Sovryn, a Bitcoin (BTC) money market protocol based on the Bitcoin-based smart contract platform RSK, recently appeared to be shooting up in decentralized financial rankings.
On Wednesday, Bitcoin commentator Anthony Pompliano shared data from the decentralized financial data aggregator DefiLlama to his 1 million followers, suggesting that the protocol had amassed a Total Locked Out Value (TVL) of $ 1.95 billion – number 14 for the sector and victory over DeFi favorite Uniswap v3.
Sovryn has a higher TVL than Uniswap V3.
I keep telling everyone that the DeFi infrastructure on Bitcoin is the worst-rated opportunity on the market.
Proceed as desired https://t.co/YZpcSrXW9D
– Pomp (@APompliano) June 9, 2021
Pompliano and many of his followers are dismayed that Ethereum-focused platforms like DeFi Pulse fail to list Bitcoin DeFi projects like Sovryn and Stacks, with the influencer saying:
“One would be in the top 15 on the TVL list and the other in the top 25. Why aren’t they included?”
Pompliano’s post on Sovryn has sparked criticism from proponents of the Ethereum ecosystem who disproved the idea that Sovryn had amassed a ten-digit TVL. ChainLinkGod indicated that staked governance tokens may have contributed to an exaggerated TVL estimate.
How is the market price of the inserted $ SOV determined? I can’t find any information about the token price https://t.co/T5ILAtYUiz
– ChainLinkGod.eth 2.0 (@ChainLinkGod) June 9, 2021
Since Pompliano’s original post, DefiLlama has adjusted its dates for Sovryn and now listed the project with a TVL of just $ 52 million. The updated data now matches the TVL provided by Sovryn’s own wiki.
In a statement Thursday, DefiLlama confirmed that his previous estimate of Sovryn’s TVL was nearly $ 2 billion, and in fact resulted from the inclusion of the capitalization of staked assets. The data aggregator added that it will soon post an update on its website that will allow users to choose whether or not staked assets are included in TVL data.
On the recent Sovryn controversy:
1. We removed staking from their TVL
2. We will be releasing an update to the site that will allow anyone to choose whether to include or exclude staking on TVL
3. We will add Sovryn Staking again after the update
– DefiLlama.com (@DefiLlama) June 9, 2021
Since the popularity of decentralized funding exploded in 2020, TVL has emerged as the dominant metric by which the success of a protocol is measured.
However, many analysts have argued that TVL is reductionist and should not be viewed as the sole measure of a DeFi project’s progress.
Speaking to Cointelegraph, CoinGecko co-founder Bobby Ong stated that TVL has grown in popularity because of its simplicity, much like market capitalization has become the main measure of the success of a token or coin in all DeFi protocols. “
“It’s not the perfect measure […]but it’s the easiest measure people can understand and use as a yardstick, ”he added.
Ong believes that total trading volume should be the primary metric by which decentralized exchanges (DEXs) are measured, and notes that volume “drives log revenue”. For the same reason, he argued that credit volume should be the main measure of money market protocols.
Ong also recommended that analysts place greater emphasis on combining TVL with other key metrics to illustrate the capital efficiency of the liquidity contained in a given log:
“For a DEX, looking at the trading volume / TVL gives a measure of how efficiently the liquidity is used to increase the fees for the protocol and the LPs.”
Ong also argued that dividing a project’s TVL by its market capitalization or fully diluted valuation (FDV) is useful for comparing DeFi logs operating in the same segment.