ArkMoney: The Next DeFi Ponzi King You Absolutely Don't Understand

When it comes to the ArkMoney project, after reviewing analyses from KOLs and media reports on the market, it seems that all interpretations fall short, failing to truly grasp the logic behind this project. The impression is that users entering the scene are puzzled, and even the media is perplexed. Today, based on actual on-site experience, I will present a version that will undoubtedly provide you with a profound understanding. Key points covered include:

1. Cognitive Refreshment

2. IQ 50: How high are the returns?

3. IQ 100 Three Soul Tortures: How does it operate? Where does the money come from? How big is the bubble?

4. Assuming no additional funds or users enter later, will it collapse?

Cognitive Refreshment

“This is not a financial product; it is a MARK mining machine with a regular maintenance cost of 200u for electricity and a daily yield of 0.5%.”

If you are a beginner or do not wish to delve too deeply into the internal operational logic, then stopping here is sufficient. You can consider MARK as a mining machine, and your initial investment is the money used to buy the mining machine. The price determines the computing power of your mining machine—the higher the price, the greater the computing power. With larger computing power, the absolute value of the daily yield based on a 0.5% daily rate will be higher. Regularly paying 200u for electricity (reinvestment) allows you to accumulate profits from the mining machine.

IQ 50: How High Are the Returns?

Experience the power of compound interest. Buy a mining machine for 10,000u and pay 200u for electricity every week:

1. 112 days: Cost: 10,000 + 3,200 = 13,200u, Total returns: 21,282u, Return rate: 160%

2. Six months: Cost: 10,000 + 5,200 = 15,200u, Total returns: 32,145u, Return rate: 211%

3. One year: Cost: 10,000 + 10,400 = 20,400u, Total returns: 85,511u, Return rate: 419%

IQ100 Three Soul Tortures: How to Run? Where does the money come from? How big is the bubble?

First of all, the documentation and publicity of this project do not make it very easy to understand the principles of the project. Let us summarize the description in the official information:

1. Users deposit $USDC into the vault and receive 0.5% daily earnings growth
2. Users hold $MARK tokens, increasing the value of the asset from transaction taxes and increasing liquidity.

First of all, a daily yield of 0.5% immediately raises concerns about financial Ponzi schemes and is deemed unsustainable. However, many people are unaware of the operational logic behind this 0.5%. Where does the money come from? How significant is the bubble? Let’s start from here:

1. Operational Logic

Although the daily yield of 5% accumulates in real-time, triggering this yield is conditional – reinvestment must be carried out. If reinvestment is not performed, the accumulated daily yield of 5% will not be included in your total TVL (Total Value Locked, understood as your deposit balance). Additionally, in the absence of reinvestment, any withdrawals will be directly deducted from your TVL. Therefore, if you refrain from reinvesting from the moment of deposit, it is equivalent to unlocking your principal at a rate of 5% per day, without any interest.

Here is a specific case (as the system supports a minimum reinvestment amount of 200, we will use 200 USDC for illustration):

1. Initial deposit amount: 39,370 USDC

2. No reinvestment conducted

3. Individual TVL: 39,370 USDC

4. TVL after reinvestment: 40,123 USDC

So by calculation, the income accumulated through daily investment of 0.5% is 40123-39370=753 USDC. Whether to reinvest here, it will produce two results:

1. Withdraw directly without reinvesting: the income will be deducted from personal TVL. TVL is reduced to 39370-753=38617.

2. Reinvest 200 USDC: The income will increase to your personal TVL with the principal of the reinvestment. TVL increases to 39370+753+200=40323.

At present, the minimum amount for reinvestment is 200 USDC. Of course, no matter if you deposit 1,000 USDC or 50,000 USDC, as long as you reinvest 200 USDC, your income can be accumulated into TVL to activate the income.

So the conclusion is that you need to reinvest a certain amount on a regular basis to activate your daily 0.5% return. If you do not reinvest, this 0.5% is just a rate at which your TVL is continuously unlocked.

