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What Are the Risks Associated with Relying Solely on TVL for Valuation?

TVL can be inflated by temporary incentives and does not reflect revenue, security, or genuine, sticky user adoption.
Greeks.Live17.11.25

What Are the Risks Associated with Relying Solely on TVL for Valuation?

Relying solely on TVL is risky because it can be easily inflated through 'vampire attacks,' mercenary capital, or temporary incentive programs, which do not represent genuine, sticky user adoption. TVL also does not account for the quality of the locked assets, protocol security risks (like smart contract bugs), or the protocol's actual revenue generation.

A high TVL with low revenue capture suggests poor token economics and a potentially misleading valuation.

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