How Can a Low TVL Protocol Still Have a High Intrinsic Value?
A protocol can have a low TVL but a high intrinsic value if its tokenomics are highly effective at capturing revenue from a low volume of locked assets, or if it provides a non-monetary utility that is highly valuable. For example, a Layer 2 scaling solution may have a low TVL but a high intrinsic value due to its ability to capture significant transaction fees or its essential role in the overall ecosystem's security and throughput.
The key is high revenue capture and utility per locked dollar.
Glossar
Intrinsic Value
Valuation ⎊ This represents the in-the-money amount of an option, calculated as the difference between the spot price and the strike price, if positive, otherwise zero.
High Intrinsic Value
Status ⎊ High Intrinsic Value describes an option contract that is significantly in-the-money, meaning its market price is dominated by its intrinsic component rather than its time value, indicating a high probability of a profitable outcome upon exercise.
Tvl
Value ⎊ The total aggregate worth of all assets deposited into a specific decentralized finance protocol, typically denominated in a stable unit for consistent measurement.
Low TVL
Liquidity ⎊ Low Total Value Locked (TVL) within cryptocurrency protocols signifies a reduced amount of capital deposited as collateral or participating assets.