Parsing the Truth of TVL: Static Capital ≠ Actual Value, Project Quality is Key

A possibility of data fraud in TVL has sparked discussions within the industry. Some believe that the same UTXO may be approved for use multiple times, leading to it being counted multiple times as part of the TVL for different projects.

However, from a technical perspective, this situation is actually impossible. A UTXO can only be locked once, even when using a hash time lock. Therefore, the same UTXO cannot be counted towards TVL by multiple projects simultaneously.

In fact, most projects will publicly disclose their staking addresses. Even if they do not, these addresses can be traced through on-chain fund flows. These addresses are not only for users to view, but also to demonstrate to investors the project's control over these funds.

TVL data manipulation mainly occurs on these public addresses. Project teams often collaborate with large holders to inject funds to increase TVL. For large holders, project teams promise a minimum yield. This practice is common across various DeFi projects, whether they are European, American, or Asian.

Taking a certain project as an example, it adopts a common pattern: using an MPC wallet to achieve multi-signature. Large holders do indeed transfer funds into the project's MPC wallet address, but these funds are jointly managed by the large holders and the project team. The MPC wallet implements multi-party collaborative management through multiple private key shares, so no single party can unilaterally control the funds.

From the outside, these addresses do belong to the project party, but the project party does not fully control the funds within them. This is the origin of the term "false TVL".

It is worth noting that "fake TVL" does not refer to data falsification, but rather to the fact that this TVL consists of static funds, which cannot truly create value and are only used to attract retail investment and hype up the project.

TVL can be divided into real TVL and false TVL. Real TVL is the liquidity that can be effectively utilized, such as funds in lending or exchange projects, which can enhance user experience. False TVL, on the other hand, refers to idle liquidity, such as funds in staking projects.

For staking projects, TVL data often only represents surface-level prosperity and does not actually play a substantial role in product operation. The industry has long placed excessive emphasis on TVL metrics, but not all TVL has actual value.

As ordinary users and investors, we should focus on the actual value of a project: does it solve user problems? Can it generate positive cash flow to prove the feasibility of the business model? Projects that create value for users and the industry are the truly high-quality projects.