Okay, from now on, forget about the concepts of saving money and re-investing, and understand it with the thinking of a mining machine:

Spend money to buy a MARK mining machine,

1. The price of the mining machine is the computing power. The more expensive the mining machine, the higher the computing power and the higher the revenue output.

2. The cost/electricity fee for regular maintenance is 200u. Of course, if you want the mining machine to run faster, you can also pay more for electricity to increase the horsepower.

3. The output is 0.5% per day based on computing power, but if you want to gain income, you must pay the electricity bill regularly.

4. When you no longer pay the electricity bill, the mining machine will stop operating, but the profits will still be in the mining machine. After 200 days, you can return the mining machine to the factory. Not only will you get the profits, but you can also get back the money you spent to buy the mining machine.

2. How many bubbles are there? Who is carrying the burden?

Now, about the bubble. From the above, we have learned that the operation mechanism of this project is such that you only receive a daily yield of 0.5% if you reinvest. In other words, your mining machine, which you bought, needs to generate profits for you only when you pay its electricity cost.

This seemingly significant daily yield of 0.5% is actually completely diluted by time and reinvestment costs. When you don’t reinvest, this bubble does not exist. Let’s assume that everyone entering the project does not reinvest. This is equivalent to the mining machine having no electricity cost and not operating. After 200 days, you can return the mining machine and get back all the principal, but with no profit. In this process, no bubble is generated.

When someone pays the electricity cost (reinvests), the mining machine will generate some profit. This profit is paid in USDC. So, USDC cannot appear out of thin air. Isn’t this scenario about those who came in earlier sharing money from those who came in later? What? Is it a pyramid scheme?

To understand this problem, we first need to understand what exactly are the benefits generated in the entire system?

On the surface, everyone’s income is paid in USDC, and this USDC can only come from the people who buy mining machines later, but we all know that there is no way to create a USDC by yourself in this system, and there is no direct income from USDC. However, the system can produce its own token $MARK, so the final revenue of the system can only be created by $MARK.

In principle, in a short period of time, the USDC of the people behind is used to pay the income of the people in front. This is because there is cash flow in the settlement inventory, and there is no need to sell coins to pay the income.

Here comes the first trick:

Graft

The coins produced by the mining machines are not sold in the market, but the cash in stock is first used to redeem the profits.

The ingenious aspect of this mechanism is that, although the system’s generated earnings can only come from the cryptocurrency $MARK, for a significant period, $MARK has no sell orders. It is designated as the final step for redeeming profits, prolonging the period before $MARK is sold. You can also understand it as long as there are enough people buying mining machines and an ample cash reserve; there is never a need to sell $MARK.

Of course, this raises the question of who is “bearing the burden” for the system, and the answer is $MARK. In the worst-case scenario, when there are no more purchases of mining machines in the system, and the cash reserves are gradually depleted, it becomes necessary to sell $MARK to cover the earnings of the last few mining machines.

3. Where does the money come from?

It is the mining currency $MARK that “carries the burden” for the system, so who will support the value of $MARK?

Here we talk about inventory cash (USDC) management in the MARK system:

1. 86% is used to buy back $MARK

2. 10% is used as reserve gold for the extraction of mining machine income.

3. 5% undecided

Second trick:

Grand Displacement

The mining coins produced by the mining machine are not sold in the market, and the money from selling the mining machine is used to purchase mining coins.

Firstly, we know that the money users spend on buying mining machines (deposits) will enter the project’s treasury as cash reserves. 86% of this amount will be used to purchase $MARK on the market, leaving 10% as a buffer fund for users to redeem mining machines and for earnings.

Theoretically, this 10% buffer fund can be used for a considerable period because, from the moment mining begins after purchasing the machine, whether redeeming the machine to recover the principal or withdrawing earnings, it takes at least 200 days. (Of course, you can choose to withdraw every day without considering losses, but this daily withdrawal against losses is counterintuitive.)

Therefore, the system takes out a significant portion of the cash reserves to generate earnings. This approach is similar to DeFi projects using treasury reserves for mining, investing, and financial activities, with the difference being that the project chooses to buy its own token.

