Defillama founder: False indicators in RWA

Source: 0xngmi, Founder of Deflama; Compiled by: Golden Finance

False Metrics in RWA

With DeFi applications, anyone can verify TVL by looking at the assets deposited on the chain and in the contracts. However, with RWAs, this verification is impossible due to their greater opacity, which has led to an increase in the number of RWA projects, thereby inflating their TVL.

One example is that when you go to RWA.xyz, you'll find that ZKSync ranks second in RWA, far behind all other blockchains. However, I bet that no one reading this article owns ZKSync's RWA, so what's going on? According to them, this token is the largest RWA asset on ZKSync with a market cap of $235 million: https://era.zksync.network/token/0x6ff4fafd8d604614c704a5936d9146c0af19bd1e#balances The token currently has 11 holders and has never been transferred or exchanged between addresses since its creation 300 days ago. All activity totals 31 transactions, with the issuer minting tokens to an address or burning tokens from an address. All holders are just dead addresses with a lifetime transaction record of 0, not even gas to conduct transactions. The second largest RWA asset has a market cap of $202.5M and the same story, with only 10 holders and no activity between addresses since creation: https://era.zksync.network/token/0xac4de1e9a9e83524f24af77972dd39d588de8164 The same is true for the vast majority of RWA TVL on ZKSync. How does this make sense? The issuer here just has an internal database that is simply mirrored to some address on the blockchain with zero activity, so any new changes to the database are just pushed to the blockchain and that's it. I think these might not even be bearer assets.

Another similar case is where a company mints a token for themselves that they own entirely and says “this token represents equity in a company that we value at $500 million, so we ask to be listed as an RWA issuer with $500 million in TVL” and the token isn’t tradable, nobody owns it, and 100% of the supply is just sitting on their own address.

I’m not sure if the company does this to inflate metrics, to claim they’re working with the blockchain, or for some other reason. But when users think of RWAs, they think of stocks they can buy, tokenized houses, or any financial asset that can be transferred or exchanged on-chain, and that’s clearly not what’s happening here. The value of DefiLlama lies in the trust our users have in us providing them with good data. So, if we were to list this and say, "Look, ZKSync has 10x the adoption rate of Solana when it comes to RWA," when on Solana people are trading stocks, holding stocks... and on ZKSync, it's just a mirrored database with no activity, not even a single transfer, we'd be doing them a disservice because users might invest in ZK based on the argument that RWA adoption is 10x better than Solana, and then be defeated when that argument turns out to be false. Furthermore, TVL is used to measure the market's trust in a project and the riskiness of that project. Something like minting tokens with just one address and then burning them to 11 empty addresses is risk-free. If anything bad happens, they can simply cancel the blockchain. This defeats the purpose of TVL as a trust metric. Therefore, it's crucial for us to provide high-quality data that meets user expectations and helps them make informed decisions. We take user trust very seriously and want to ensure our metrics reflect reality. This often leads to people believing Deflama's RWA data is incomplete compared to RWA.xyz's RWA data. This is because RWA.xyz's volume is much larger, but the reason for this is that they list everything, while we intentionally exclude the aforementioned projects to make our RWA adoption data more accurate. Their approach has led to their data consistently showing Provenance as number one in RWA adoption for years, far ahead of Ethereum and every other blockchain, despite every institution launching products on these other chains. They've now reversed this decision and removed it, but ZKSync remains the second-highest blockchain for RWA adoption, based on the tokens I discussed earlier.

That’s why we put so much effort into due diligence on RWA, checking everything on-chain, verifying the backing of RWA to ensure it’s authentic…

Due Diligence on Figure

Figure claims they have issued 12 billion RWA on-chain, but when we looked into it, we found something strange:

• Their exchange only has $5 million in BTC and $4 million in ETH (BTC has a 24h trading volume of just $2,000)

• Their own stablecoin, YLDS, which all RWA transactions are supposed to be based on, has a supply of only 20 million

• Most transactions transferring RWA assets appear to be made by accounts other than the ones holding them

• Their lending process was overwhelmingly done with fiat, and we could find almost no on-chain payments.

So, we weren't sure how 12 billion in assets could be traded with so little available on-chain. Since most holders didn't seem to be using their keys to transfer these assets, were they simply mirroring their internal database on-chain?

We had been digging up and sharing this information with their team in our Telegram group chat as part of our due diligence for a while, and when they submitted their PR, our developers asked a bunch of questions about issuance, how their system worked, and more. One of them was that it seemed odd that they had such a low presence on Twitter, yet their TVL was 12 billion, and we needed more details to verify the data.

Then, someone who had been in the group chat for months and was aware of the entire due diligence process and the questions we raised tweeted that defillama had refused to list Figure because they didn't have enough Twitter followers. Over the next few days, I received several private calls from people at major cryptocurrency institutions and venture capital firms, including defillama and our partners (who subsequently forwarded the tweets to me), asking why we refused to list Figure because they didn't have enough Twitter followers. What a funny world! This guy, knowing the reasons for due diligence, fabricated lies, trying to get everyone to pressure us into skipping the listing process so they could improve their metrics before the IPO. Now I'm writing an article claiming we refused to list a project not because of their low Twitter follower count. Even worse, the CEO of the public chain they were partnering with claimed we were charging a listing fee, which was a complete lie. We never asked for or received one. We lost a lot of money because of this.