How Does the Introduction of Token Lending Protocols Affect Velocity Calculation?

When tokens are deposited into lending protocols, they are typically locked up as collateral or lent out, reducing the tokens available for general market transactions. This action decreases the effective velocity because the tokens are not actively changing hands in the broader market.

However, the interest paid to lenders can be seen as a form of "cash flow" that must be factored into the overall valuation, even if the velocity is low. The calculation of circulating supply for QTM must be adjusted for locked tokens.