The third trick:

Turning the Tables

By this point, most people should understand that depositing USDC is equivalent to buying a $MARK mining machine. While the mining machine theoretically produces $MARK, what you actually receive is USDC. $MARK is not sold on the market; instead, it continuously buys using the reserved funds. Due to this expectation, $MARK attracts additional buying pressure, introducing external capital into the entire system.

1. What? You understand it, so you won’t buy $MARK? Just get a mining machine for free.

Even if you buy a mining machine, the system will still use the money to buy $MARK, and then $MARK will start rising like a bulldozer.

1. What? I want to buy $MARK; after all, funds are flexible, and I don’t need to buy a mining machine and pay electricity fees.

Congratulations, you’ve contributed “income” to the entire project.

This system currently has a TVL of 6 million US dollars. After analyzing this, smart people will come to the conclusion that either no one is playing this system, and it may not be able to transfer. However, once the amount of funds and the number of people reach a certain order of magnitude, it will be difficult to stop. .

4. Assuming that no funds or users enter subsequently, will it collapse?

First of all, let’s be clear. If no one pays the electricity bill (reinvests), the mining machine will not really generate income, and there will be no bubble. All the people who entered the market will not move, and new people will no longer enter the market. In this case, everyone will unlock the principal of their mining machine at a rate of 0.5% per day. After 200 days, the mining machine will be returned to the factory to get back the principal. No one will be damaged and there will be no collapse.

Under normal circumstances, each person purchases a mining machine at different times, and the timing of paying electricity fees (reinvesting) varies. Therefore, the timing of withdrawing profits also differs. As more people buy mining machines, more reserved cash is used to purchase $MARK, resulting in less $MARK selling pressure and more buying pressure. This encourages more people to enter the market, holding and continuously appreciating $MARK. The sustained appreciation of $MARK supports the payout of mining machine profits, accommodating the activation of more mining machines and attracting more people to buy them. In this way, a positive spiral is completed.

What about extreme cases?

When someone pays the electricity bill and the mining machine is turned on, the revenue generated is paid to the user in USDC, but there are no new users within 200 days. After 200 days, all the mining machines that are turned on are refunded and receive revenue at the same time. It can be said it is the most extreme run situation. In this case, it tests whether the liquidity and value of $MARK in the market are sufficient to cope with the occurrence of a run.

The fourth trick:

Ambidextrous Gaming

Another essence of the design - the continuous appreciation system of $MARK

Continuous Purchasing Power

As mentioned above, with the “Grand Displacement” of cash used to buy mining machines, 86% is continuously used to purchase $MARK, creating a constant anchor point for the rising price of $MARK. Unlike many POW mining and DeFi mining projects, there is almost no additional coin selling pressure in the market, leading to a bulldozer-like price increase.

Another cash flow to consider here is the “electricity fee,” which is the money for reinvestment. If users want to maintain income from the mining machine, they must continue to pay the electricity fee. This cash flow income continues to provide a lifeline to the system in the absence of new buyers for mining machines.

10% Tax: Black Hole

A genius design in the system is the “black hole.” In the initial state, the black hole holds 49% of the $MARK tokens, and no one can directly control it. It cannot be traded or sold on the market. Since trading $MARK incurs a 10% tax on buying, selling, and transfers, this tax is continuously distributed to $MARK holders. It means that the tokens in the hands of $MARK holders are constantly increasing. The black hole is no exception; moreover, the black hole absorbs most of the transaction taxes. When the black hole’s share exceeds 51%, it will automatically sell the accumulated excess $MARK and combine it with USDC to form an LP, adding it to the $MARK pool. This mechanism will continuously increase the depth of the $MARK pool. The longer the time and the more transactions, the continuously captured taxes will be injected into the pool, and they can never be withdrawn, becoming the fundamental value support for the entire system.

It’s a typical model of not being afraid of you making money but fearing that you won’t participate. Each transaction contributes to the bottom-level value of the system.

