TVL Is Not the Same as Sustainable Liquidity
Total value locked measures presence, not durability. This explainer separates the two and shows what evidence would distinguish them.
Key points
- TVL is a stock measure and says nothing about how long capital stays.
- Incentivised liquidity frequently exits within weeks of emissions ending.
- Retention curves and depth-at-price are more informative than headline TVL.
What TVL actually counts
TVL sums the value of assets sitting in a set of contracts at a point in time. It does not distinguish capital that would remain without incentives from capital that is renting yield.
Why proposals lean on it
It is one number, it is publicly available, and it usually goes up when a programme launches. That makes it convenient rather than informative.
What to ask instead
Ask for retention curves after incentives taper, depth at a specified price impact, and the share of liquidity attributable to programme participants. If a proposer cannot produce these, that is itself information.
What we could not establish
- Public data rarely separates incentivised from organic liquidity.
- Wallet-level retention is difficult to attribute reliably.
Sources and references
- [1]Comparative incentive programme post-mortems - Source link placeholder
- [2]Method note on retention curves - Source link placeholder
Author
Mira Halvorsen
Market structure contributor
Independent quant who models incentive programmes and their failure modes.
Reviewer
Dr. Elena Vásquez
Reviewer, public economics
Reviews method and framing for treasury-adjacent research.
Related
Proposal evidence checklist
Resource library
DeFi & Market Structure track
DRep Academy