DeFi Gold Rush: 6 Metrics to Filter Out 90% of Shitcoins
Title: DeFi Gold Rush: 6 Key Metrics to Filter Out 90% of Low-Quality Projects
This article explains how to evaluate crypto projects using on-chain fundamental metrics, a revolutionary advantage DeFi has over traditional finance. Unlike quarterly corporate reports, DeFi data is transparent, real-time, and publicly available on the blockchain.
The author, drawing on four years of experience, including work with DefiLlama, outlines six core metrics:
1. **TVL (Total Value Locked):** The total value of assets deposited in a protocol. It's a measure of trust but should be analyzed alongside activity metrics as it's highly correlated with token prices.
2. **Fees, Revenue & Holders' Revenue:** *Fees* are the total amount users pay (gross revenue). *Revenue* is the portion of fees kept by the protocol (gross income). *Holders' Revenue* is the share distributed to token holders via buybacks or dividends.
3. **Volume:** Tracks trading activity on DEXs and perpetual exchanges. Market share trends within a category are often more insightful than absolute numbers.
4. **Open Interest:** The total value of unsettled derivative contracts, indicating liquidity on a platform. It can collapse quickly during market volatility.
5. **Stablecoin Market Cap:** The total value of stablecoins on a blockchain, representing real capital inflows into an ecosystem, unaffected by token price volatility.
6. **App Revenue & Fees:** The total fees and revenue generated by all applications on a blockchain, excluding stablecoins and gas. It acts as a "GDP" for a chain's economic activity.
The article provides a three-step framework for analysis:
1. **Focus on sustained, stable growth** over time rather than short-term spikes.
2. **Track both stock metrics** (e.g., TVL, OI) and **flow metrics** (e.g., Fees, Volume) to get a complete picture of capital deposits and actual activity.
3. **Consider token unlocks and incentives**, as they create sell pressure. High revenue is less impressive if it's outweighed by token emissions.
The key takeaway is that these on-chain fundamentals provide a powerful filter to identify valuable projects with real traction long before market narratives catch up.
marsbit01/08 13:08