DeFi projects under fire for inflated TVL and murky lending loops
On-chain analysts have spent the past few days scrutinizing a web of decentralized finance (DeFi) yield farming projects which collectively claim $950 million worth of total value locked (TVL). Criticisms levelled at the projects include that they recursively lent funds between one another’s assets to inflate TVL, and the lack of transparency over the positions held. Some have also raised doubts over the ability to unwind positions safely in order to secure the backing of their yield-bearing stablecoins, especially in the event of a liquidity crunch like that of October 10, 2025. DeFi daisy chain Projects such as YieldFi and Stream Finance aim to generate yield by using deposits to run delta-neutral strategies, similar to $10 billion “synthetic dollar” protocol Ethena. They bill themselves as “asset management for the on-chain economy” and “the SuperApp DeFi Deserves,” respectively. DeFi commentator Togbe kicked off the discussion with an X post on Sunday, cast...