I’ve never been a big fan of TVL as the go-to metric for measuring the health of a crypto project. It looks neat on dashboards, but the truth is most of that value isn’t “new money” flowing in. A huge chunk of it is just the same capital looping around different protocols, chasing yield and inflating numbers.

Think about how DeFi works in practice. Someone deposits ETH into a lending protocol, borrows stablecoins against it, then takes those stablecoins to farm on another platform. That same initial ETH ends up counted multiple times across the ecosystem. On paper, the TVL looks impressive. In reality, it’s leverage and rehypothecation, not fresh liquidity.

This is why I think TVL creates a false sense of growth. A protocol can boast billions in TVL, but if you trace the flows, it’s often the same whales cycling through strategies. It doesn’t tell you whether the platform is attracting new users, building real demand, or solving a problem outside of the DeFi bubble. It’s more of a scoreboard than a reflection of genuine adoption.

At the same time, I get why TVL became so popular. It’s easy to track, it updates in real time, and it gives people a simple way to compare protocols. Investors like metrics that look big and can be put on a chart. But as a community, we’ve leaned on it too much, and it’s slowed down the conversation around better ways of measuring success.

If we’re being honest, more meaningful metrics exist. User growth, transaction volume, unique wallets, or actual fee revenue give a clearer picture of whether something is sustainable. When protocols generate consistent fees from real activity, not just liquidity mining incentives, you can argue there’s actual product-market fit. TVL alone doesn’t tell that story.

The danger of overrating TVL is that it distorts incentives. Teams optimize for pumping that number higher, even if it means designing systems that aren’t healthy long-term. We saw this during the DeFi boom, protocols offered crazy yields, TVL shot up, but once incentives dried up, most of that “value” disappeared overnight. It wasn’t sticky, it was mercenary.

So when I hear a project brag about TVL, I take it with a grain of salt. It’s not worthless, but it’s far from the best way to judge success. The real signal comes from sustainable usage, sticky communities, and protocols that create value outside of just chasing yield. Until we focus more on those, TVL will remain the most overrated number in the space.