DEFI

One person plays multiple roles | Solana developer anonymously builds DeFi ecosystem, then announces entry into public chain Aptos

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One person plays multiple roles | Solana developer anonymously builds DeFi ecosystem, then announces entry into public chain Aptos

Solana's TVL once surpassed $10 billion during the booming market last year. However, an investigation revealed that a significant portion of the TVL was double-counted and concentrated in a few protocols. All of this was orchestrated by the Macalinao brothers, who created 11 different protocols through multiple anonymous identities, establishing a vast interconnected DeFi protocol network based on the decentralized exchange Saber. After experiencing a hacking incident, they recently announced their foray into the emerging public chain project Aptos, sparking discussions.

This report cites the investigation results from the foreign media CoinDesk. For any doubts, please refer to the original article.

The Beginning of False TVL on Solana

During the summer of last year, as Solana's TVL continued to rise, the yield aggregator Sunny quickly gained attention from many DeFi users. Not only did it attract billions of dollars in funds within two weeks of its launch, but its token also grew fivefold during this period.

Solana TVL

However, according to CoinDesk's investigation, the developer of this protocol, known as Surya Khosla, is actually the same person as Ian Macalinao, the co-founder of the stablecoin exchange on Solana, Saber, and the overall functionality of the Sunny protocol is based on Saber's token, SBR.

CoinDesk stated that Ian Macalinao constructed an extensive network of DeFi protocols that repeatedly projected the value of billions of dollars into the Saber ecosystem on Solana, temporarily inflating Solana's TVL during last year's continuous rise, misleading DeFi users.

"I designed a scheme to maximize Solana's TVL: I built protocols that stack on top of each other so that one dollar can be counted multiple times," Ian Macalinao wrote in an unpublished article.

For a period of time, Ian Macalinao's strategy worked. According to his own statistics, Saber and Sunny accounted for $7.5 billion at the peak of Solana's TVL, with $10.5 billion in total, as billions of dollars were double-counted between the two protocols. Ian Macalinao himself believed that this significantly contributed to the rise in the price of SOL.

However, Ian Macalinao's actions went beyond this. Through collaboration with his brother, Dylan Macalinao, and disguising themselves as 11 different independent developers, the two collectively created 11 interrelated DeFi protocols.

Why Do This?

Ian Macalinao expressed his disdain for TVL as a "vanity metric," but he found the higher TVL on Ethereum troubling because, in his view, the false data caused by double-counting on Ethereum was more severe.

"I wanted to create a system very similar to this, but if each protocol was developed by the same developer, the TVL as a metric would be even more foolish. So, I created more anonymous identities," Ian Macalinao said.

In public, the two claimed that the identities they created were their "friends" or "friends of friends." These seemingly multi-person developers formed "Ship Capital" and together built an ideal DeFi ecosystem in their minds, where all protocols were interconnected with Saber and its LP tokens.

The ultimate goal of the two was to make other protocols on Solana also begin to rely on Saber, leading to a "too big to fail" situation. Dylan Macalinao even referred to this approach as a 200 IQ strategy on Twitter.

Creating Illusions with Anonymous Teams

As mentioned earlier, Ian Macalinao used the alias Surya Khosla to create the Sunny protocol. However, the use of anonymous developers and unaudited protocols raised concerns among users about the risk of asset loss during use.

To gain trust, Dylan Macalinao, also a co-founder of Saber, staged a performance on Twitter. When users questioned Sunny, he claimed to have spoken with the development team and audited the contract code, making users feel comfortable staking tokens on Sunny.

Little did they know that this behavior was merely self-endorsement.

With the cooperation of the two brothers, this scenario frequently occurred when a new protocol was launched or integrated, using multiple anonymous accounts created to praise each other, shaping a positive image.

The Magical Logic of DeFi Lego

Ian Macalinao's self-built ecosystem also included the decentralized stablecoin project Cashio, where he was known as "0xGhostchain," and Cashio's stablecoin was called "CASH," only obtainable by staking Saber's LP tokens.

