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DSI
Workbook

TVL, Liquidity & Incentive Review Workbook

A workbook for assessing DeFi growth and incentive proposals on measurements that survive the incentive ending, rather than on headline total value locked.

Type
Workbook
Difficulty
Advanced
Time
60 min
Version
v1.0.0
Updated
8/9/2026
defitreasuryevidence

What this helps you do

Total value locked is the most quoted and least informative number in a DeFi funding proposal. It moves with token price, it counts the same capital more than once across protocols, and it rises reliably while an incentive is being paid regardless of whether anything durable was built.

This workbook separates what an incentive bought from what would have happened anyway. It records a baseline, adjusts for incentive inflows and token price, and puts the weight on usage measures: volume, fees, liquidity depth, active users, retention, and stablecoin liquidity. It computes cost per retained user or per retained dollar where the data supports it, and it insists on measurement after the incentive stops, which is the only period that answers the question.

When to use this

  • A proposal asks for treasury funds to grow liquidity, users, or activity.
  • A funded programme is reporting success and you want to test the claim.
  • You are comparing several incentive proposals and need a consistent basis.

When NOT to use this

  • The proposal has no incentive or growth component.
  • You need investment advice or a valuation. This measures programme effect, nothing else.
  • No baseline exists and none can be reconstructed. Say so rather than producing numbers that look rigorous.

What you'll need

  • The proposal's stated growth targets and the metrics it will report
  • The incentive budget, schedule, and the form of the incentive
  • A baseline measurement taken before the incentive starts
  • A data source for volume, fees, users, and liquidity, with its methodology documented

Estimated completion time

60 minutes

Working time for one governance action, assuming the inputs listed here are already to hand.

How to use it

  1. 1Set the baseline before anything else, and date it. Without a baseline there is no measurement, only a level.
  2. 2Record headline TVL, then immediately decompose it: how much is incentive capital, how much is the same capital counted in more than one protocol, how much moved with token price.
  3. 3Compute token-price-adjusted growth by holding the token price constant at the baseline date, so a price rally does not read as adoption.
  4. 4Record usage measures that do not move with price: trading volume, fees paid, liquidity depth at a stated slippage, and active addresses.
  5. 5Define active user precisely and use the same definition at every measurement point. State the definition in the workbook.
  6. 6Measure retention as the share of users or capital present at baseline plus a defined interval who are still present later.
  7. 7Record stablecoin liquidity separately. It behaves differently from volatile-asset liquidity under stress.
  8. 8Record incentive spend at each point, and compute cost per retained user and cost per retained dollar where the denominators are honest.
  9. 9Take measurements at 30, 90, 180 and 365 days. Record the exact date and source of each.
  10. 10Measure again after the incentive ends. The post-incentive reading is the result; everything before it is a progress note.
  11. 11Find at least one comparable programme, on this or another network, and record what happened when its incentive stopped.

The tool

Full workbook - v1.0.0

Baseline

  • Baseline date
  • Headline TVL at baseline
  • Token price at baseline and the source
  • Trading volume, daily and 30-day average
  • Fees generated over the prior 30 days
  • Liquidity depth at a stated slippage, for the main pairs
  • Active addresses over the prior 30 days, with the definition used
  • Stablecoin liquidity at baseline
  • Data source and its methodology link

Incentive design

  • Total incentive budget and denomination
  • Form: emissions, direct grants, fee rebates, matched liquidity, other
  • Schedule and end date
  • Who receives the incentive
  • Whether recipients can be the same parties as the proposers
  • Stated target and how the proposer will measure it
  • Whether the proposer's metric can be inflated by the incentive itself

Measurement points: 30, 90, 180, 365 days

  • Headline TVL
  • Incentive-adjusted TVL: headline minus capital attributable to the incentive
  • Token-price-adjusted TVL: valued at the baseline token price
  • Double-counted capital identified and removed where possible
  • Trading volume and the volume-to-TVL ratio
  • Fees generated
  • Liquidity depth at the same stated slippage
  • Active users, same definition as baseline
  • Retention of baseline users and of incentive-attracted users, tracked separately
  • Stablecoin liquidity
  • Cumulative incentive spend
  • Cost per retained user
  • Cost per retained dollar of liquidity

Post-incentive and comparables

  • Date the incentive ended
  • Measurements at 30 and 90 days after the end
  • Share of incentive-attracted liquidity remaining
  • Share of incentive-attracted users remaining
  • Fee generation relative to the incentive-period peak
  • Comparable programme, network, and dates
  • What happened to that programme after its incentive ended
  • What that comparison implies for the proposal in front of you
Fictional Example

Invented for illustration. It does not describe a real governance action, proposal, or organisation.

Fictional review: liquidity bootstrap for a lending market

  • Baseline: TVL 12.0m USD, token price 0.42 USD, 30-day volume 3.1m USD, fees 41k USD, 2,400 active addresses, stablecoin liquidity 4.2m USD (all fictional).
  • Day 90: headline TVL 41.0m USD, reported by the proposer as a 240 percent increase. Incentive capital accounted for 22.0m; token price had risen to 0.61 USD.
  • Adjusted: token-price-adjusted TVL 28.2m; incentive-adjusted TVL 19.0m. Real underlying growth closer to 58 percent than 240 percent.
  • Volume-to-TVL ratio fell from 0.26 to 0.11, meaning capital arrived faster than usage did.
  • Fees at day 90: 96k USD over 30 days. Incentive spend to date 1.9m USD, so incentives cost roughly twenty times the fees generated.
  • Retention: 71 percent of baseline users remained; 24 percent of incentive-attracted users remained at day 90.
  • 30 days after the incentive ended, 19 percent of incentive-attracted liquidity remained and fees had fallen to 52k USD, above baseline but far below peak.
  • Comparable programme on another network showed the same shape, with roughly 15 percent liquidity persistence after emissions stopped.

How to interpret the result

  • A rising volume-to-TVL ratio means capital is being used. A falling one means capital is being paid to sit still.
  • Retention of incentive-attracted users below roughly a quarter is common and is not by itself a scandal, but it must be priced into the cost per retained user before the programme is called a success.
  • If fees never approach the incentive spend, the programme is buying activity rather than building a market. That may still be a legitimate choice, made openly.
  • The only reading that settles the question is taken after the incentive stops. Treat every earlier number as provisional.

Limitations

  • TVL is a poor standalone metric: it double counts capital across protocols, moves with token price, includes capital that is only present because it is being paid, and says nothing about usage. Never report it alone.
  • Attributing capital to an incentive requires judgement. State your attribution method and its uncertainty rather than presenting a single clean figure.
  • Third-party data sources differ in methodology and revise historical figures. Record the source and the date of every reading.
  • Cost per retained user is only meaningful when the user definition is stable and the denominator is not inflated by the incentive.
  • This workbook measures programme effects. It is not financial advice and makes no claim about token value.

Sources and methodology

Downloads

  • Markdown export: the complete tool, including metadata, instructions, the template, limitations, sources and version history.

No other file formats are published for this resource. We list a format only when the file exists.

Version and governance

Current version
v1.0.0
Published
Not recorded
Last updated
8/9/2026
Next scheduled review
2/9/2027
Licence
CC BY 4.0
Editorial status
Not yet externally reviewed

No named reviewer is shown because no external review has been completed. Attribution appears only once a verified reviewer has signed off.

Changelog

  • v1.0.0 (2026-08-09) - First published edition.
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