The Rise and Fall of Solana's DeFi Ecosystem
In 2021, Solana's Total Value Locked (TVL) surpassed $10 billion during the market boom. However, investigations revealed that a significant portion was artificially inflated through duplicate calculations concentrated in a handful of protocols. This elaborate scheme was orchestrated by the Macalinao brothers, who created 11 interconnected DeFi protocols under various pseudonyms, building an ecosystem centered around decentralized exchange Saber.
Key Takeaways:
- Solana's TVL was artificially inflated through protocol stacking
- One developer created 11 pseudonymous identities
- Ecosystem collapsed after Cashio stablecoin hack
- Developers now pivoting to Aptos blockchain
The Anatomy of Solana's Fake TVL Boom
How One Developer Fabricated an Entire Ecosystem
The deception began when yield aggregator Sunny gained rapid popularity, attracting billions in deposits within weeks. CoinDesk's investigation revealed its developer "Surya Khosla" was actually Ian Macalinao, co-founder of stablecoin exchange Saber.
Macalinao designed a system where:
- Protocols would stack on each other
- The same dollar could be counted multiple times
- Anonymous identities would mask the scheme
👉 Discover how blockchain analytics can prevent such schemes
The 11-Person Illusion
The brothers created:
| Pseudonym | Protocol | Function |
|---|---|---|
| Surya Khosla | Sunny | Yield aggregator |
| 0xGhostchain | Cashio | Stablecoin protocol |
| kiwipepper | Crate | Asset bundling |
| oliver_code | Arrow | Derivative staking |
| Larry Jarry | Quarry | Yield farming |
This network accounted for 75% of Solana's peak TVL ($10.5B), with billions double-counted between Saber and Sunny.
The DeFi Domino Effect
The interconnected protocols created a financial house of cards:
- Users deposited assets into Saber for LP tokens
- LP tokens collateralized Cashio's stablecoin (CASH)
- CASH was bundled in Crate Protocol
- Bundles were staked in Arrow Protocol
- Yields flowed to Sunny/Quarry aggregators
This circular system offered illogical returns:
- Direct Saber staking: 5-10% APY
- Through Cashio/Sunny pipeline: 20-30% APY
Despite identical underlying assets, the layered structure artificially boosted apparent yields.
The Ecosystem's Collapse
The scheme unraveled when:
- March 2022: Cashio hacked ($52M loss)
- Stablecoin CASH collapsed to near-zero
- Promised user reimbursements never materialized
👉 Learn how to identify risky DeFi protocols
Pivoting to Aptos
In July 2022, the Macalinao brothers announced plans to:
- Open Saber to external developers via DAO program
- Migrate ecosystem to emerging blockchain Aptos
- Focus investment firm Protagonist on Aptos projects
Solana users expressed frustration about:
- Uncompensated losses
- Abandoned ecosystem
- Lack of transparency
DeFi TVL Reporting Reforms
Following the exposure:
- DeFi Llama disabled double-counting by default
- Solana's "real" peak TVL adjusted from $15B to $12B
- Industry-wide recognition of TVL limitations
FAQs
How did one developer control 11 protocols?
By creating multiple pseudonymous identities and having them cross-promote each other's projects while maintaining the illusion of independence.
Why did the TVL scheme work initially?
The layered protocol design allowed the same assets to be counted multiple times across different platforms, creating artificial growth metrics.
What's the future of Saber ecosystem?
The developers are transitioning to Aptos blockchain, leaving many Solana users feeling abandoned without compensation for their losses.
Risk Disclosure
Cryptocurrency investments carry substantial risk, including possible loss of principal. Prices are highly volatile, and users should carefully evaluate their risk tolerance before participating in DeFi protocols.
This Markdown-formatted article:
1. Preserves the original story while improving structure
2. Incorporates SEO elements naturally
3. Removes promotional/redundant content
4. Adds valuable FAQs
5. Includes engaging anchor texts as requested
6. Maintains professional tone with reader-friendly formatting