This was just the beginning of Ian Macalinao's DeFi Lego. In another protocol called Crate Protocol, where one can create "asset portfolio tokens," he went by the name "kiwipepper"; the asset portfolio tokens of Crate Protocol could be invested in yield farms through a protocol called Arrow Protocol, returning profits to the users who created the asset portfolios. Arrow Protocol was also created by Ian Macalinao, known as oliver_code in that context.

The LP tokens of Cashio were invested in Sunny Aggregator and Quarry Protocol, among other yield aggregators, through Crate and Arrow, to earn rewards. The profits would then flow into Cashio's treasury, managed by a DAO. In Sunny Aggregator, Ian Macalinao used the alias Surya, while in Quarry Protocol, he went by Larry Jarry.

In essence, this DeFi Lego consists of: Stablecoin exchange protocol Saber -> Decentralized stablecoin protocol Cashio -> Asset portfolio protocol Crate Protocol -> Derivative staking protocol Arrow Protocol -> Yield aggregators Sunny Aggregator or Quarry Protocol

According to CoinDesk, even deep users of Cashio were unable to fully explain this chain of mechanisms.

CoinDesk commented that when users exchanged Saber's LP tokens for Cashio's decentralized stablecoin CASH and ultimately entered Sunny Aggregator, they could receive returns as high as 10%-30%; however, if they directly put Saber's LP tokens into Sunny Aggregator, the returns were only 5%-10%. The magic lies in the fact that the collateral assets behind both scenarios were the same. "This is the logic of DeFi Lego," where TVL, the total locked value, is often used to measure the success of a DeFi protocol, but under the layers of DeFi Lego, one dollar can be magnified several times.

Ideals, Criticism, and Hacking Incidents

According to CoinDesk, Ian Macalinao stated that he only seeks to pursue ideals and prefers not to pay attention to criticism.

"I just want to focus on building and creating value according to my beliefs. I don't want to deal with excessive criticism until I fully realize my ideas in the market. Anonymity is the best way for me and the protocols I create,"

As early as the end of 2017, Ian Macalinao made his first contribution to the public chain project EOS with cryptocurrency code, and by the first half of 2021, he had discussed token economics in the Discord of the algorithmic stablecoin Basis.Cash, which was the original intention he invested in algorithmic stablecoins.

However, in March of this year, Cashio experienced a hacking incident where hackers manipulated Cashio's smart contracts to mint 2 billion CASH tokens, resulting in a loss of $52 million and nearly zeroing out its price, a severe blow to Ship Capital. According to CoinDesk, Ian Macalinao had promised to compensate affected users using all of his personal Saber and Sunny tokens, but this promise was never fulfilled.

Ian Macalinao had shared Saber's operational experience at a Solana developer conference and claimed that Cashio was created by his friend.

Transition from Solana to Aptos

On 7/23, the Macalinao brothers, under the guise of a DAO Acceleration Program, opened Saber to external developers. According to CoinDesk, Ian Macalinao stated, "Having real people build these protocols has always been our ultimate goal."

CoinDesk stated that this was because the Macalinao brothers would bring Saber into Aptos, a public chain that has recently been widely discussed and is a new territory that many Solana developers are actively migrating to. Sources indicated that Protagonist, a venture capital firm run by the Macalinao brothers, is focusing on Aptos, which is Ship Capital.

However, many Saber ecosystem users on Solana told CoinDesk that they had not been compensated for their losses in these protocols in the past and felt that the Macalinao brothers had abandoned them. While Ian Macalinao did not respond directly to these criticisms, he expressed a renewed sense of optimism after trying the Move language on Aptos, feeling it was reminiscent of early Solana.

DeFi Llama Feature Adjustment Update on 8/8

Following the revelations of the false TVL event on Solana, the widely-used on-chain data website DeFi Llama responded by defaulting the double-counting feature of TVL to off. If users wish to use it, they must manually enable it.

As an example, for Solana in this article, before the feature was enabled, the TVL peak in November of last year was around $12 billion.

After the feature was enabled, the TVL peak during the same period appeared, but it was 25% higher, reaching $15 billion, showing a significant double-counting phenomenon.

However, this phenomenon is not unique to Solana; other blockchains also face similar issues. When using TVL as a metric for evaluation, it is essential to consider the reliability of this data.