Onchain fundamentals are reshaping how crypto assets are evaluated. Patrick Scott, a researcher at DefiLlama, draws on four years of DeFi data analysis to unpack TVL, fees & revenue, volume, open interest, stablecoin market cap, and other key metrics, then provides a three-step methodology for filtering signal from noise.
TVL: Trust and Size, Not a Complete Story
Total Value Locked measures assets deposited into a protocol's smart contracts, akin to assets under management in TradFi. But TVL alone does not reflect activity—a protocol can hold billions in deposits yet generate minimal fees. Price swings also skew the picture: if ETH drops 30%, TVL in ETH-denominated protocols falls in tandem even if no withdrawals occur. Pairing TVL with “net USD inflows” helps strip out price effects.
Fees, Revenue, and Holders Revenue: Know the Difference
In DeFi, these terms diverge from traditional accounting. Fees are what users pay; Revenue is what the protocol keeps (after paying liquidity providers); Holders Revenue is the portion distributed to token holders via buybacks, burns, or staking rewards. A protocol can rack up huge fees yet capture almost nothing itself. DefiLlama now publishes auto-updated income statements for many protocols, complete with fund-flow visuals.
Volume and Open Interest: Gauging Market Engagement
DEX volume and perpetual volume track trading activity across the ecosystem. Market share trends often matter more than absolute numbers—a perp DEX growing from 5% to 15% share signals rising relevance even if total volume dips. Open Interest measures the value of all open positions on derivatives platforms; a sharp liquidation cascade can wipe OI in hours. Tracking recovery speed reveals a platform's ability to retain capital.
Stablecoin Market Cap: Real Capital Inflows
Stablecoin market cap sums all stablecoins deployed on a chain, representing genuine dollar inflows via bridges. From October 2023 onward, roughly $180 billion has entered crypto through stablecoins. Rising supply signals fresh capital; declining supply suggests outflows—akin to a nation's capital account.
App Revenue and Chain-Level GDP
App revenue and app fees aggregate the economic output of all applications on a chain (excluding stablecoins, liquid staking, and gas fees). Revenue is one of the hardest onchain metrics to fake, as it requires real user spending. However, it's better suited for diagnosing growth than for direct valuation.
Three-Step Filter: Find Sustainable Growth
First, favor steady, persistent expansion over wild spikes. Monthly revenue growing from $500k to $2M over six months is more telling than a one-week surge to $5M followed by a crash. In crypto, time moves fast: one month of sustained growth roughly equals a TradFi quarter. Second, track both stock metrics (TVL, OI, stablecoin market cap) and flow metrics (fees, revenue, volume). If both rise together, the protocol is likely expanding. If only flows surge while stocks stagnate, suspect wash trading or incentives. Third, account for token unlocks and incentive costs. A protocol with 90% circulating supply has little dilution risk; one with only 20% and a large unlock in three months is a different bet. DefiLlama’s “Earnings” metric subtracts token incentives from revenue to show true profitability.