Extremely high PoL rewards
• Additional high incentives for the agreement

Risks and Precautions:

• Price fluctuations are severe, posing a high risk of loss
• Impermanent loss can be significant
• Need to closely monitor market data changes

Conclusion

Under this new mining mechanism, the best strategy is often to adopt a decentralized and dynamically adjustable approach:

• A portion of the funds is allocated to relatively stable mainstream asset pools.
• A small portion of funds to try high-risk, high-reward emerging token pools.
• Continuously monitor the yield rates of various pools, validator commissions, protocol incentives, and other data to optimize configurations in a timely manner.

At the same time, it is essential to pay attention to security and carefully assess factors such as contract risks, the reasonableness of the token model, and the team's background for new projects. High returns are often accompanied by high risks, and investors need to stay vigilant and manage risks appropriately.