No One Can Resist the Upside

So, summarizing along this line of thought, those who trade $MARK ultimately provide external blood input to the system. The allure of $MARK lies in the fact that no one can resist the upside. When everyone understands the game, they will realize that $MARK is the ultimate invisible buyer at the bottom. However, ArkMoney has cleverly designed a continuous upward engine for $MARK. Regardless of whether one has a speculative or investment mindset, when you see this price trend, no one can resist the temptation. (This is the Elephant’s price trend.)

Many people may also wonder why there is such a bulldozer-like price trend in the chart. The reason is that most of the money in the USDC vault is used to buy $MARK in the market. The chips will gradually concentrate in the hands of the project, and the circulating chips outside will become fewer and fewer. In this way, the cost of constantly washing out the chips in the hands of users will expand the market value.

Infinite Restart

What if it really faces a run on the bank, a collapse? Here is a very ingenious design where the $MARK token supports the value of the entire system. This is very similar to the relationship between LUNA & UST:

1. The market value of LUNA determines the market value ceiling of UST.

2. The market value of $MARK determines how much deposit the USDC vault can absorb while ensuring redemption.

However, the difference lies in the fact that LUNA has an unlimited issuance mechanism, and the redemption and cashing of UST are real-time, greatly increasing the possibility of a run, which, once triggered, may lead to a death spiral due to LUNA’s unlimited issuance.

MARK does not have an issuance mechanism, and most of the chips are concentrated in ArkMoney’s buyback treasury. Meanwhile, the redemption time of the USDC vault is extended, avoiding the risk of a run on every design level. Additionally, because MARK does not have an issuance and there is a low circulation ratio in the market, once it drops to a psychological level, someone will enter to buy the dip, injecting new funds into the system. The collapse of LUNA can be said to be partly due to the failure to stop unlimited minting in time.

So, as long as there are buyers on the dip, there is the possibility of an infinite restart.

Elephant’s rising range

Therefore,

The outside funds is provided by those who trade $MARK,

The people who provide the internal funds are those who buy mining machines with USDC.

This is completely different from the financial Ponzi that people often say, and it is even more dynamic than DeFi liquidity mining.

Finally, let’s analyze the data layer with Elephant, which has been running for over 2 years:

Elephant has been in operation for 2 years since its launch in 2021. The most severe market crash occurred in 2022 when it was hacked. Throughout most of the other times, it has experienced a bulldozer market trend, including its recovery from the hack. During this period, it also went through events such as the decline of BNB and the BUSD token swap. Currently, Elephant’s market capitalization has reached $380 million.

The price has surged over 300 times from the low point of 0.000000001217 in 2021 to the current value of 0.0000003804, and if calculated from the highest point, the increase exceeds 500 times.

The current market value of MARK is US$30 million, which is at least 10 times that of Elephant.

MARK’s advantage lies in the stability of assets on Ethereum, whether it’s USDC or ETH, compared to BNB and BUSD. It has a larger audience. While acknowledging that it is a Ponzi-like project, I believe it is still a great social experiment. Every detail of its design can be considered as the king of Ponzi schemes, but many people have not truly understood it. Whether compounding in the USDC vault or holding $MARK for the long term, there will be decent returns. The combination of $MARK and the USDC vault presents a unique strategy, simultaneously navigating both an upward trend and a descending channel, effectively maximizing risk avoidance over time. It’s like a vine that climbs higher as more people join in!

Current status: As of this post, there are 2 days left in ArkMoney’s Vault Boost event, and the APR is 1923%. This event lasted for 14 days. On the first day, the $MARK output stimulated by the activity of those who bought a mining machine (deposited in USDC) has already paid back, which is equivalent to getting a mining machine for free, and users who enter later are equivalent to buying it at a discount. Mining machine, there are currently 2 days left in this event (of course, users who enter for the first time also bear the risk of early start-up of the project, the current TVL has increased to 6 million US dollars, and the overall risk of the protocol has been reduced.)

Risk warning: The ArkMoney project is forked from Elephant and has been improved. The team is in an anonymous state and the tokens have been audited once. Possible risks include team risks, contract security risks, and token skyrocketing and plummeting risks.

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