Uniswap is the world’s premier decentralized exchange and liquidity provision service, relying on an orderbook-less trading mechanism through liquidity pools. Since its introduction, it has facilitated billions in trading volume through its three iterations or version updates. It also constantly ranks as a leading revenue-generating DeFi protocol, second only to the Ethereum base layer itself. Here’s how to overtake it and the description of the one trick that most DeFi projects miss.
Uniswap Discovery – Here’s what happened:
Sovryn – an RSK side-chain-based project with EVM compatibility recently discovered a trick. This happened after the team claimed that they had overtaken the Total Value Locked (TVL) in Uniswap v3. The claim was viewed with skepticism/disbelief as the project is still new and relatively unknown. It also has no prior record of competing with Uniswap on any level.
It was also worth noting that just 24 hours ago, the protocol’s own statistics module reported a TVL of only $51M. Somehow, it suddenly started showing a $2B TVL figure first without any explanation (right image), directly counting numbers to arrive at a “value” and later by adding a mysterious column of “Bitocracy Staking Contract” (left image). So, how did this happen?
What was the Answer?
The answer was as simple as inflating the TVL numbers by counting the value of the team’s held SOV governance tokens outside circulation and including it in the final TVL count. Sovryn’s own vesting schedule showed that these tokens were locked until next year. Surprisingly, the team doesn’t count these tokens in its circulating supply on the website to give the illusion of low token supply and lower market cap but includes them in TVL calculation.
These tokens were merely present inside this contract and didn’t serve any economic activity, being not available for lending and borrowing actions. A strict no-no for any credible DeFi protocol and not a legit practice.
Somehow, the protocol utilized TVL data by incorrectly counting the Fully Diluted Value (FDV) of SOV tokens more than 13 times its original market cap!
SOV tokens are utilized Sovryn governance, don’t have a significant trading volume, and carry limited liquidity. A completely different scenario than the Uniswap UNI token. At around $150M total market cap for the token, the ~ $1950M addition to the TVL would have meant one thing – 98% of the locked tokens somehow making up for the ~97% of the Total Value Locked (TVL). A practice, which remains unknown to Uniswap protocol.
After the controversy drew the irk of the community, DefiLlama the aggregator data that the Sovryn team used to advertise their abnormally high TVL to feign dominance over Uniswap reported the following. They had simply relied on the data forwarded by the protocol’s API.
Since then, the DeFi aggregator has modified the TVL data to exclude staking data, being used to inflate numbers. However, Sovryn’s own website still uses the same metrics for obscure reasons, a suspicious practice after it was determined that the counting method wasn’t legitimate.
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