The Mirage of DeFi Metrics: Analyzing DefiLlama’s Allegations Against Figure

The promise of decentralized finance (DeFi) lies in its transparent, open-verification model. However, as real-world assets (RWA) find their way onto the blockchain, the complexities introduce unprecedented levels of opacity, reminiscent of ‘black box’ data challenges. The recent confrontation between data platform DefiLlama and RWA platform Figure sheds light on the potential for projects to manipulate metrics through inflated data and internal ledger reflections, serving as a reminder that not all projects waving the RWA banner represent genuine financial innovation.

RWA Transparency Turmoil: Bloated TVL Figures

In the DeFi ecosystem, Total Value Locked (TVL) metrics are usually straightforward; users can verify assets within smart contracts themselves. However, the paradigm shifts when it comes to RWA. Many projects claim extensive on-chain assets, but often these are merely mirrored internal data lacking actual transactions or holders.

For instance, ZKSync is touted on rwa.xyz as the second-largest chain for RWA after Ethereum, boasting over $200 million in assets. However, DefiLlama’s scrutiny uncovers that the tokens mainly comprise a meager 10-11 holders, with minimal transaction activity and barely sufficient gas for operations. These so-called ‘assets’ resemble more of an internal digital display than genuine blockchain assets.

TVL: From Trusted Metric to Data Decoration

DefiLlama’s critique highlights how such practices distort the essence of TVL. Ideally, TVL should represent market trust and risk exposure regarding a project. However, when inflated by a single entity minting tokens and holding them in dormant wallets, the market basis for risk is absent. Investors might mistakenly interpret these numbers as genuine adoption, potentially leading to misguided investments.

Figure’s Controversy: Discord Between Claims and On-Chain Record

At the crux of this controversy is Figure, asserting it has issued $12 billion of RWA on-chain, yet DefiLlama’s due diligence reveals stark discrepancies:

• Figure’s exchange only holds approximately $5 million in BTC and $4 million in ETH, with minimal trade volume.
• The proprietary stablecoin YLDS has a supply of about $20 million, starkly contrasting the proposed $12 billion magnitude.
• Many RWA-related transactions are not conducted by holders but by alternate accounts.
• Most financial processes remain within fiat systems, with scant corresponding blockchain payment records.

To simplify, Figure’s proclaiming of ‘$12 billion in on-chain RWA’ appears more like internal ledger shuffling than real asset circulation.

The Power Struggle: DefiLlama’s Defense

DefiLlama claims extended dialogue with Figure over technical and data concerns, only to be publicly accused by a Figure member of denying platform listing due to a lack of Twitter followers. This allegation led to private pressures from other crypto entities. DefiLlama’s founder, 0xngmi, calls this a “ridiculous falsehood,” emphasizing their non-inclusive pay-for-listing or popularity-based integrations. They were steadfast in their decision against Figure based solely on failing rigorous due diligence, resisting marketing or community influence.

The Path Ahead for RWA: Transparency is Key

This dispute underscores a crucial issue: Does RWA blockchain integration truly embody transparency and decentralization? If data remains solely issuer-provided, with no verifiable liquidity or user participation, the ‘value’ of RWA might be an illusory construct.

DefiLlama underscores that their aim is not to impede RWA’s growth but to ensure data integrity, preventing users from misjudging investment risks due to misleading appearances.

For investors, this debate serves as a cautionary note: not all on-chain assets are legitimate. When TVL appears vast yet lacks transactional depth and a user base, skepticism is warranted.