Algorand Foundation Exposes TVL as a Flawed Metric for Crypto Investments
Total Value Locked (TVL) has long been the darling of DeFi analysts—but Algorand just ripped off its rose-tinted glasses.
Why TVL fails investors
The metric ignores liquidity depth, smart contract risks, and the oldest rule in finance: 'If it looks too good to be true, it probably is.' Projects can artificially inflate TVL through circular farming—yet another case of crypto eating its own tail.
The Algorand alternative
Proof-of-stake chains like Algorand measure real economic activity, not just dollar figures locked in contracts. Think of it as valuing a company by revenue, not just its bank balance.
Closing shot
Next time a protocol brags about TVL, ask where the yield comes from. (Spoiler: Probably from the next bagholder.)
Why you should listen
The team analyzed 300+ cryptocurrencies from 2023–2024, simulating weekly long/short strategies based on TVL rankings. The result? No outperformance, no alpha. And no meaningful insight once broader market movements are accounted for.
As Pew reported last year, most Americans still don’t trust crypto. If TVL continues to be used as a shorthand for credibility, that only adds noise. This paper adds to the growing push for better metrics in DeFi.
Algorand’s mission is to power a world where information has integrity and innovative ideas can scale. The Algorand Foundation supports Algorand’s rapidly growing ecosystem by providing a best-in-class developer environment, supporting key infrastructure and setting technical standards, offering comprehensive support to builders and entrepreneurs, and providing the framework for decentralized governance.
Supporting links
Stabull Finance
The TVL Study WHITE Paper
The TVL Study Blog Post
Algorand
Andy on Twitter
Brave New Coin on Twitter
Brave New Coin
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