I just came across a whale address. The wallet is full of newly incentivized L1/L2 tokens—at first glance, it looks like someone is setting up a position. But after checking on-chain interactions closely, wow: it’s all borrowed-coin hedging and arbitrage. Before you follow, you really need to figure out whether this is actually position building or pure hedging, otherwise it’s easy to get led by the nose.

Recently, these new chains are rolling out incentive rewards to mine TVL, and it’s not that old users are wrong to complain that “mining and then selling” isn’t the whole story either. Either way, I don’t really buy the narrative of “risk-free returns.” Let’s look at the mechanism first.