TVL Trends and Triumphs' - Lessons from this Cycle's Leaders (David Silverman)

afternoon guys uh I'm David uh I do uh product things at polygon labs and want to talk a bit today about TBL as a metric and obviously how protocols look at it but more importantly I guess how chains have begun looking at it and how analyzing how chains look at it we can think about what's coming in the next cycle or so so we all love flexing tvl it's the primary thing defi Lama tracks everyone tweets about it leviathan's posting about it Non-Stop um we know it's a flawed metric uh it's not the real kpi for pretty much any protocol for Lending protocols care about borrows there's a lot of Supply that might not actually be used it's nice to have it in there it's great for us to show off but for the protocol itself lenders care about borrows that's where their revenue comes from for dex's TBL is great once again but ultimately volume and more importantly volume per unit of tvl is really where LP Revenue comes into place and for lsds obviously you want to have massive AP you want to have massive TL but more importantly it's what are you earning on it for a size adjusted yield and what is your liquidity to all to be integrated funding markets for leverage plays Etc and that's great for protocols I think for Chains It's Different we think a lot about tvl and Bridge tvl it is a core metric of ours But ultimately there's a lot of questions with what counts is good tvl for a chain do I want a lot of usdc or do I want something more yield bearing like an s usde from Athena I I want a lot of assets on my chain but I don't want assets that are just idle I want them deployed into protocols super nice we get a big flashy number from a predeposited vault but it's not actively sitting in a protocol it's probably just the foundation parking Capital um I been using a metric uh called productivity to determine chain Health productivity is basically the defi Lama tbll for the chain over the l2b tbll for the chain basically how active is the ecosystem um and this has been good for us for a bit but even interly our research team we've been trying to find a new metric that encapsulates a bit more holistically what we think chains are moving towards longer term and that's this new metric we call cat or chain aligned tvl so chain align tvl uh is the sum of assets that benefit the underlying chain as well as assets and protocols that benefit the underlying chain effectively a measurement of enshrined or partially enshrined assets and applications and it's definitely a pretty big departure of this normal tvl number um because it kind of has this embedded idea that I think a lot of chains have started to realize which is transaction fees alone can't be a business model to sustain a chain we've seen this with app chains we're starting to see it with sector specific chains and I think it is the direction we're going to be going in down the future what are some examples that we've seen of Channel L tvl we can look at blast or nois or Avo like blast very much would prefer that you're holding one usdb over a stock usdc on the Chain they benefit from that even nosis nosis would rather you have XI than probably other stable coins on the Chain helps power that SD yield product they have uh it's great to have native usdc uh or it's great to have some these native stable coins but it's not really bringing much to the chain reg perspective unless you're doing a ton of actual transactions on the chain and even then it's probably not going to compensate for the emissions you're giving out we've seen it from more you know in enshrined uh fig from ring rings was up here rings has done a great example in the Sonic ecosystem meth from man they just created their own actual asset that the underlying chain is involved in the issuance of or closely Affiliated entity a USD from Agora and usdg from paxos are other examples where the distributor in this case the chain is brought in and cut into the economics and lastly we're seeing it now with bar chains p app chain applications themselves and revenue sharing apps directly the tvl and those apps are directly returning Revenue to the chain stakeholders whether it's token holders for bar chains liquidity or some Equity structure in the case of an app chain and I think the thesis that we're kind of coming at from this number is as chains become sector and app chains a shman is only going to continue to grow chains are going to begin to optimize on sectors of tvl that benefit them the most uni chain is not going to spend a blot on marketing or incentivizing a per Dex if you're creating a crazy pers app Unity Chain's probably not the place to deploy it unless you're doing it as a V4 hook and then it actually benefits their bottom line grants and incentives and BD support are probably going to flow to aligned apps and assets over anything else I don't think bar chains going be doing too many marketing posts for applications that aren't actively bribing the validators through the P mechanism lastly more teams are going to be beginning to share Revenue to grow and that's probably going to be a huge source of growth for them if I'm deciding to give a grant between two different projects I'm probably going to do the one that's going to support the ecosystem and my stakeholders overall more assets are going to start cutting chains and apps in on their economics we've seen this again in the stable coin Market markets with aora and usdg we're seeing with apps starting to do direct Revenue shares with chains themselves and apps are going to start doing that in order to be considered aligned to avoid a locally supported Fork we can see for a lot of the new chains popping up how many of the apps that are coming on launch day or they're being actively supported are like bigger brand name apps or locally incubated where the chains foundation and therefore token holder base has has has a position I guess a polygon we're looking at this a lot is working with a ton of different teams um it's definitely a change for how we've been thinking about Defi and how I think a lot of the ecosystems talking about Defi and definitely something that we want to keep working with all the app Builders here to figure out what business models both for chains and applications make sense to keep the whole ecosystem sustainable in the long run so yeah