When it comes to DeFi data, many people's first reaction is, "What's the TVL?" "What's the annualized return?" However, these indicators alone cannot determine whether a project is reliable. To truly understand a DeFi project, we need to focus on three key indicators: how much is locked, how much is earned, and how active the users are. These correspond to asset security, profitability, and user activity.
1. How much is locked? — Looking at asset security, is it trustworthy?#
Why look?
TVL (Total Value Locked) is the most direct data for judging how much trust a protocol has. The larger the pool, the more people have put real money into it; fluctuations may indicate unstable funds or hidden issues.
What data to look at?
Total TVL: Like the amount of deposits in a bank, how big is the protocol's "pool"?
Asset structure: Is it mainly stablecoins (USDC, DAI), blue-chip assets (BTC, ETH), or "homegrown tokens"?
On-chain distribution: Is it concentrated on a single chain or multi-chain?
Growth trend: Is the TVL steadily increasing or experiencing spikes and drops?
What tools to use?
DeFiLlama: The most comprehensive TVL data, supports detailed views by chain and project.
Token Terminal: Combines revenue and user data to better assess the "value" of locked assets.
Project official website & GitHub: Check the locking mechanism, is it pure staking, bilateral pools, or synthetic asset models?
A reminder:
A higher TVL is not always better; it should be considered alongside the asset structure and volatility. Only projects with healthy fund structures and stable growth are truly worth paying attention to.
2. How much is earned? — Looking at the profit model, can it survive?#
Why look?
A good DeFi protocol should not rely on airdrop subsidies to "burn money for growth," but should be able to generate profits and share them with users, creating a positive business loop.
What data to look at?
Protocol Revenue: How much has been earned from fees, liquidations, and transactions?
User Revenue: Are users and LPs making profits or losses? Is the subsidy and actual revenue structure reasonable?
Cost ratio: Who takes the larger share, the protocol, LPs, or stakers?
Token economic model: Does revenue feed back into token value? For example, through burning, dividends, or staking rewards.
What tools to use?
Token Terminal: Overview of financial data, P/F (Price/Revenue ratio) can also be viewed.
Dune Analytics: Search "project name + revenue" to find community-created dashboards.
Project Docs & white papers: Understand how it makes money and the distribution logic.
Judgment tips:
Whether a protocol is reliable is crucially determined by "whether it can survive without subsidies." Projects that rely on incentives for survival will collapse once the incentives stop.
3. How active are users? — Looking at user activity and risk situation#
Why look?
High TVL ≠ high activity. Some may be one-time institutional injections; high activity ≠ safety. A protocol that hasn't been audited and is frequently attacked by flash loans can easily encounter issues, regardless of user numbers.
What data to look at?
Active user count (DAU/MAU): Are there "real users" using it, rather than zombie addresses completing tasks?
Transaction count: High interaction frequency indicates that real use cases exist.
Contract audit status: Has it been audited by a reputable organization? Has it ever been attacked?
Historical risk events: Have there been liquidation incidents, flash loan attacks, or reentrancy vulnerabilities?
What tools to use?
DappRadar: Check user numbers and transaction activity.
DefiSafety / Certik / Code4rena: Audit status ratings.
Dune Analytics: Check liquidation records and risk events.
Rekt.news: Attack event tracking and incident analysis.
A small tip:
A sudden spike in user numbers without an increase in revenue is likely "airdrop volume manipulation," rather than healthy growth.
In summary: How to interpret DeFi data? Remember these three keywords:#
Lockable: Look at the TVL structure and trend, whether the assets are "real money," and if the project is stable.
Earnable: Check if the protocol has sustainable revenue and whether the profit-sharing logic is reasonable.
Sustainable: Look at the real user usage and risk resistance capability, whether it has "long-distance running capacity."
Next time you encounter a DeFi project, you can use this approach to make a general assessment. I will update the tools used in the community later. Thank you.
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