Episode 2

Solana's Co-founder On Legitimacy In The DeFi Space

Anatoly Yakavenko discusses Solana's DeFi ecosystem and metrics that may have been inflated

By Zack Abrams

October 31, 2022


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Solana co-founder Anatoly Yakovenko weighs in on Solana's total value locked, and the games that may have been played to inflate that metric.

What metrics should we look at when evaluating a blockchain's speed and throughput? What about for examining a DeFi ecosystem? Can we trust any of the figures we see on-chain, or any of the people trying to push a certain narrative?

Those are the questions answered by Solana co-founder Anatoly Yakovenko in this Community Extra from Coinage Episode 2.

Solana boasts incredibly fast speeds and high throughputs for its blockchain, making it an attractive playground for DeFi developers of all shapes and sizes. However, not all of those interacting in Solana's ecosystem have had completely transparent intentions. In fact, a CoinDesk report recently alleged that a pair of brothers secretly colluded to artificially inflate the apparent size of Solana's DeFi ecosystem last year as Solana's native token was exploding in price.

The metric in question is "total value locked," or TVL. It's a metric many in the space use to track where DeFi users are choosing to store digital assets for yield. For blockchains like Solana, a spike in TVL can make it appear as if a massive audience is suddenly choosing to adopt the chain as its go-to ecosystem. That can, in turn, drive a positive feedback loop by driving more investors to buy tokens on that chain on the belief that more users may soon follow into the ecosystem. But, as Yakovenko points out, that makes it an inherently "gameable" metric.

"I think folks that are sophisticated discount TVL by quite a bit, what's harder to fake are volumes — like actual activity and even those, again, wash trading and all this stuff exists so you have to be very sophisticated in how you analyze this stuff," he said.

Surprisingly, Yakovenko's major complaint wasn't necessarily that the brothers designed DeFi protocols that counted tokens multiple times, which made Solana's adoption appear larger than it really was. Rather, he lamented that it was done deceitfully rather than transparently in the open.

"If you're open and transparent, people will analyze what you're doing and either destroy you or support you," said Yakovenko. "I think being open and transparent is really important in crypto, to me, more so than being anonymous."

One piece of advice Yakovenko has for sophisticated DeFi explorers: Pay attention to stablecoins minted on-chain, since that requires actual backed dollars.

"If you have organic demand from DeFi, that should actually get real dollars minted on chain," said Yakovenko.

For more Yakovenko's thoughts on the important metrics to watch in crypto, watch the full Community Extra above.