What Are the Main Criticisms of Using TVL as a Primary Valuation Metric for DeFi Protocols? ▴ Learn

What Are the Main Criticisms of Using TVL as a Primary Valuation Metric for DeFi Protocols?

The main criticisms of TVL are that it is easily inflated, does not account for the quality or activity of the locked assets, and is a backward-looking metric. Protocols can use "liquidity mining" rewards to temporarily boost TVL without creating sustained utility.

Furthermore, TVL double-counting (where the same assets are counted across multiple protocols) and the lack of standardization make it an unreliable proxy for true intrinsic value or future cash flows.

How Does a Protocol’s Total Value Locked (TVL) Relate to Its Projected Cash Flows?

What Is the Difference between Implied Volatility (IV) and Historical Volatility (HV)?

How Is “Historical Volatility” Different from Implied Volatility?

Distinguish between Historical Volatility and Implied Volatility (IV)