In-depth indicators that cannot be ignored in DeFi project analysis

Data can be considered the most important asset of any project, and the analysis of data can provide insight into the past, present, and even predict the future. However, in traditional industries, the difficulty often encountered in data analysis is that data sources are lacking or difficult to obtain.

The world of blockchain breaks the barriers of data sources. It is like a "big ledger" that you can read on the desktop, and the data is completely open and transparent. But it is obviously more difficult to find valuable information in the huge amount of obscure data.

There are countless tools for data analysis of DeFi projects on the market, and there are many kinds of indicators. This article uses the metrics involved in Footprint Analytics’ upcoming DeFi 360 to summarize the overall situation of the project, and from which angles to dig into the reasons behind the data.

What: the current indicator category
The past and present performance of the project can be quickly understood through the general indicator overview. Understand the project situation and trend changes through indicators such as time-point value, increment, and rate of change.

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Project Overview

I. Operational Data

TVL
TVL stands for Total Value Locked, which is usually the first indicator of a project’s attention. It reflects the total value of the assets mortgaged by all users. People often use the growth of TVL to judge whether the project is in an upward trend.

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TVL Trend

TVL is measured in US dollars, but in the world of cryptocurrencies, currency prices are changing rapidly, and it is difficult to see whether TVL's rise or fall is caused by changes in currency prices, or more investment. Therefore, in addition to the TVL in the conventional sense, it is also necessary to pay attention to the TVL of the currency standard.

For example, according to the statistics of Footprint Analytics, Liquity (a lending project that can only pledge ETH to lend stablecoins) has a slight decline in the TVL in ETH in the black box part of the figure below, while the TVL in US dollars is rising. Originated from the rise in the price of ETH. This creates the illusion that the project is going up.

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TVL in ETH vs USD

After complex projects such as Aave and Yearn appear to provide both lock-up and lending functions, this also makes it more difficult for simple TVL to be used as a single indicator for measuring projects, so it is necessary to combine more indicators for evaluation.

Net Liquidity
Net Liquidity finds changes from the previous day by subtracting inflow and outflow data. It can be further analyzed from the two sides of inflow and outflow that the change mainly comes from the entry or loss of users.

Revenue
For DEX-based protocols, TVL cannot be used to determine the status of the platform, and swap will also generate revenue for the platform. The ultimate goal of the project is to maximize profits. Revenue allows operators to understand profitability and reflect project operating results.