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Five Leading Factors To Identify A Worthy DeFi Project

18 November 2022 09:52, UTC

How do savvy financiers figure out which DeFi ventures to back? Although no investor can see into the future, investors can look for indicators of a strong protocol. The fundamentals as well as important crypto criteria for judging a DeFi project's worth are discussed in this tutorial. You will be prepared to dive headfirst into DeFi by the end of the article.

Total Value Locked (TVL)

The sum of all digital assets locked within a DeFi protocol is referred to as their Total Value Locked (TVL). It's a standard metric for investors to use when contrasting different cryptocurrencies and projects.

As of September 2020, the total value of all DeFi space was AU$868 million, as measured by TVL. More than 50% of that TVL just was in one protocol, Maker, which is quite an accomplishment. This showed that Maker was meeting the needs of its target clientele in the cryptocurrency industry, a good sign for the future of the venture. Maker's TVL soared to AU$332 billion per month in 2021, and the price went from AU$700 to AU$3,500 over that time.

Address Count

If you want to estimate how many users are employing a given DeFi protocol, you can do so via their unique identifiers. It is typical practice for investors to monitor changes in the number of distinct addresses. More users joining the network and buying or using the token may be reflected in a larger number of distinct addresses. Similar to how a drop in the number of distinct email addresses may signal the project is stalling, a rise in the number of shared ones may indicate the opposite.

To give the illusion of greater popularity than it actually has, a single user can create several addresses on such a DeFi protocol.

Market Cap 

Market capitalization, or the entire market value of the system as calculated by multiplying the coin value by the number of coins outstanding, is arguably the most crucial indicator for any crypto project. It is widely used in both the cryptocurrency and banking industries via trade assistance forums like btcloopholepro.com alongwith other trade assistance bots. 

When Bitcoin's market worth hit $1 trillion, for example, it marked a significant point in the history of cryptocurrency.


How many individuals are trading a cryptocurrency can be gauged by looking at its volume. An increasing volume over time is indicative of a healthy DeFi project, although a sudden spike in activity may follow the publication of either positive or negative news about a procedure.

Ratio of Inflation 

The inflation rate measures the rate at which the total supply of tokens is growing. As an example, protocols can automatically issue new tokens to stakers on a regular basis as a form of compensation. Inflation isn't always a bad sign and can be a natural part of the crypto ecosystem, but it's important to make sure it isn't getting out of hand.

The Bottom Line 

These crypto research instruments may prove useful now that you know how to spot a good DeFi project if you see one. They are useful for seeing new opportunities and discovering underappreciated gems. Then, when you're open to trading, you can use our sophisticated trading charts to determine when it's a good moment to buy, and then automate the process by setting price alerts.