In 1720, during the South Sea Bubble in Britain, the South Sea Company proposed a seemingly foolproof plan—using a sophisticated debt swap structure to offer bondholders a promise of continuous and stable high returns. And what was the result? Nobles, parliament members, scholars all rushed in, even brilliant minds like Newton fell into the trap.

Interestingly, what ultimately caused the bubble to spiral out of control was neither rumors nor outright scams, but something that appeared extremely rational at first glance—everyone started calculating the yields seriously. People began to believe in a simple logic: as long as the compound interest formula holds, the future must be better. In this process of "rational calculation," risk silently seeped in.

Three hundred years later, in the on-chain world of Web3, the same story seems to be repeating itself with a similar script. The difference is, we are now "smarter" than the investors of that time. We say we only trust data, not stories; we focus solely on APY numbers, not conceptual narratives; we refuse to be swayed by emotions, relying solely on Excel and calculators.

But the problem lies precisely here—when everyone thinks they are rational, the system begins to exploit this confidence in reverse. APY appears to be a neutral mathematical indicator, but in reality, it has long been carefully packaged as a behavioral guiding tool. It conceals three assumptions that many people tend to overlook.

First, APY assumes you will keep participating indefinitely. The only condition for the compound interest formula to hold is that you neither withdraw, change your mind, nor make mistakes. But is the on-chain world that stable? Protocols change, incentives shift, risks evolve. Only the participant side is assumed to be an unchanging pawn in this formula.

Second, it assumes the underlying structure will not deteriorate. The annualized yield presented by APY is essentially a projection based on "current conditions." But where do most DeFi yields come from? Subsidies, inflation, pre-placed incentives. When new user growth slows down and incentive pools start to dry up, the entire calculation will collapse sharply.

The third point, which is most easily overlooked— it masks the real transfer of risk. What does a high APY usually imply? It means risk has been redistributed, not eliminated. Someone is earning what appears to be "interest," but in essence, they are betting that others will continue to enter and take on the risk. This logic is exactly the same as the South Sea Bubble three centuries ago.

So next time you see that tempting APY number, ask yourself: where does this yield come from? How long can it last? What happens if participation stops growing? Most importantly, are you actually earning returns, or are you just playing the last link in this chain of profits?

The lessons of history have never changed; only the ways we deceive ourselves have evolved.